Choosing a credit card for your business

Are you looking to start your own business? Perhaps you've already taken the first steps to set up your business. Or maybe you have an idea and you're not quite sure how to take it to the next level. Whatever the case, if you own or are planning to start a business, you need to learn how to manage the finances. Businesses require finance for any number of reasons, including start up costs, equipment maintenance and to assist with cash flow and overheads.

The NSW Business Chamber estimated approximately 10% of Australian small businesses in 2015 struggled to access finance – that's approximately 200,000 businesses in Australia. Managing cash flows, costs and overheads is one of the top five biggest issues affecting small businesses, acccording to the Reserve Bank of Australia in 2015.

So depending on how your expenses stack up, credit cards can help small business owners manage their funds and grow their companies.

The benefits of a business credit card

Depending on the size of your business, you might be able to use your personal credit card. Alternatively, you can apply for a business credit card, which will help seperate your business and personal spending.

Either way, once you've been approved for a business credit card you can take control of your business's finances. Whether it's paying suppliers and distributors on time, managing equipment costs, freeing up cash to pay employees or simply having additional funds for new oppotunities, credit cards provide business owners with freedom and flexibility.

Choosing an appropriate business credit card limit

When it comes to choosing a business credit card that suits your situation, there are a number of factors to consider the following things

Credit card limits:

Your credit limit is the size of the liability against your name, which will be taken into consideration if you choose to take out any other credit (such as a loan) in the future. When applying for a credit card, you'll be asked what limit you want set. To help your decision, consider exactly what you'll use the credit card for and how much you'll realistically be able to pay off on a monthly basis. But remember, just because you can apply for a limit of $50,000, for example, that doesn't mean you should. Consider only applying for a credit limit for the amount you think you'll reasonably need. Your lender will take into consideration how much money your business makes to set the card limit.

Interest rates, fees and charges:

Whether you're applying for a personal credit card or a business credit card, you need to consider the impact of the interest rate and any annual fees. Depending on the type of credit card (e.g. low rate or unsecured) an annual fee can be as low as $40, with other cards charging $450 or more per annum. It's important to research these charges prior to signing up for the credit. To avoid additional interest charges, consider paying off the balance of your credit card each month, rather than the monrhtly minimum.

Credit card features:

Some lenders offer different fearures, including an interest-free period, reward program points for the dollars you spend or complimentary purchase or travel insurance.

With the right credit card, you can take the next steps towards starting or growing your business.

Click here to compare business credit cards and find one that's suitable for your business.

/Thinking%20Business%20Reports/Small-Business-Access-to-Finance.pdf – Page 9

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