HomeFinanceCreditWhen to Opt for Credit Card Financing for a Small Business?

When to Opt for Credit Card Financing for a Small Business?

Credit cards have become one of the quintessential financial tools in India today. It provides a cardholder with the convenience of paying for goods or utilities even if they are very low on cash. These cards can be used for different purposes, and come as multiple specialised variants including business credit cards in the market.

A business credit card is a particular type of card for business rather than personal use. These are available for companies of all sizes and can help create an excellent credit rating and ease the process of borrowing loans in the future. The application process is similar to any other type of credit card, and the product ensures you do not mix your personal and business expenses together.

When to use a business credit card?

There are various reasons why you should use business credit cards instead of personal credit cards. Let’s take a look.

  • To separate your personal and business expenses – One of the main reasons to use a business credit card is to separate your personal and business spending. It allows you to track the expenses individually and ease up when you are filing your taxes.

Another advantage of business credit cards is that the annual card fee may be tax deductible; however, you should consult your financial institution before you commit to a particular product.

  • To conveniently acquire an advance – You can quickly access funds for purchases or make cash withdrawals if you are using a business credit card. Also, thanks to the revolving line of credit, a business owner can use the credit card even when the work is slow, or cash flow is minimal.
  • To make expensive purchases –The lower credit limit of conventional cards often does not allow a cardholder to make a large purchase of raw materials or industrial equipment. Business credit cards generally offer a higher credit limit, suitable for making commercial procurements like that.
  • To improve your business’ credit score – Proper utilization of your business credit card can significantly improve the credit score of your organisation. It helps you get a lower interest rate in case you need to take an advance like a business loan.
  • To earn various rewards and incentives – Various credit card companies offer customer loyalty programs where they provide lucrative incentives and rewards on transactions. These can be cashback from stores where you make your purchases, bonuses on reaching specific spending target, etc. Cards like Bajaj Finserv RBL Bank SuperCard even give you reward points on domestic and international spends, which can be redeemed for discounts, cashbacks, and more.
  • To meet emergency financial requirements –Various lenders allow you to take a loan against a credit card to meet unforeseen expenses on an emergency basis. These loans are issued against the unused limit of your business credit card, which can provide a substantial amount of funding to meet a monetary emergency.

Companies like Bajaj Finserv also provide pre-approved offers that give you an instant credit card application approval. These are available for credit cards, personal loans, business loans, home loans, and a range of other financial products. Such offers simplify the process of availing finances and help you save time. You only have to provide some necessary information online to check your pre-approved offer.

How to use a business credit card?

Business credit cards are an attractive alternative to the conventional one and are a great source of financing small and medium business. However, these should be managed carefully to utilise all their advantages fully.

  • Establish a robust accountability system – The most crucial step to utilise a business credit card is to create a thorough accountability system to keep the expenses in check. It prevents costs from spiralling out of control, creating massive debts.
  • Set limits – Every business should have a limit on how much money can be utilised from the credit card. Establishing a cap on the money available to spend can help you manage your budget and limit the transactions.


See the applicable charges and other important details


Before accepting a credit card offer, it’s important to see the applicable charges, including the processing fee, late payment charges, annual maintenance costs, etc. At the same time, find out other important details such as the duration of the interest-free window, credit limit and the minimum amount to be paid, among others.

Choose a card that gives you a higher interest-free window to repay the borrowed amount and a credit limit that comes in handy to meet unexpected needs.

Do check your credit score before applying for a credit card as a high score expedites your application and helps you bag a card at favourable terms and conditions. Evaluating credit card offers on your needs and goals would help you make an informed and intelligent choice.

Business credit cards are a great way of separating your finances and establishing more control over your commercial spending. Proper utilisation of the credit cards can offer you several benefits specifically when starting a business.

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Gaurav khanna is an experienced financial advisor, digital marketer and writer who is well known for his ability to predict market trends.
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