Business Members May Need Your Help Choosing Best Way to Pay for Expenses

Credit cards are easy, at-the-ready financing, but they aren’t always the right financial tool for your business members’ needs. Before they use a credit card to fund their business or pay for a capital investment, you can help them consider the full, long-term cost. Here is a list of what your member business-owner should know about credit cards for business use and how to evaluate the right kind of financing for their business needs.

When your business member should use a business credit card

  • Short-term cash flow – Using the interest free days on a credit card can be an instant boost for cash flow. Often a business owner can be waiting for customers to pay, before they can pay their own bills. A late payment from a customer can result in a cash crunch for the business and the threat of a critical bill, like the phone or power, being late or going unpaid. The interest free period on most credit cards can run as many as 55 days, which is usually enough time to keep current on bills while waiting for invoices to be paid.
  • Know where the money goes – Using business credit cards can make it easier to keep track of a company’s spending. Putting all business expenses on the company credit card will enable the member to view all their monthly bills on their statement, eliminating the need to track them separately. Also, your credit union may provide a monthly expense report and enable the member to import charges into their accounting software, allowing them to track expenses with ease.
  • Reap the rewards – Many business credit cards also come with rewards programs. If the member uses their card for most expenses, they can end up building up quite a few rewards. Examples of rewards offered include business and supply discounts, as well as many travel and cash-back rewards.
  • Control spending – Having all the business spending in one place makes it easy to keep an eye on how much is being spent on business purchases. Additionally, some card providers offer cards with variable spending limits or notifications for purchases over a specified amount.
  • Enjoy protection – All credit cards offer a bit of extra protection for purchases and typically business cards include even more protection benefits. These benefits can include extended warranties, travel accident coverage, and identity theft coverage.
  • Making it easy – Using a credit card is a lot more convenient and widely accepted than using checks. Credit cards are accepted online and over the phone, ensuring your member can always get the items their business needs.

When your business member shouldn’t use your business credit card

  • Paying late – Besides those costly late charges, making delinquent payments can impact your member’s credit score. If they find they are in a situation where they are making late payments, it is time for them to reduce expenses or look for other ways to finance cash-flow.
  • Carrying a balance – While credit cards are great for those interest-free days between the charge and the payment, credit cards can get really costly really fast if the member doesn’t pay off the balance every month. Help them understand that they should only charge those expenses they expect to be able to pay when they are due, and seek a business line of credit or business loan for large expenses.
  • Mixing business with personal – Business credit cards are great tools for tracking expenses and getting rewards for making necessary purchases. But the member should beware of using their business credit card for personal expenses, as that negates the ease of tracking business expenses and can make it harder to sort out deductions at tax time.

If your member needs equipment that can’t be paid in full in one credit card cycle, or have other large investments needed in their business, there are other kinds of financing for those items that will cost them less in the long term. Helping your business members understand the best use of your credit products will keep your credit union top-of-mind when they have a need for additional products and services for their small business.

Newtek Business Services offers several different small business financing options you can make available to your members through a referral relationship between Newtek and your credit union.

Barry Sloane

Barry Sloane

Mr. Sloane is the President, Chairman and CEO of Newtek Business Services, Inc. Prior to joining Newtek Business Services, Mr. Sloane was a Managing Director of Smith Barney, Inc. where ... Web: Details