Are Business Credit Cards a Good Option for Financing

By: Kate Samano May 18, 2022

Credit cards aren’t often thought of by businesses as a good financing option, but they might be particularly appropriate in the current interest rate environment. Of course, using a credit card in place of a financing option like a traditional loan may require additional discipline on the part of the business owner. But when you incorporate all of the additional benefits that a credit card can provide, it might end up being the ideal solution for a company. As this type of financing option isn’t without risk, it’s best used in consultation with a financing expert, such as those you can find at Lendzi. Here are all of the business credit card pros to help finance your business, along with a look at the possible credit card cons.

Credit Card Pro: Big Sign-Up Bonuses

Companies apply for equipment loans and pay for the acquisition of assets right away, having complete ownership and control over those items. It means they will only be liable to the lender to repay the outstanding amount. Whereas, in the case of equipment leasing, a company lacks ownership of an asset. Instead, the business incurs monthly expenses qualified as operating or finance lease expenses.

Many business credit cards offer generous sign-up bonuses just for signing up and using a card. The points or miles you earn for relatively little effort can be used to reduce the travel cost for your company or perhaps to purchase equipment or supplies free of charge. As long as you use the card for expenses you were going to incur anyway, this is an easy way to get essentially free bonuses for your company to use.

Credit Card Pro: Bonus Points in Common Business Spend Categories

In an attempt to gain as much business as possible, card issuers try to offer perks that customers will actually use. This can work to the advantage of your business, as it’s fairly easy to find a card that pays additional points for spending in categories that your business likely uses. For example, if your company spends a lot on office supplies or shipping, you can rack up significant rewards quite quickly if you use a card that pays multipliers of 3x, 4x or even 5x points on these categories.

Credit Card Pro: 0% Options Available

One of the main drawbacks of any credit card is that you have to pay interest on any balances you maintain. But just like it’s easy to find cards with extra perks, it’s becoming more common for card issuers to offer introductory 0% interest rates for purchases and/or balance transfers. When properly used, this can be a great way to get some zero-cost short-term financing for your business. If you’re looking to make a big purchase of equipment or land, for example, you can use a 0% credit card to pay it off over however long the promotional rate lasts, typically somewhere between 12 and 18 months.

Credit Card Pro: Current Loan Rates Are High and Going Higher

Loan rates across the board have shot up thus far in 2022, and they look to be heading higher still. Much of this increase can be attributed to the rise in inflation and the Fed’s dedication to fighting it by raising interest rates. Many analysts expect the short-term federal funds rate to hit 2.5% or even more this year, up from essentially zero over the past few years. This has ramifications for all loans, which will likely continue to get more expensive. Rather than locking your business into a high-rate, long-term loan, you may want to develop a credit card strategy that leverages 0% introductory rates and/or balance transfer options. The lending experts at Lendzi can help you develop a credit card financing strategy using single or multiple cards to keep your expenses as low as possible.

Credit Card Pro: Business Credit Cards Can Come With Valuable Perks

On top of point or mile bonuses and potential access to 0% financing, most business credit cards also offer valuable perks. For example, if your company frequently sends employees on business trips, you might want to find a card that offers free baggage, airline lounge access and/or trip cancellation insurance. Other perks may include car rental insurance, cell phone protection, extended warranties or other valuable benefits, things you can’t typically get with a standard business loan.

Credit Card Con: You Can Get Stung With Interest Charges

This is the real danger when it comes to financing business expenses with a credit card. If you can’t manage to pay off your balances on time, you’ll typically get hit with very high interest rates, often in the high double digits. This is why it’s important to work with the experts at Lendzi to make sure that your business can utilize a credit card strategy without causing more harm than good.

The Bottom Line

Using one or more credit cards to finance your company’s operations may not be the first financing option that pops into your head, but when used properly, it can provide significant benefits. You’ll want to work with a loan specialist, such as those found at Lendzi, to make sure that you manage your credit card portfolio properly. But at the end of the day, credit cards may be able to provide your business with the flexibility, low costs and additional perks that you need.

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