Small business credit cards are one alternative to traditional loans that offer financing options for companies that may either be beginning or well-established, but may need a line of credit that will allow them to make purchases, like inventory, which keep the business running and will potentially allow for growth and prosperity. However, many question whether credit cards for small businesses are a good alternative to a small business loan, and the answer usually depends on not only the business, but what they plan to use their card for, the kind of card they get, and whether they will need an open-ended line of credit or simply a one-time a financial injection into their business.
One of the big arguments in favor of small business credit cards comes in the form of having constant access to a line of credit that it may either be used continuously or to make purchases during the year. As an example, if a business uses their credit card for inventory purchases, this can be helpful even if a company may only purchase inventory every so often or on a more constant basis. Small business credit cards can also be helpful in establishing a business’s credit history and score, which could lead to perks down the road if a company does need to borrow or wishes to expand and looks to get a mortgage on a new property.
However, an article on SmartMoney.com mentions that when a business is looking for a credit card to suit their needs, they may be overwhelmed with a variety of options not only from various lenders, but in the types of cards that may be available as well. Business owners may have trouble well enough looking at all the different offers from a particular financial institution or credit card company, but when it comes down to the benefits that may come with certain business credit cards, like cash-back rewards or airline miles, business owners must be careful when selecting the right card for their business as some may be drawn in by these perks but in all reality a higher interest rate on their card may negate these offers, particularly if a business carries a balance.
Business owners are therefore prompted to not only research the details and fine print of small business credit cards, but make sure that they are in a position where their business can benefit from a line of credit. Again, some companies may need only a one-time loan or financing opportunity to either get established or make a purchase, like office equipment, but if companies are continually using credit to make purchases and pay off these debts, certain types of credit cards may be available to help but if a business owner selects one of these cards that comes with particular benefits, they may end up paying a higher rate as a result.
Understandably, the type of card and the lender that a business owner chooses will be a highly personal decision, but researching the fine print, questioning whether a small business credit card is even necessary, and looking at all the benefits that may come from certain cards before making a decision will be needed since there are some companies that do find themselves in an advantageous position from simply using credit cards that come with perks, but of course this will not be the case for every business.