LLCs, or Limited Liability Companies, are a popular business structure for many entrepreneurs due to their flexibility and limited personal liability. However, managing the finances of an LLC can be challenging, especially when it comes to large purchases and managing cash flow.
Business credit cards can be a useful tool in managing these challenges and separating personal and business expenses. In this article, we will discuss the benefits of using business credit cards for LLCs, the different types of cards available, and how to apply for a card that best suits your business's needs. We will also provide tips for using a business credit card to maximize its benefits.
Benefits of using a business credit card for LLCs
1. Building credit history for the business
One of the most significant benefits of using a business credit card for your LLC is that it can help build a credit history for your business. Having a good credit score is essential for securing financing, negotiating better terms with suppliers, and accessing other credit products. By using a business credit card and making timely payments, you can establish a credit history for your business, which can help you in the future.
2. Separating personal and business expenses
Using a business credit card can also help you separate personal and business expenses. Mixing these two types of expenses can create confusion, make it challenging to track business expenses accurately, and make it challenging to prepare accurate financial statements. A business credit card can help you track your business expenses, making it easier to manage your finances.
3. Managing cash flow efficiently
Managing cash flow is a significant challenge for many LLCs, especially in the early stages of the business. A business credit card can help manage cash flow by providing access to a line of credit when needed. This can be especially useful for unexpected expenses or during slower periods when cash flow may be tight.
4. Access to higher credit limits
Another benefit of using a business credit card is that it can provide access to higher credit limits than personal credit cards. This can be useful for large purchases, such as equipment or inventory, that may be beyond the limit of a personal credit card.
5. Earn Rewards
Many business credit cards offer rewards programs, allowing you to earn points or cash back on your purchases.
Types of business credit cards for LLCs
There are several types of business credit cards available for LLCs, each with different features and benefits. Below are some of the most popular types of business credit cards for LLCs.
Card from American Express
The Card from American Express is a popular business credit card for LLCs, with several features and benefits that can help manage business expenses. One of the key benefits of this card is that it offers a 0% introductory APR on purchases for the first 12 months. This can be useful for managing large purchases, as it provides a year of interest-free financing. Additionally, the card offers rewards for purchases at gas stations and office supply stores, which can help maximize rewards on everyday business expenses.
Ink Business Preferred Credit Card
The Ink Business Preferred Credit Card is another popular business credit card for LLCs. It offers a large sign-up bonus and rewards for spending on advertising, travel, internet, cable, and phone services. Additionally, the card provides access to higher credit limits, which can be useful for large purchases or to manage cash flow.
Business Unlimited Credit Card
The Business Unlimited Credit Card is a straightforward business credit card that offers unlimited 1.5% cashback on all purchases. This can be useful for businesses that don't have a specific category of expenses that they spend more on than others. The card also offers a 0% introductory APR on purchases for the first 12 months, making it a useful tool for managing large purchases.
Ink Business Unlimited Credit Card
The Ink Business Unlimited Credit Card is similar to the Business Unlimited Credit Card but also offers rewards for spending on gas stations and office supply stores. Additionally, the card provides employee cards with rewards for spending at gas stations and restaurants, making it a useful tool for businesses with employees who travel or entertain clients often.
How to Choose the Right Business Credit Card
Apply for a small business credit card
When applying for a business credit card, it's essential to choose a card specifically designed for small businesses. These cards typically offer benefits such as higher credit limits, rewards for business spending, and tools to help manage expenses.
To maximize the benefits of a business credit card, it's important to choose a card that offers rewards on the types of expenses that your business incurs the most. For example, if your business spends a lot on travel, a card that offers rewards for travel-related expenses would be a good choice.
Look for a card with a credit limit that matches your business needs. Some cards offer higher credit limits, while others may have lower limits but better rewards programs.
Use social media sites and search engines to research cards
There are many different types of business credit cards available, each with different features and benefits. To choose the best card for your business, use social media sites and search engines to research different cards and compare their features.
Take advantage of 0% introductory APRs
Many business credit cards offer 0% introductory APRs on purchases for a limited time. This can be a useful tool for managing large purchases or to help manage cash flow.
Utilize employee cards
Many business credit cards offer the ability to provide employee cards, which can help earn rewards on employee spending. Additionally, some cards offer rewards for employee spending on specific categories, such as gas stations and restaurants.
Use cash back rewards to reinvest in the business
Cash back rewards earned from a business credit card can be a useful tool to reinvest in the business. For example, the rewards could be used to purchase equipment, hire employees, or invest in marketing efforts.
Consider the fees associated with the card, such as annual fees, balance transfer fees, or foreign transaction fees.
Once you have selected the right business credit card for your LLC, it's important to maximize the rewards. Here are some tips for doing so:
Purchases at Gas Stations and Office Supply Stores: Many business credit cards offer bonus rewards for purchases at gas stations and office supply stores. Take advantage of these bonus rewards by using your card for these types of purchases whenever possible.
Use Social Media and Search Engines: Some business credit cards offer bonus rewards for advertising on social media or search engines. If your business uses these platforms for advertising, consider using a card that offers bonus rewards for these purchases.
Cash Back Rewards: If your business is looking to earn cash back rewards, consider a card that offers a cashback rewards program. Look for a card with a high cash-back rate and low redemption requirements.
Maintain a Good Credit History: To qualify for the best business credit cards, you'll need to have a good credit history. Make sure to pay your bills on time, keep your credit utilization low, and monitor your credit report regularly to ensure that there are no errors or fraudulent activities.
Separate Your Personal and Business Expenses: Finally, make sure to separate your personal and business expenses. Use your business credit card for business purchases only, and avoid using it for personal expenses. This will make it easier to track your expenses, manage your cash flow, and avoid confusion come tax time.
Monitor Your Account: It's important to monitor your business credit card account regularly to ensure that there are no unauthorized charges or errors. Set up alerts and notifications to receive alerts for transactions and payments, and check your account online or through a mobile app regularly.
Using a business credit card can be a useful tool for LLCs to manage cash flow, separate personal and business expenses, and build a credit history for the business. When choosing a card, consider factors such as credit limits, rewards programs, fees, and employee cards.
To maximize the rewards, use your card for purchases at gas stations and office supply stores, take advantage of bonus rewards for social media and search engine advertising, and maintain a good credit history.
By following these tips, you can ensure that your LLC is getting the most out of its business credit card.