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Using Small Business Credit Cards

Using small business credit cards for early venture financing is pretty common. In fact, a 2000 study conducted by [then] Arthur Andersen revealed half of all new businesses use credit cards for their debt financing. They are typically used by newer businesses that lack the operating history required of traditional bank loan. Granted, this was before online small business loans exploded across the internet.

Today, things are different. Quick business loans have gained acceptance, handing credit cards serious competition. But this competition is great news for startups as rewards programs and sign-on bonuses have ramped up.

Your small business should approach the use of any type of debt, including  small business credit cards, with caution. Don’t forget that credit card financing is still a small business loan. And since this ‘loan’ is often with individual cardholder, not the business entity, the individual could still be on the hook if your business encounters bankruptcy. This liability is the same dilemma facing entrepreneurs tapping personal loans for business or owners that offer ‘personal guarantees’.

Small Business Credit Cards: Some Pros and Cons


·       Quick Funding.

·       Maintain equity in the business.

·       Easy acceptance.

·       Attractive cash back and rewards programs.

·       Balance transfer offers keep rates relatively low.


·       Best offers usually require excellent credit.

·       Uses more expensive compounding interest, not simple interest.

·       Best promotions often require a small business bank account.

·       May be personally liable for business defaults.

The Best Small Business Credit Cards

For more information on the cards mentioned in this article, visit their specific review pages for our numerical scoring system. Here’s our best business credit cards list:

·       Bank of America Business Credit Card

·       Capital One Business Credit Card

·       Chase Business Credit Card

·       Citibusiness Card

·       Delta SkyMiles Card (American Express)

All of these small business credit cards have a unique benefit for merchant customers. For example, Bank America has a travel rewards cards offering 3 for 1 points awarded when booking through their travel center. For companies where traveling is essential, cards like these can save small business owners serious money. This can improve not only the bottom line but also net working capital positions.

Try Secured Business Credit Cards

Now that you’ve seen the pros and cons and favorite credit cards for small business, let’s look at secured business credit cards. This is one of our favorite small business funding methods. Unfortunately, it’s an option many business owners are unaware of.

Typical credit cards are unsecured, meaning they are not backed by any collateral. However, secured cards are different. These cards are increasingly issued by small business owners to manage employee spend. Since the loans are collateralized, they have better rates than typical, unsecured credit cards.

These are essentially loans that are collateralized (secured) by a specific asset. Typical collateral includes the borrower’s home or property and the balance in a brokerage, savings or business checking (sometimes referred to as a collateral account).

We see similar secured funding with invoice finance. Here, the financing is secured by the outstanding invoices (accounts receivable). These [current] assets are used as collateral by invoice factoring companies and a revolving credit facility is often established.

If the borrower is unable to repay the loan, the creditor can seize the assets that were pledged as collateral to be made whole. Ample collateral relative to the loan provides appeasement for creditors, allowing them to offer lower rates and greater credit limits. Consequently, many secured loans enjoy annual percentage rates (APRs) in the 5%-9% range, terms between 6 to 48 months and up to $500,000 in borrowable funds (depending on the collateral base).  These cards are another way to provide the capital your business requires for growth while keeping rates down and employee spending under control. However, use any borrowed funds responsibly.