Possibly the most confusing aspect of choosing a business credit card for a new business is wading through the seemingly endless lists of incentives and perks that are on offer to the small business owner. These can vary from things such as cashback deals on selected services and supplies to reward schemes that offer discounts on petrol or hotel accommodation. These perks are designed to benefit the entrepreneur and, ultimately, save the business money. This fact, however, doesn’t necessarily make the selection process any easier.
In order to make the most effective choice, the business owner is well-advised to do a little ‘homework’. Firstly, it is a good idea to work out just how much credit the business could and should require. This can be done by analysing the projected turnover of the business and weighing it up against monthly outgoings and expenses, such as wages and office supplies. Once these figures have been compared, it should be relatively simple to decide just how much credit would benefit the company and help begin the selection procedure.
Next it is worth considering just how the card will be used, by whom and for what. If cards are to be issued to employees, it may be worth considering a business credit card that offers the facility to ‘cap’ monthly spending on individual cards, giving the business owner more control over potential overspend. A card that comes with software to allow transactions to be tracked online can also provide additional control margins. Alternatively, the card may be used solely as ‘back-up’ in times of cash flow crisis, allowing wages and services to be paid for and giving the company cash account a period of grace whilst customer payments are processed. In this instance, a business credit card with an introductory offer of 0% APR would be helpful, as long as the APR that follows the introductory period is low.
When starting out, it is important that the business owner’s personal accounts and the accounts of the business are kept separate, and most business credit cards offer this capability. This way, paperwork is kept to a minimum and all business transactions will have an online record of where and when they took place, as well as for how much.
Once the amount of credit to be borrowed has been decided upon, the next piece of homework is to figure out just how much the company can comfortably afford to repay each month. This can have a massive influence on which card is most suitable for a company; certain cards may have great perks attached but, if the interest rates involved are too high, there may be little point in pursuing them. Instead, it is better to focus on details that will constantly benefit the business, rather than on the money-saving advantages that may be of little use during times of economic stress. Having said that, the deals and incentives that are on offer can also be made to work for a business. If there are repetitive payments being made from a business to suppliers, for example, it can be worth sourcing a card that offers cashback or discounts on these services or products. Businesses that require a lot of travel from employees can also make savings on things like petrol, Airmiles and hotel accommodation. Once again, the question, “who will use the business credit card and for what?” becomes very pertinent.
Business plastic can be a very dynamic and useful tool for any company. By continually questioning its purpose, the entrepreneur can build up an ‘identi-kit’ picture of just what the card ought to do for the business and find the one that corresponds with those requirements.