Business Credit Card

Hannah Callen asked:


Finding the right business credit card for your company can feel like trying to find a needle in a haystack. The perks, deals and incentives that are designed to help your business run cost-effectively can sometimes serve to make the decision process more confusing, but there are logical steps that can help you make an informed decision which will benefit your business.

In order to find the business credit card that best suits your needs, the most sensible solution is to look at the cards available on the market and compare between them. Business credit card comparison sites can help you to see which financial institutions offer the best deals for you and also identify and discard those that will not benefit your business’s financial planning.

The factor that instantly attracts customers is the APR offers. An introductory offer of 0% APR is now commonplace and provides greater flexibility for a business within that time period. However, it is also worth checking out what the APR rises to once the introductory period is over. Balance this figure against what you think your company can reasonably afford to repay each month and your company’s projected turnover and you could already be whittling a few business credit cards off the list. You may find yourself choosing to go with a company that does not have a 0% APR offer, but does have consistently low rates. This could work out cheaper and more beneficial in the long-term.

Once you have found a card with repayment rates that suit you and you feel that the company can comfortably make those repayments each month, you can then start to look at the ‘fun stuff’. Most business credit cards come with associated deals and perks, which can range from cashback on certain product purchases to free air-miles. Looking carefully at your company’s expenditure can show you where repeat payments are made and you can then hunt around to find the deals that may save your business money. For example, if your employees travel a lot, you might find petrol discounts or hotel discounts useful. Some computer companies and delivery services offer discounts to selected business credit card holders. Only by examining the products on offer can you begin to decide which will be of the most benefit to your business.

Business credit cards generally come with a degree of consumer protection, which is particularly advantageous if your business makes purchases via the Internet. However, you may wish to seek out additional security measures to cover other eventualities, such as supplementary cards for employees. Some business credit cards offer further insurance against circumstances such as employee misuse. In the case of supplementary cards, there are also facilities available to set a limit on employee spending.

A great resource for business credit card comparison is the comparison website. There are many of these available online and they condense the data available on each business credit card, displaying it in a format where it can be easily summarised and compared. Many of these sites also contain a link to the application page of your chosen card, which can also be used for further research. While comparison sites such as Moneysupermarket.com hold a great deal of information on business credit cards, they do not hold ALL the information and it is often worthwhile visiting the individual web pages of the business credit cards on your final shortlist. This way you can reinforce your decision by comparing the finer points of the business credit cards that you feel may be of most benefit to your company. A business credit card can be a dynamic tool with which to manage your business’s cash flow and accounts. Taking a little time when choosing a business credit card can ensure that you make the right decision at the right time.



Juanita

Hannah Callen asked:


One of the biggest concerns for small and medium size businesses (SMEs) is juggling time and company finances, particularly as the economy slips further into a financial downturn and priorities shift. Business owners are always looking for new ways to give themselves a little bit of financial breathing space that won’t unbalance either their business or their books. Using a business credit card could be one weapon that could help to minimise the day to day problems that many businesses encounter, giving them the chance to reappraise their cash flow and give them more control over their daily finances.

A business credit card (unlike a personal credit card) can offer SMEs greater financial flexibility and provide an alternative to expensive loans or debilitating overdrafts. If your company only needs a relatively small ‘fighting fund’ to cover daily expenses or the occasional payment to suppliers, a business credit card could be the answer. By choosing a card that best suits your company’s needs, you can reduce the amount of ‘empty money’ you pay on overdraft interest payments or loan interest charges. Business credit cards are easily managed and can certainly help a business to survive a lean month by ensuring suppliers are paid on time, thus keeping open other lines of credit essential to the operation of the business. If managed carefully it can also improve the credit rating of a business - something that, in the current climate, where banks are reigning in on business loans to minimise their exposure to ‘bad debt’, puts a business on much firmer ground.

In 2004, the Warwick Business School carried out a study of 2,500 businesses that looked into financial options for SMEs. The study found that business credit cards were the financial option of choice for 55% of small and medium sized businesses. 53% of SMEs had overdrafts, 27% used hire purchase agreements or leasing contracts and only 3% cited equity finance as their primary financial source. This study, although carried out before the current recession kicked in, is still applicable today and business credit cards are still an integral part of business life. The major benefit of a business credit card is that it gives a company a separate source of income from their main cash flow. It can also provide them with an extended, interest-free credit period when dealing with suppliers. This ‘grace’ period between payment to a supplier and the money being removed from the company’s assets via credit card payment can sometimes mean the difference between survival and closure for many small businesses.

Time management is another crucial factor, and business credit cards can also be a boon to a business in this aspect. SMEs waste valuable time (and money) by carrying out labour-intensive administrative and accounting processes. By employing a business credit card as part of an overall fiscal strategy, the time spent on complicated accounting (particularly when dealing with expenses such as travel and accommodation) can be reduced, as the statements provided by the card supplier will give a complete breakdown of monthly expenditure on all cards. This lets the accountants monitor expenses, supplier payments and other transactions quickly and easily. It also ensures that personal expenditure and business costs are kept separate, again allowing the business to chart ‘cash in’ and ‘cash out’ much more easily.

Most business credit cards allow multiple users to access the same account by issuing additional cards for employees. This gives SME owners the reassurance that employees have a payment tool that can be collated into a single account. Pre-set limits also control the amount of spending additional card holders can make, ensuring that the company does not inadvertently overspend and allowing owners to monitor individual employees’ spending. With the advent of online banking this monitoring can be carried out instantly, giving a business owner the chance to stop any overspend in its tracks. Statements can also be a useful cost-cutting tool, giving a business a window on their expenditure and if necessary making fundamental changes in their organisation to reduce overheads such as travel expenses.

There is a wide range of business credit cards available, so it pays to shop around to find the best offer that suits your particular business needs. Some cards offer ‘reward schemes’ with offers on petrol or accommodation, so if your business involves employees travelling extensively this option could save your business money in the long term. Others offer attractive APR rates or interest-free periods, which may be more suitable for a new business trying to find its financial feet. By choosing carefully, a business credit card can be an integral part of an overall financial policy that benefits a business both in the short and long term, particularly in a chilly economic climate.



Ellen