As a small business owner you may be
thinking that the last thing you need is another
bill and more paperwork, let alone the
opportunity to get your business into debt.
However, if you know the secrets to applying
for and managing a small business credit card,
it can help you run your business more
efficiently, it can mean less paperwork and it
can even save you money.







A small business in Australia is classified as one with less than 15 employees, and a medium business as one with less than 200 employees. With such a variation in the classifications, small and medium businesses are often grouped together in the classification ‘small to medium enterprises’, or SMEs, as you may also see yourself referred to. Whether you feel like a small business, you’re technically a small business or you’re somewhere in between, following are eight simple steps to applying for and managing a small business credit card.

Author: The Frank Team.

Understand the importance of comparing small business credit cards

Choosing a small business credit card is just as important as making comparisons before applying for a personal card. Making the wrong decision about a small business credit card could see your business spiralling into unmanageable debt, yet not considering the benefits of a business credit card could be equally expensive.

When comparing small business credit cards:

• Know the importance of keeping your business and personal credit cards separate. Making business purchases on your personal credit card can be very risky and should only be done as a last resort. While a business purchase on a personal credit card may get your business out of trouble in the short term, it could be getting you into personal credit card debt in the long term if you can’t pay off the purchase right away.
• Your personal credit rating doesn’t affect your business’ rating and visa-versa. If you don’t have a stellar personal credit history this shouldn’t affect your ability to apply for a business credit card. Keeping your business and personal credit histories separate also means that if your business gets into financial trouble, your personal credit won’t be affected. However, if you have a good personal credit rating, you’ll still need to build a good business rating, and using a credit card – responsibly – is a good way to build a good credit history for your business.
• Look for specialised business credit cards. Dedicated small business credit cards will have specialised reporting systems which itemise your purchases in detail each month, as well as produce a comprehensive report at the end of each financial year for you to take to your accountant. This means less paperwork as you don’t have to collect and file receipts all year, just monthly credit card statements.
• You can lend credibility to your business and avoid lost work time. Business credit cards often allow a higher limit than personal cards and this means you don’t have to scramble through your wallet to pay for a business lunch, or lose valuable work hours because you’re waiting for payment of your invoices to be able to afford new equipment.
• You’ll have 24 hour, seven day a week access to your account. As a small business owner you don’t have to worry about approvals from the board of directors, or getting the right number of signatures on a cheque. Instead you can make use of online banking systems and check your credit card account at any time of the day or night.

Know how to compare small business credit cards

We know you’re strapped for time but it is important to make meaningful comparisons of the best business credit cards available so you find one which works for you and your business needs, getting you in front of the game instead of dragging you behind.

How to compare small business credit cards:

• Know your business’ credit card needs. Before you start looking at the luxury rewards programs or the colour choices of the cards, know why you need a credit card for your small business. Do you need to make overseas purchases, or online purchases? Are you looking for a card to help you manage your cash flow or your paperwork? When you know the basic features you need – the ones which will affect your everyday business spending – then you can start looking at the fancy features which can qualify you for free flights and discount stationery.
• Consider which business extras you would use. Each small business credit card offers slightly different features, for example will you make overseas or online purchases with your credit card? Then you could benefit from purchase insurance in case there is an issue with the product when it arrives – or when it doesn’t.
• Will the card grow with you? As your business grows will you easily be able to increase the credit limit, can you add more card holders? And is the credit card provider willing to grow with your business and offer you new features as they become the industry standard, or are the features of your small business credit card set from the beginning?
• Watch out for the interest rate. Small business credit cards will entice new customers with introductory low interest rates too, but don’t be caught out – make sure to compare the standard interest rates too. Even if you have the best intentions to repay your business balance within a promotional period, you don’t want to be drowning in interest if you fall a little behind in your repayments.
• Count the interest free days on offer. Ideally you should use a business credit card within the interest free days while you wait for your customers to pay you, and at the end of the month you pay off your card balance in full. Therefore, you want a small business credit card with the longest interest free period available.
• Is the card widely accepted? If you are going to be using your small business credit card primarily overseas, you may not worry about the acceptance of American Express cards, however, not all Australian retailers or businesses accept American Express because of the higher merchant fees, and if they do, they may charge you a surcharge. Therefore, look for an American Express business credit card with a companion MasterCard or Visa card, or just go with a more widely accepted card issuer.
• Compare the offers from your existing bank first. As an existing business customer, your bank may be willing to offer you a good deal on a small business credit card to secure more of your corporate dollars. It doesn’t hurt to ask, and even negotiate a little to find out about better deals on annual fees and interest rates.

