Most business owners need resources to sustain themselves in the early stages of their company. Owners everything from…

Most business owners need resources to sustain themselves in the early stages of their company. Owners want everything from computers and phones to specialized equipment.

But getting a new business can be challenging. That’s where the business credit card comes in. A business credit card can help you find the business capital you need, build your business credit history, and reap the benefits along the way.

Even if your business is well established, there are many reasons to consider getting a credit card for daily expenses. Keep reading to find out if you need a business credit card.

[Read: Best Business Credit Cards.]

How do business credit cards work?

A business credit card is a revolving credit line that you can use to pay for business expenses. It works the same way as a personal credit card, but is designed for business expenses rather than personal or family needs.

While you can technically use a personal credit card for business expenses, here are some comparisons with business cards and personal cards and why a business credit card is generally better.

High credit limits. Small business credit cards often offer higher credit limits because businesses often cost more than families. If you use a personal card, you can compile a large loan amount that could affect your credit score.

Build business credit. Personal credit cards, which are important for your organization’s future financing, cannot be used to build your business credit history.

Business-oriented rewards and benefits. If you spend a lot on common business categories such as office supplies, advertising and shipping, you can get business credit cards that offer bonus rewards at that cost. Also, business credit cards often offer other value-added benefits to business owners, such as the ability to set expense limits for free employee cards, detailed reports, compatibility with accounting software, and more.

Different types of business credit cards

Like personal credit cards, there are many different types of business credit cards. You can choose one based on your business needs and personal preferences. Options usually include:

Back cards in cash. If you are interested in getting cash back into your business or using it for personal expenses, there are cards that offer a flat reward system or bonus rewards system in certain categories.

Travel cards. If you choose to earn points and miles that you can use to pay for business or personal travel, there are usually many cards that offer flat-rate or level prizes with huge registration bonuses.

0% APR cards. Although 0% Annual Percentage Credit Cards are more common among business credit cards than personal, there are very few strong options. If you have a lot of expenses but do not have enough money to pay them right away, these can help.

Protected Cards. Business credit cards usually require personal credit. If your credit is weak, your only option may be a secure business credit card. These cards usually require an advance guarantee equal to your credit limit, but it can still be useful to help you build your business credit history.

If you are thinking of getting a business credit card, buy it and consider your options for deciding the right one for your organization.

“Decide which card offers the most attractive rewards and services package that best suits your business needs,” says Michael Fisher, a financial planner and asset consultant at Circle Wealth Management. If you are looking for flexibility in cash flow, but do not plan to balance, Fisher recommends a reward card with a large registration bonus. He added: “If you expect to pay some revolving debt, the interest rate may be much higher than the registration bonus.”

Benefits of Business Credit Cards

There are many ways a business credit card can add value to your small business. Here are some of the great benefits that one can offer:

Build your business credit history. Business credit cards can be a great way to set up a business credit point that can be challenging for new business owners.

When you use your card responsibly and make your payments on time, it can help you build your business credit to the point where you can apply for other affordable business types.

Keep in mind that there are other steps you can take to build a business credit history, such as obtaining an employer ID number, applying for a DUNS number, and more.

Manage your cash flow. Like personal credit cards, business credit cards allow you to make purchases immediately without having to pay for them. Each month, you will receive a statement, and your deadline is usually a few weeks later, which will give you time to earn the money needed to pay your bill.

You do not have to pay any interest as long as you pay your bills on time and in full. While you may not be able to pay your bill in full, your business credit cards allow you to balance some of your cash flow.

“A small business credit card allows you to go through the many flows and streams that are common in many business cycles,” Fischer said. “Business owners can take out loans and pay bills in a high-income period.”

Simplify labor costs. It may take some time to process the employee’s refund. Instead of going through that process, consider adding employee cards to your business credit card account.

Employee cards are usually free, and you can set spending limits to avoid misalignment.

Get rewards. Rewards received through a business credit card in the form of cash refunds, points or miles are yours to use as you wish. Many small business owners are rewarded with thousands of dollars for continuing to build their businesses or for personal reasons.

Some have used credit cards to give extra benefits to their employees, such as gift cards, vacations, and so on.

Simplify accounting and taxes. To build a successful business, it is important to distinguish between personal and business expenses, and a business credit card makes it easy to distinguish between the two.

“Never mix your personal and business finances,” says Rob Estefanos, founder of CFO Perspective, which provides financial advice to small businesses. “Integrated accounts create a nightmare for tax preparation. It is very difficult to monitor the profitability and cash flow of your business. Financial consolidation can jeopardize the limited legal rights of some companies.

In addition, many business credit cards offer easy synchronization and import with popular accounting software, so you don’t have to manually update your expenses.

[Read: Best Bad Credit Loans for Small Businesses.]

Weaknesses of business credit cards

While there are many obvious reasons to consider getting a business credit card, not all are positive. Here are some pitfalls to keep in mind

A Personal security is required. All small business credit cards require personal insurance when applying. This means that if your business is unable to pay the fees on the card, you are legally responsible for using your personal property.

Because businesses have a high rate of bankruptcy in the first few years, you are taking that risk even if you have limited liability companies that protect you from other debts.

They can affect your personal loan. When you first apply for a small business credit card, the card issuer will ask serious questions about your personal credit reports. While this may not have much effect on your credit score, it could affect your results if you apply for multiple credit bills recently.

In addition, some business credit card providers report negative information to consumer credit bureaus. As long as you pay your bill on time, you can avoid this.

Still, other card issuers, including Capital One and Discovery, will report all of your account activity to consumer credit bureaus. This means that if you have a large balance in relation to your credit limit, it could damage your personal loan even if you pay off your balance every month.

When you buy a card, find out how that card issuer reports to the consumer credit bureaus and how.

They can be expensive. While business credit cards are more affordable than merchant financing and other forms of short-term financing, they are still not cheap. If you think you need to balance in the long run, a business credit card can cost you a lot of money in interest payments.

Do I need to get a business credit card?

While using a business credit card can add value to your business, you and your company are still financially responsible. Take your time with the pros and cons of credit cards and how using one can help you build your business.

If anything, use it as a way to put yourself in a better position to get the financing you need to expand your business along the way.

“You want your company to be financially strong, so owners no longer need personal insurance,” says Stephen.

[Read: Best Small Business Loans.]

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