Business credit and a business credit card.
Is it necessary? Depending on the type of business, you might need a business credit card or a line of credit as a business loan.
Let's take a look at why you would need a business credit card.
If your business will require an inventory of goods to operate,if you travel frequently, use autos or trucks in your business,have staff that will need to submit expense accounts, and so on, then you probably should take a serious look at a card.
Let's talk a bit more about each different need or needs.
A Need to Extend Cash Flow:
For any business that relies on a consistent cash flow to pay for supplies, etc.,like hair salons or landscapers, a credit card can help you buy items from suppliers before you even invoice a customer.
Let's say you're a landscaper. You might use a credit card to buy materials from a wholesale nursery and then pay it off when the statement comes. Usually, by this time your customerhas already paid you. Using a credit card like this means, the money paid out doesn't need to come out of your cash accounts.
If your business type would have this type of situation,then you should look for a business credit card with high credit limits and benefits for paying off within 30 days.
If you have a customer billing cycle that is longer than 30days, then you better look for a low interest credit card so it won't hurt so bad if you have to carry a balance for awhile.
Flexible Credit Limits:
Credit limits for a business credit card come in two ways.
One is preset limits by the credit card company. The other is no-preset limits. Credit cards with preset limits are usually pretty good and normally don't charge an annual fee.
The others do charge an annual fee but offer more flexibility.
Business Credit Cards with Rewards:
Any Business that requires frequent travel and/or client entertaining should look at credit cards that offer reward benefits, like frequent flyer business credit cards which can and do offer benefits both for making charges to their cards and for flying with their airline.
Maintaining proper records can be crucial for small business expense reporting and profitability analysis.
Credit card statements – and in particular, year end statements are invaluable for small business to monitor spending by category, and certainly simplify tax preparation.
Don't overlook the advantages of using a credit card and how it can simplify your bookkeeping.
All your business charges can be put on one credit card. This means you can keep track of your business purchases and it keeps your business and personal charges separate, which is a must for the small home-based business or for a huge corporation.
Some credit card companies even give you monthly, quarterly,and annual itemized statements.
When it's time to do your taxes you can take this information to your accountant or CPA, which again will save you both timeand money. Some reports even automatically categorize yourpurchases based on common tax return deductions like;
So, armed with this information and some analyzing of your needs, maybe a credit card is a good idea.
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