Don’t swipe your personal credit card for business – Get a business credit card instead

Business credit card has gained immense popularity in recent times and business owners have realized that it can be a great tool in helping business owners to separate their personal account from their business account. In earlier days, business owners did not bother to open a separate account for their businesses and managed it with their own personal credit cards. This created a lot of confusion regarding business expenses, especially when the business started growing. Nowadays, most business owners try to keep a separate account for their business and thus keep a closer watch on their business related expenses in addition to facilitating easier accounting and bookkeeping.

Both start up and established business owners are applying for business credit cards these days, if not as a substitute to a business loan, then at least using it as an emergency funding option. Start up companies find this window especially attractive because getting a business loan for start ups is a somewhat difficult and often quite a lengthy process. These business credit cards can come to the aid of the start up businesses taking care of the cash flow issues in the initial stages, when a business loan is not forthcoming. They are also quite useful for buying certain office equipments, such as computer, telephone units, fax machines, scanner, photocopier, etc in advance until their loan is approved.

Business credit card can also be a great relief for both new and established businesses, when an unexpectedly huge order comes to a manufacturer and there is an immediate cash flow crunch to purchase the raw material. At times, there is a danger of a huge supply or work order getting lost because of immediate cash requirement and non-availability of that much cash with the company. The business credit card can take care of such problems, also some short-term working capital shortage issues with a company.

It is not that the business loans are losing their importance; in fact, most businesses, whether established or new, still prefer traditional financing system, because of the low interest charged on business loans in comparison to interest applicable on business credit cards. Yet, it has advantages in some situations and most of the businesses keep a business credit card as a back up arrangement or device to meet unforeseen circumstances.

But, it is very essential to use business credit cards judiciously to avoid getting trapped in the vicious cycle of debt. It must be seen as an emergency device and not as a regular tool for business funding. It is also important that it is strictly used for business purposes alone and the credit card payment is done on time. Only if a business owner knows how best to take advantage of this facility, is the use of business credit card advisable.

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