Stay Cash Positive with a Business Credit Card

Credit cards are one of the most common ways to finance business expenses. Thirty-one (31%) percent of business owners report using a card at least once in the past 12 months to meet capital needs.¹

One of the biggest financial problems plaguing businesses of all shapes and sizes is cash flow management. More than a quarter (29%) of new business owners cite lack of operating funds as the reason their startup failed to thrive.² It's not hard to imagine the challenges of maintaining a healthy account balance when income is scarce and unpredictable. Yet even the most profitable multi-national corporations struggle to be cash flow positive due to complex investments in inventory, facilities and other operational expenses.

Small but mighty, credit cards provide a much-needed lifeline for cash-strapped entrepreneurs—when used responsibly as part of an overall financial plan.

Float Short-Term Expenses

Deploying credit cards to cover short-term expenses can be an effective financial strategy if you are confident of your ability to pay off the card on time. Use the grace period between monthly payments to let your account receivables catch up with your account payables. Then pay off your credit bill as soon as it's due to avoid carrying a balance and accruing interest on your debt.

Manage Employee Spending

Many business owners hesitate to issue corporate credit cards to employees because they fear irresponsible and reckless spending. Yet advances in technology have made it easier than ever to track and set limits on employee spending, making your budget more predictable. Many financial institutions and lenders have online banking websites and mobile apps that let you monitor your accounts while on the go. For example, BECU Business Members can view and manage all employee card activity, all in one place through their Online Banking portal.

Build Your Business Credit Score

Each charge you or your employees put on the corporate card builds your business' credit history. Pay off your balance in full each month before the due date to net your business the highest credit rating and cost you $0 in interest on purchases—benefitting both your credit score and your cash flow. You'll be wanting a high credit rating when you seek out loans and other sources of funding in the future.

Just as lenders look at your credit rating when assessing your credit risk, you can request the Supplier Evaluation Risk (SER) Rating of vendors before choosing to do business with them. Stay on top of your accounts receivable by identifying credit risks and reconfiguring your budget to anticipate late payments.

Take Out A Cash Advance

Credit cards aren't limited to plastic-only payments. Many business cards offer cash advances, letting you convert your credit balance into cash withdrawals. While the allure of instant cash is enticing, beware that cash advance withdrawals accrue finance charges immediately.

Although the BECU Business Cash Back Credit Card does not charge a separate fee for cash advance withdrawals, many financial institutions do. And, depending on how much you borrow and what your credit limit is, these charges are on top of any annual membership fees and Annual Percentage Rate (APR) interest fees accrued for carrying a balance.

Save More With Rewards

Nearly a third (29%) of American small-business owners use credit card rewards to pay business expenses. And 1 in 10 use rewards to help their business' bottom line.³ Unlike traditional consumer cards, business cards often come with higher credit limits, reward programs and insurance coverage. The dollars saved by taking advantage of these perks can really add up for your company over time.

Points-based rewards cards earn you discounts on certain business-related purchases, such as travel, office supplies and phone bills. And cash rewards cards return a percentage of monthly spending on purchases made not just by the primary account holder, but by every employee cardholder as well. This puts money back into your business for doing what you do every day: spend money.

Business credit cards can also offer benefits similar to a typical consumer card like purchase warranty protection and travel insurance. Hopefully you won't ever need to take advantage of these types of perks, but you—and your accountant—will be glad to have them should you ever find yourself confronted with a damaged rental car or fraudulent purchase.

Grow Your Business With Credit

When used intentionally as part of a coordinated financial plan, credit cards are a useful tool for managing day-to-day business cash flow. To learn more about the BECU Business Cash Back Credit Card visit www.becu.org/cashrewards.