As a small-business owner, you might be looking for a more convenient and flexible way to pay for everyday expenses.

A business line of credit is one option, but it isn’t right for every business or for the smaller day-to-day purchases that you or your staff may need to make. In many cases, a business credit card could be the smart choice.

A new business owner without a well-established credit history may find it easier to get a business credit card than a fixed line of credit or term loan.

Credit cards are an increasingly popular option for business owners looking to boost their credit rating, keep tabs on employee expenses, and take advantage of discounts on travel and supplies while making the purchases that keep their business moving forward. Depending on the card, other perks or protections for cardholders may be available as well.

If you’re thinking about applying for a business credit card, consider:

• Who will use the card – only owners and managers, or certain trusted employees as well?
• Will it be used for daily business expenses or only certain types of purchases?
• Do you want traveling employees to have access to it on their trips?
• Do you plan to carry a balance or pay off the statement every month?

Pros and Cons to Consider

A business credit card comes with advantages and potential drawbacks — just like any other financing tool.

A new business owner without a well-established credit history may find it easier to get a business credit card than a fixed line of credit or term loan. And sometimes, a business owner simply doesn’t want to tie up collateral. When you have a business credit card, you can easily pay vendors, suppliers, and contractors in person or online.

Many cards offer incentives like cash back, discounts, and tax-free rewards points. Regular, responsible use builds credit for your business and makes it easier to track everyday expenses with up-to-the-minute online account statements.

A business credit card may also have some pitfalls to think about before you sign up. Cards, compared to loans or lines of credit, are likely to have higher interest rates – and that interest can accumulate quickly if payments are late. How you use your card can determine whether your interest rate increases. You’ll also need to consider the possibility that your employees could misuse the card.

Business Cards vs. Personal Cards

You probably know how personal credit cards work, but business credit cards have a few key differences. First and foremost, business cards should only be used for business expenses. Business cards typically have higher limits and higher fees and may offer rewards and tools targeted to business needs. They may come with fewer protections than consumer credit cards.

Alternatives to Credit Cards

When it comes to small-business financing, it’s smart to explore all your options. Here are a few other lending solutions to consider:

• Term loans give you a lump sum upfront, often with a lower interest rate
• Lines of credit let you withdraw smaller amounts as and when needed
• Accounts receivable financing enables you to leverage your outstanding invoices
• Merchant cash advances can be useful if you have consistent credit card sales

Choosing the Right Card

If you do decide that the perks outweigh the potential problems, here’s how you can make sure you find the right business credit card for your business and use it appropriately:

• Look for a card with no annual fee. Also look for a card with no-fee cash advances, a discounted introductory rate, or other meaningful incentives.
• Carefully choose who controls the card, and avoid issuing too many cards to employees, because this will increase your liability for unauthorized transactions.
• Pay your balance in full whenever possible and avoid interest rate hikes by making timely payments.
• Pick a card with rewards that add value to your business – and don’t forget to redeem them.

Charge Ahead

The right credit card can be a valuable tool that helps you manage business purchases quickly and conveniently while helping to support your cash flow. For more information and personalized guidance, contact your financial institution.