Are Credit Cards a Viable Option for Business Financing?

Co-Founder / Partner at Lendzi

Credit cards have gotten a bad reputation over the years and many companies wouldn’t even consider using them as a financing option. It is certainly true that the misuse of credit cards can lead to financial ruin, especially for companies that put all their expenses on a card and then face double digits to pay them off.

But a credit card is simply a financial tool, and when used properly, it can give a business a significant financial boost. Here are some of the reasons why you might consider using a credit card as an additional financing option for your business.

Easy Approval

One of the main reasons a business might use credit cards is that they are easy to obtain. Instead of visiting a loan officer and producing boatloads of financial documents, you can usually apply for and approve a business credit card directly online. All you normally need is a good credit history and possible proof that your business exists.

0% financing

If you can score a business credit card with an introductory rate of 0%, you’ve found gold. Many businesses need new equipment, extra inventory, or some expensive items that they just don’t have the cash flow to buy right away. But with a 0% credit card rate, you can go ahead and make the necessary purchases and take a whole year or more to pay them off. This offers the incredible combination of low costs and flexibility that most traditional loans simply cannot match. Just make sure your projected cash flow over the next year is more than enough to pay off your purchases, or you could end up in a bigger financial hole than when you started.

You don’t need to use your full credit limit

If you finance your business with a traditional loan, you receive a lump sum of dollars that can stay in your checking or savings account for months — while accruing interest costs along the way. This can force entrepreneurs to spend all that money, even if they don’t really need it. You don’t have that problem with a business credit card. You only use your credit line for purchases that you really need, leaving the rest of the credit line ready for any future expenses.

Big Sign Up Bonuses

One of the most immediate benefits of using a business credit card is the great sign-up bonus you can usually get. By simply spending the money your business normally does on a daily basis, you can accumulate 100,000 or more points or miles that in some cases can be converted into plane tickets, hotel stays, or even cash. Since most credit card points or miles are worth one cent or more, a credit card signup bonus can easily be worth at least $1,000. This can more than offset the costs or fees associated with the card, especially if you use the card with care.

Significant ongoing benefits

Using a business credit card properly can provide not only an inexpensive financing option, but also significant ongoing benefits. Right now, the business credit card industry is so competitive that it’s pretty easy to find a card that provides the benefits your business needs.

For example, if your business expenses are primarily for airfare and hotels, it’s easy to find a card that offers significant travel rewards. These can range from things like airport lounge access and cancellation insurance to elite hotel status or a Global Entry credit. Travel cards also typically offer triple, quadruple, or even five times points or miles for spending in certain categories, such as airline tickets or trips booked through a credit card company’s online travel portal.

If your business is more regionally based, you should be able to find a card that offers bonus points or miles for shipping, internet, or social media. Some other cards simply offer cashback, which relieves your company’s cash flow somewhat.

It comes down to

If you’re like most businesses, using a credit card as your only source of funding is probably not a good option. However, if you already have various forms of working capital, a credit card can be a perfect complementary financing option. From the various perks and benefits cards can provide to the potential for 0% financing for a year or more, a business credit card can boost your business with little to no net cost to you. As long as you can stick to your typical spending habits and pay your bills each month, a business credit card can be a great short-term financing option that pays significant dividends.


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