Don’t Just Accept Credit Cards - Use Them in Your Business Too
By: Gerri Detweiler
Business credit cards have gotten a bad rap. Many entrepreneurs assume that it’s better to use debit cards to pay for cleaning supplies and tools, as well as for larger purchases, and that taking out any kind of credit is a sign of weakness.
In fact, there are many perks to using business credit cards that can help your window washing company get ahead. You may not be one of the 52% of small businesses that use credit cards yet, but after you learn the benefits to doing so, you’ll want to join the bandwagon.
Keep Cash Flowing
Because you don’t get paid until after a job’s done, you might not have the cash to cover your supplies in advance. Dan Downey, owner of Dan Downey Window Cleaning LLC in Orangevale, California, says he uses business credit cards for short-term financing to purchase supplies.
"I use a combination of business and personal credit cards. If it’s a big purchase I usually go with my business credit card. For smaller purchases I might use a personal card."
Charging smaller expenses keeps your cash free for transactions with companies that perhaps don’t accept cards.
And if you find yourself in a cash crunch, you may find it difficult to get access to funds quickly through traditional loan routes. Let’s say your pressure washing machine breaks and you have a job later today. You don’t have the cash to buy a new machine, and you certainly don’t have time to apply for a short-term loan, but with a business credit card, you can replace the machine today without stressing.
Build Your Business Credit
Just like you want to build your personal credit score to get better rates on credit cards and personal loans, you should also work to build and improve your business credit. If you’ve never taken out a business loan, worked with vendors who offer payment terms, or used a business credit card, you likely don’t have much of a business credit history for lenders to base financing decisions on.
On the other hand, if you have a business credit card or two and pay your balance in a timely manner, you’ll start to build your business credit history. Even if you don’t anticipate needing to take out a business loan now, down the road it might make sense if you want to expand your window cleaning business. Establishing your positive business credit habits now paves the way for you to get approved for a small business loan at a great rate later, should you need it. (Here’s a list of small business credit cards that help you build business credit.)
Reduce Your Risk with Business Credit Cards
It’s scary stuff: in 2018, the Federal Trade Commission received more than 1 million fraud reports with $1.48 billion in losses. Some of this fraud happens when hackers use financial accounts to make unauthorized transactions. Credit cards are a lot less risky than debit cards when it comes to fraud.
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Imagine this scenario: someone hacks your debit card number and makes $2,000 in purchases...which puts your bank account in the negative. You start racking up overdraft fees and can’t make any purchases until your bank investigates the charges. The impact this could have on your business is frightening.
On the other hand, a credit card company limits your liability in the case of fraud. If your credit card is lost or stolen, you won’t be responsible for more than $50 in unauthorized charges...or you might not be liable at all, particularly if you still have the physical card but the account number is stolen.
Another way business credit cards provide more value over debit cards is that, should your account be compromised, it’s your line of credit that’s impacted, not your personal funds. So your bank account can never go in the red if your credit card gets stolen or hacked.
Credit card companies are usually pretty prompt at investigating fraudulent claims and removing unauthorized charges from your account, but you’ll need to be diligent about monitoring your credit card statements to ensure that there’s no unusual activity.
Earn Rewards on Purchases
Who doesn’t like to be rewarded for spending money? More and more business credit cards offer rewards like cash back on purchases or points you can use to redeem for products and travel. Assuming you pay off your credit card each month, it’s like the credit card company is paying you to use it!
Charging your window cleaning supplies and making larger purchases with your credit card can help you rack up those rewards quickly. If you take your reward in the form of cash back, you’ll reduce what you spend on your purchases, which increases your profit margin.
Using a business credit card effectively can help your window cleaning business grow faster. The key is paying off your balance each month as often as possible, or at least pay the minimum on time. Keep an eye out for annual fees! Some cards waive the fee for the first year, but make sure any fee you pay after that is worth it in terms of the rewards you’ll earn.
Also keep tabs on your business credit report so that you can spot any discrepancies or inaccuracies that might negatively impact your credit scores. It’s up to you to use credit wisely and to build your credit history over time.
About the Author:
Gerri's been guiding individuals through the confusing world of finance and credit for 20+ years. She is the author or coauthor of five books, including her most recent, Finance Your Own Business: Get on the Financing Fast Track. Today, Gerri serves as the Education Director for Nav, an online platform that matches small business owners to their best financing options and gives free access to personal and business credit scores.
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