Can business credit cards help navigate the COVID-19 crunch?

The economic recovery post COVID-19 may take some time and so during this period, a business owner may look to secure business loans, overdrafts and other financial remedies that could help them find their financial feet sooner rather than later.

Other than secured or unsecured business loans, a business credit card may help alleviate the pain.

In fact, business credit cards could prove to be essential assets during this current coronavirus pandemic. They could be used to delay the impact of expenses on their cash reserves and help businesses stay afloat.

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Cash flow is king

One thing to keep in mind if you do decide to use a business credit card to mitigate financial issues is your cash flow.

Remember, you still need to pay down the debt on your card.

The best way to do this is to calculate your revenue over a 30 to 90 day period.

Take into account any outstanding invoices: incomings and outgoings including wages, staff costs, rents, supplier costs and whatever other expenses are required to run your business.

Once you have calculated these costs, measure them against your credit card billing cycle and plan your spending accordingly.

You may find suppliers and vendors are more than happy to take credit card payments in this current environment. Obviously, it’s better to get paid by credit than have to wait for cash to roll in. You may be able to use your credit card to pay expenses like rent, utilities and freelance contractors.

The benefits of a business credit card

There are several benefits in securing a business credit card.

  1. Higher credit limits make it easier to make large purchases that you may not have the cash for in difficult times. Just make sure you pay off the minimum monthly amount in order to avoid late payment fees.
  2. You can boost your credit rating by making timely repayments. Banks love it when you pay on time, which will make it easier to apply for further cards or a secured or unsecured business loan in the future.
  3. Business credit not personal credit, separates your business from personal expenses. Avoid using your personal credit card for business expenses at all costs.
  4. Empower your employees … with limits. A business credit card is a great way to keep tabs on employee spending whilst building a level of trust between the business and its staff.
  5. Let’s not forget about the perks. Most cards have a rewards system that could include discounts on travel, shopping and other business expenses.

What business credit card best suits you?

There are plenty of cards to choose from. InfoChoice lets you compare cards by lowest rate to highest rate, annual fees or maximum free days.

Perhaps start by comparing the cards that best suit your intended payback timing.

When comparing cards, make sure you compare interest rates, introductory periods, annual fees and special rewards programs. Determine whether any additional fees apply and always read the fine print before you sign.

If you think it will take longer than 12 months to pay down the debt on a credit card, you should consider a small business loan.

There are undeniable perks in securing a business credit card, but there are also risks.

If you are considering applying for a card to take some heat off your financial situation, measure the risks against the rewards and choose a card that best suits your needs.

The right credit card can help you through uncertain financial times, whilst empowering you to take your business forward.

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