4 Reasons To Max Out Your Business Credit Card
As a business owner, one of the biggest questions that you will face is how to get the most out of your different resources. Likewise, another big question that you’ll face is where to find the most advantageous credit terms. Luckily for business owners, there is a way to combine these two things and make a responsible decision for your business. Using a solid business credit card and maxing that credit card out can have many benefits for a smart, sensible owner. So why should you max out your business credit card? Here are four of the top reasons why that is such a good idea.
1. Cash Back Aids the Bottom Line
Studies suggest that just less than 40% of all business are profitable over the long run. Some industries have it more difficult than others, as well, as food service and retail businesses tend to fail at a higher rate than their service-based counterparts. What this means for business owners is that you must do whatever it takes to add little bits to the bottom line.
When you max out a business credit card instead of using cash reserves or some other form of credit, you are giving yourself a significant boost in the form of cash back. Many business credit card providers give a hefty percentage of all purchases back to the card holder. This percentage is even higher for some types of purchases, so it is smart to buy things like gasoline on a credit card if you have those expenses. Even if the amount of money you’re getting back seems small in comparison, it can add up over time. A smart business owner will recognize this and maximize his use of the credit card in an effort to aid the bottom line.
2. Travel Rewards Make Expanding a Business Much Easier
One of the things that most business owners struggle with is expansion. For most, there are huge markets that can be exploited elsewhere and a smart business plan might allow an owner to make significantly more profit over time. Owners struggle to take advantage of these opportunities, though, because travel expenses stand in the way. These expenses seem extraneous for business owners who are faced with the day to day grind.
When you max out your business credit card, you often earn rewards that can be applied to hotels, airfare, and other travel-related costs. Many business credit cards have reward programs that provide free hotel nights. Many also have sky mile programs where business owners can earn free flights just for spending money on their cards. With the help of these freebies, individuals can expand their businesses and take advantage of those opportunities that might present themselves in other parts of the country. If the free stuff is there, it just makes good sense to take full advantage of it.
3. Preserving a Business’s Fiscal Liquidity
One of the major issues for most businesses is liquidity. Simply put, money often comes in and goes out at such a fast rate that businesses don’t have cash on hand to make a bunch of purchases. When a business does spend its money, it is essentially taking those resources away from other potentially profitable ventures. This is especially true for businesses that must buy a ton of inventory during a given month. Because liquidity is such a big deal, businesses must do everything in their power to preserve the cash reserves that they do have.
Maxing out your business credit card is a really good way to make this happen. When a business owner makes all of the necessary purchases on a credit card rather than using the business’s cash reserves, he can then turn and use the cash for investments or just as a contingency fund. You never know what is going to happen in the business world and you never know when an emergency cost might pop up. Having cash on hand for those purposes is essential to maintaining solvency for even the smallest of businesses. A smart business owner will use a business credit card for its buying power while maintaining
cash reserves for their primary purposes.
4. Easier Tracking of Expenses
Another reason to max out your business credit card has to do with bookkeeping. Ask any business owner who has had some success and they will tell you the same thing. They will tell you that a good business is built on information. A good business model is one where individuals know exactly how much money is going out and how much money is coming in. This can be really hard when one makes purchases in cash. One advantage to maxing out your business credit card is that you can better keep track of your expenses on a monthly basis.
This makes the most sense for people whose business expenses are of the daily variety. The more small purchases that need to be made and the more small expenses that come up in the operation of a business, the more important it is to keep clean records. Maintaining a solid business credit card requires one to make payments monthly and to stay on top of record keeping. In a way, this forces businesses to become more efficient in how they handle their money and how they keep up with their in and out. A smart owner could certainly see the value in this practice.
Your Business’s Credit Needs in Summary
Overall, it just makes sense to max out your business credit card if you have a solid card with a reasonable rate. Given the large number of good card options out there today, business owners can find a card that provides them with an interest rate that’s reasonable. Likewise, business owners have the option of simply paying off the card each month in an effort to earn cash back and travel rewards. When you add in the fact that this helps with record keeping and ensures long-term liquidity, maxing out a business credit card becomes a no-brainer decision.