Small business owners, even ones who have set up a separate bank account for their business, often hold off on procuring a business credit card, choosing instead to use their personal card for business transactions. The arguments for doing so range from not wanting to give up spending rewards offered by personal cards to not seeing the advantage in a business card, since they must be personally guaranteed by the business owner anyway.
It is true that small businesses do not typically qualify for credit cards that are not personally guaranteed by the business owner. This is unlikely to change as the issuing bank is entitled to financial protection in a case where a small business fails. Therefore, a small business owner is just as responsible for their business debt as they are for their personal expenses.
It is also true, at present, that business credit cards are not bound by the same consumer protection laws which govern personal credit cards (although expanding these protections to include small business cards has been proposed). These 2 facts may make business owners even more wary of opting to utilize a business card.
But there are several excellent reasons to utilize a business credit card for your small business.
Tracking your business expenses on a personal credit card may seem simple on the surface; you only need to carry and use a single card and the expenses are all there on the statement so you can sort out which is for business and which personal at the end of each billing cycle. But there are definite disadvantages to this practice.
Having company expenses mixed in with personal makes it very easy to miss business purchases on a credit card statement. You may be omitting some transactions that should be classified as business expenses, ultimately affecting your tax liability and your bottom line. In addition, because you track your personal expenses and your business expenses, these "cross-over” expenses are essentially being double-posted each month – once to ensure you track the business expenses, and then again to make sure you are accurately tracking your personal cash flow. This practice is costing you valuable time each month that could be spent growing your business. With a business credit card, your expenses are cleanly and easily separated and tracked for accounting and tax purposes, saving you time.
Tracking company purchases on a personal card does nothing for establishing credit in the name of your business. If you do plan to grow your business and will someday be looking for a loan or credit line to help you reach your goals, a business credit card is a great way to establish an ongoing record of financial responsibility.
There are a multitude of business credit card options available
from financial institutions, including some that offer the same types of spending rewards as personal cards. When choosing a card, choose one with options that match your spending patterns. And consider your local bank, the same one where you keep your business bank accounts, as a credit card provider. This bank will be a great resource when you are ready to grow your business, and setting up business credibility though a well-managed business credit card now will begin to establish an ongoing relationship that will be of great benefit to you in the future.