Make your business an attractive credit card applicant

You don't want a rejected credit card application on your business' credit report so before you apply, make sure you are a good candidate for a small business credit card by:

• Checking your business credit score. You may be a brand new small business without any credit history at all, but even that is an important fact to be aware of; if you approach a credit card issuer with the state of your credit history from the beginning, you can avoid a rejected credit card application by finding out you’re not eligible to start with.
• Being organised. Not only will having all of your paperwork in one place ready to go save you time in a credit card application, you will also present an organised image to the credit card provider or bank and business loans can rely on subjective criteria such as the appearance of your business operations.
• Don’t apply for more than one card. Each credit card application – approved or rejected – will appear on the credit history of your business. Therefore, make your comparisons carefully and apply for just one card at a time. If you are rejected for that card, wait three to six months before applying again.

How you should apply for a small business credit card

The application process for a small business credit card is much the same as a personal one, so make sure you:

• Have an ABN to apply for a business credit card. Business credit cards only offer their specialised services to businesses so if you haven’t applied for your Australian Business Number yet, do that before you start your credit card application. You’ll also need the details of your registered business name as the card will be issued in your business name, not your own name so bring along a copy of your business name certificate too.
• Identify yourself as the card holder. While the card is in your business name, you’ll still have to provide 100 points of identification to apply for the card on behalf of your business.
• Seek the help of an accountant or financial advisor to help you choose a credit limit. In the application process the bank may ask you what credit limit you would like – don’t be tempted to choose the highest you qualify for. Instead, meet with your accountant or business advisor and work out a budget for credit card spending and a limit you can comfortably stick to.

Know how to use a business credit card

If you may already have a personal credit card you may think you already know how to use credit, however using a credit card in your small business should follow these tips:

• Make all your business purchases on the card. It may seem like an unnatural impulse to pay for everything with credit, but the reason you have a business credit card is to track your small business expenses, so make them easy to track, and all in one place.
• Collect the rewards points. Business credit cards typically offer great rewards programs so make sure your spending qualifies for the rewards bonuses when you apply for the card. You can then be eligible for discounted office supplies or flights which can mean big savings to a small business.
• Qualify for the extras. If your small business credit card offers free travel insurance for example, make sure you make all the purchases for your trip on your card to qualify. There’s no point having a card with these great rewards if you can’t benefit.

Maintain your credit card use

As you get caught up in the spending and running of your small business, it can be easy to forget about the obligations of owning a credit card and your debt can quickly get out of control. To maintain your small business credit card:

