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Business Credit Cards - the Smart Way to Improve Your Cash Flow

Hannah Callen asked:

One of the biggest concerns for small and medium size businesses (SMEs) is juggling time and company finances, particularly as the economy slips further into a financial downturn and priorities shift. Business owners are always looking for new ways to give themselves a little bit of financial breathing space that won’t unbalance either their business or their books. Using a business credit card could be one weapon that could help to minimise the day to day problems that many businesses encounter, giving them the chance to reappraise their cash flow and give them more control over their daily finances.

A business credit card (unlike a personal credit card) can offer SMEs greater financial flexibility and provide an alternative to expensive loans or debilitating overdrafts. If your company only needs a relatively small ‘fighting fund’ to cover daily expenses or the occasional payment to suppliers, a business credit card could be the answer. By choosing a card that best suits your company’s needs, you can reduce the amount of ‘empty money’ you pay on overdraft interest payments or loan interest charges. Business credit cards are easily managed and can certainly help a business to survive a lean month by ensuring suppliers are paid on time, thus keeping open other lines of credit essential to the operation of the business. If managed carefully it can also improve the credit rating of a business - something that, in the current climate, where banks are reigning in on business loans to minimise their exposure to ‘bad debt’, puts a business on much firmer ground.

In 2004, the Warwick Business School carried out a study of 2,500 businesses that looked into financial options for SMEs. The study found that business credit cards were the financial option of choice for 55% of small and medium sized businesses. 53% of SMEs had overdrafts, 27% used hire purchase agreements or leasing contracts and only 3% cited equity finance as their primary financial source. This study, although carried out before the current recession kicked in, is still applicable today and business credit cards are still an integral part of business life. The major benefit of a business credit card is that it gives a company a separate source of income from their main cash flow. It can also provide them with an extended, interest-free credit period when dealing with suppliers. This ‘grace’ period between payment to a supplier and the money being removed from the company’s assets via credit card payment can sometimes mean the difference between survival and closure for many small businesses.

Time management is another crucial factor, and business credit cards can also be a boon to a business in this aspect. SMEs waste valuable time (and money) by carrying out labour-intensive administrative and accounting processes. By employing a business credit card as part of an overall fiscal strategy, the time spent on complicated accounting (particularly when dealing with expenses such as travel and accommodation) can be reduced, as the statements provided by the card supplier will give a complete breakdown of monthly expenditure on all cards. This lets the accountants monitor expenses, supplier payments and other transactions quickly and easily. It also ensures that personal expenditure and business costs are kept separate, again allowing the business to chart ‘cash in’ and ‘cash out’ much more easily.

Most business credit cards allow multiple users to access the same account by issuing additional cards for employees. This gives SME owners the reassurance that employees have a payment tool that can be collated into a single account. Pre-set limits also control the amount of spending additional card holders can make, ensuring that the company does not inadvertently overspend and allowing owners to monitor individual employees’ spending. With the advent of online banking this monitoring can be carried out instantly, giving a business owner the chance to stop any overspend in its tracks. Statements can also be a useful cost-cutting tool, giving a business a window on their expenditure and if necessary making fundamental changes in their organisation to reduce overheads such as travel expenses.

There is a wide range of business credit cards available, so it pays to shop around to find the best offer that suits your particular business needs. Some cards offer ‘reward schemes’ with offers on petrol or accommodation, so if your business involves employees travelling extensively this option could save your business money in the long term. Others offer attractive APR rates or interest-free periods, which may be more suitable for a new business trying to find its financial feet. By choosing carefully, a business credit card can be an integral part of an overall financial policy that benefits a business both in the short and long term, particularly in a chilly economic climate.

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Tags: Breathing Space, Business Credit Card, Business Credit Cards, Business Loans, Callen, Company Finances, Fighting Fund, Financial Flexibility, Financial Option, Financial Options, Interest Charges, Leasing Contracts, Medium Size Businesses, Medium Sized Businesses, Overdraft, Overdrafts, Personal Credit Card, Purchase Agreements, Smes, Warwick Business School

Small Business Startup Loans - How Does One Acquire Finance For His Or Her Business?

David S. Stratton asked:

It is inevitable that every business owner will need finance to properly run his business. The question that is always at the mind of every business owner is how will finances be pumped into the business to make it profitable? This is true for every business owner, be it on a large or small scale or on an international or local scale. There will be so many responses to the above question. The responses will depend on the person providing answers to the question as well as it may also depend on the particular period in business at which such as question is being tendered. Despite the varying responses that may be put, all these ideas about getting a business being financed will turn to a single direction. The following lines are meant for those coming into businesses, who want to identify the various options of financing their business and who will want to determine which of these options is the most appropriate for their businesses.

Individual Finances

There are so many business owners who will individually and single-handedly provide the money that is needed by their businesses. The sources of such type of capital may spring from their personal savings and other forms of capital which solely belong to them. However, these sources of finances are really workable if the business owner has substantially built up a good amount of money. If the capital is in the form of assets, it will be easy to dispose these to get some cash for the running of the business. If you intend to make use of capital through the credit card as a means of financing your business, you must take some reasonable precautions. You must be aware that this source of capital is usually best for interim financial provisions.

Angel Financing

This is yet another good way to oil the machinery of your business. When we make reference to this type of financing, we are referring to that type of financing that is often provided to new businesses. This is commonly found in the United States and most upcoming markets. In this type of financing, a group of affiliates belonging to the informal risk sector combine their resources to finance a business. What is usually done is that a business suggestion is proposed to a business owner and if the business owner finds the suggestion interesting, he will be given the option to get the business financed by the group of financiers. This group will also have the option to ether finance the business and take part in running its daily affairs or to stay aloof from the day to day running of the business.

Venture Capital

This is another way of making finances available to a business. In such a case, the business owner will approach a proficient financier and this must be a financier will is willing and capable to venture his or her money into businesses that are not only at the inception, but equally to businesses that have future prospects of expansion. Another form of financing related to this is the corporate venture capital. This is an idea often used by corporations to endow capital in some relatively young but vibrant businesses that may have some relation with these big corporations.

Credit from Banks

This is a source of finance that is commonly sought for. In most cases, either secured or unsecured loans may be provided to business owners. However, lending institutions will warrant that you provide some form of credit worthiness which will have to be carefully scrutinized ahead of making a decision if the loan will be given or not. It is sometimes easier for an unsecured loan to be given to experienced or well established businesses than new ones. But a secured loan will be provided for all types of businesses.

If You Want To Get The Financing You Are Seeking For:

Make sure you find out what the financing is all about, opt for a proficient group, set an objective, make sure your business is properly registered, investigate what type of financing will be suitable for your business and make sure that you have established the necessary connections.

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Tags: Amount Of Money, Angel, Assets, Business Loans, Business Owner, Business Owners, Business Startup Loans, Credit Card, Finance Business, Finances, Financial Provisions, Financing Your Business, Owner Finance, Personal Savings, Providing Answers, Running, Small Business Startup, Small Business Startup Loans, Source Of Capital, Stratton