As a consumer, you may have a negative view of credit cards. Because they are easy and the cost can be spread over monthly payments, it is easy to overspend and become overcome with debt. However, credit cards play a vital role in small businesses, providing flexibility when you need it. These are a few things you should know about small business credit cards.

How They Differ From Consumer Cards

Business credit cards are meant to provide your company with a revolving line of credit that has greater flexibility than traditional loans. However, they should only be used for business-related purposes, such as office supplies, raw materials and operating costs. Some of these cards don’t have a fixed credit line, while others don’t have interest rates, at least for an initial period. This makes these cards more convenient than consistently applying for loans.

When To Avoid Using Cards

Because credit cards are not subjected to the same type of regulation as other forms of financing, you can quickly overextend your company. In addition, other types of financing, such as traditional loans, often have significantly lower interest rates. New small businesses or those that are investing in new product lines or services should avoid putting initial outlay expenses on a credit card to avoid acquiring too much debt. If you have to make several large purchases, consider using working capital, traditional loans or investment financing.

Be aware that you may have difficulty disputing charges or negotiating billing and merchandise returns. Also, your card is handled by multiple people, so data breaches can be an issue. Therefore, limit the number of people in the company who have access to your card.

Advantages of Using Cards

Business credit cards are much more flexible than traditional loans. Loans provide funds for specific projects and cannot be used for other purposes. Credit cards still have fixed interest rates, but they don’t have strict payment requirements each month. In addition, as you pay them down, you can use your available credit for any new project.

Loans require significant paperwork and a high credit score, either yours or your company’s, but business credit cards have much less paperwork and lower credit score requirements. In addition, as you pay on your credit card, it increases your company’s credit score. They also give you opportunities to test new income streams. They can also be used to cushion challenging periods, especially in seasonal businesses. Cards are also great to have in an emergency, such as when you need to replace or repair equipment.

You can streamline your accounting and purchasing processes through credit cards, which provide you with monthly statements. They also increase your reputation as a business.

If you are looking for a flexible financial solution, do your research on credit cards for small businesses.