• Never use your business card for personal purchases. It’s an important point, so we’re going to repeat it. Plus, as you settle into running your business and paying your small business credit card bill, it can be easy to slip into thinking – one personal purchase won’t hurt, I’ll pay it off right away. However, that one purchase creates an exception which you have to remember, highlight on your statement and point out to your accountant and it is not just one purchase, it is something impeding the flow of your business finances.
• Keep all your paperwork separate and organised. As well as keeping your personal and business purchases on separate cards, keep the paperwork and payments separate too. It takes very little time to set up a credit card purchases filing system for your small business as you go along, but it will cost you a significant amount of time to find all those statements at the end of the financial year when your accountant needs to see them.
• Pay off the balance within the interest free period. This is an important point to keep on top of as you settle into the ease of business credit card use. As soon as your credit card balance starts accruing interest it is costing your business money. While in some cases you can claim a portion of your business credit card interest back, it is still be better to avoid getting your business into bad debt in the first place.
• Monitor the use of your card regularly. When a monthly statement arrives for your small business credit card it can sometimes be too late to spot a spending problem. Therefore, get into the habit of monitoring your credit card use regularly – perhaps every Friday afternoon before you head off for the weekend, or every Monday morning as you ease back into the work week. Keeping in touch with your spending and your credit card balance will allow you to identify blowouts in your budget, and correct your spending if you need to for the rest of the month. Regularly monitoring your credit card use can also help you identify credit card fraud, before card abuse ends up marring your business’ good credit report.
• Talk to your bank as soon as you notice a problem. Monitoring your credit card can also help you identify those issues which won’t be solved by curbing your spending for a few weeks. Instead of ignoring the issue, speak to your bank as they would much rather help you manage your business credit card than send in the debt collectors – that costs them money too. You may be able to negotiate a better interest rate or a lower credit limit to avoid blowouts in the future.

How to expand small business credit card use

If you have been following our secrets to this point, you may be ready to expand your business credit card use as your business has grown, so find out how your credit card can grow with you:

• You can add additional cards for your employees. Giving your staff a business credit card is not a step to be taken lightly, but if you think they’re ready, you can often add a card for each employee and set a different limit and different rewards and benefits for each.
• You won’t have to track petty cash. This can save you even more time because when your team members all have their own business credit card they can make incidental purchases for the company in an instant, without having to make notes in a petty cash tin, which you then have to reconcile at the end of the week.
• Your staff won’t have to wait to be reimbursed for their business purchases. Reluctance on the part of your employees to make purchases for the business on their personal credit cards could cost your business time, money or even an important sale. Instead, your staff won’t have to wait to be reimbursed for a business purchase if they use the company credit card to take advantage of every opportunity.
• Are you ready for an increased credit limit? Before you have gotten to this point, your bank may have already offered you a credit limit increase, but make sure you can afford it before you accept. If your business has grown as strongly as it appears to have, you may need a higher limit to cover higher expenses, just make sure you are invoicing for higher amounts too, to repay that higher credit card balance.

Never forget it’s a credit card

Separating your business credit from your personal credit can easily give small business owners the feeling they can spend what they like, when they like because the business will take care of the consequences. However, as a small business owner, you are the business, even if your business credit card is not in your name, you are still responsible for the success of your enterprise, so don’t every forget the rules you would apply to any responsible credit card use:

• Don’t spend just to get rewards. No matter how much you need those business class flights or that free toner cartridge, it’s not worth accumulating insurmountable business debt – and bad debt at that.
• Don’t buy things you don’t really need, or things you can afford. Just because your business credit card is there, don’t use it for everything in sight. Consider whether your desk really needs replacing or you just want a shinier one, make the decision to keep your spending under control, and your business within budget before you make purchases on your business credit card you can’t afford to repay.
• Repay the debt within the interest free days. Another important point worth repeating because once you start accumulating interest charges on your business credit card, you will have to work doubly hard to pay off your purchases and your interest and it is easy to fall behind on your payments and let that debt mount up.
• Don’t use your card to show off. Business credit cards are typically gold or platinum cards and it can be tempting to pull them out at every opportunity to show off to friends, family, colleagues or clients. However, if you are spending on your card for the sake of spending, rather than buying something your business really needs, or paying a bill your business owes, then you are accumulating bad business debt for even worse reasons.

Using a small business credit card responsibly can help you grow your business, present a professional image to your clients and competitors and make the management of your business finances easy. Just remember these eight simple secrets, otherwise you could be jeopardising your credit, your clients and your business dreams.

This article was written by Jeremy Cabral who is a regular writer at Credit Card Finder, a credit card comparison and application service.

 

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