Start using your credit to help your short-term cash flow

Successful SMEs get paid on time
Nov 2, 2020
COVID-19 Update
Nov 16, 2020

What can you as ‘n business owner do when your business is under duress and in need of short-term liquidity?  It happens too often that businesses lose out on winning big projects or cannot deliver on them due to short term cash constraints.

A business credit card is a great way to get access to liquidity fast. When utilising the advantages of this revolving line of credit offered by a financial institution, it may be a convenient way to increase your purchasing power. It is specifically aimed at the unique needs of small business owners and entrepreneurs.

Some of the financial institutions offer business credit cards with up to 55 days interest free credit, in which case you can repay purchases made without accruing interest. Essentially this is ‘free’ financing!

It is therefore possible to use business credit cards to your business’ advantage and to assist your business in managing its short term cashflow. The result is that it is putting time back in your pocket so you can spend it on the business.

Let us dive into the advantages that a business credit card can offer:

  1. Managing cash flow

A credit card can help manage your cash flow by providing your business with much needed bridge financing within the interest-free period of the business credit card when suppliers needs to be paid, but customer payments are still due.

  1. Business vs personal expenses

We all know how time consuming it can be to keep track of business expenses that you as business owner incurred on your personal account and to find all those supporting docs for it. A business credit card can help you to keep business and personal expenses separate, and simplified – saving you time to focus on your business.

  1. Goodbye petty cash

Maintaining petty cash in a business is not only a risk, but also a big headache to keep track of. A business credit card can be a convenient way to have access to funds for such purchases, without having to deal with all the administration of maintaining registers and managing cash. We know for sure that online shopping is here to stay and there is no need to even go into the convenience that it has to offer. What better way to shop for those sundry expenses!

  1. Hello online payments

Due to the recent changes to the way in which digitally transformed businesses are operating in, the usage of online payment solutions like PayFast and Snapscan is much more common practice. Businesses can make full use of the online convenience when paying bills online with a click of a button. Easy peasy!

  1. Freebees

The different financial institutions have a wide variety of reward programmes and incentives to offer, so make sure to shop around and find one that lets you earn rewards that can directly benefit your business (why do you need fuel rewards if you do not have motor vehicle expenses?). These reward programmes may have endless benefits your business can cash in on, which include earning points that can be converted to cash or discounts on other online purchases.

  1. Easier to obtain

It is easier to qualify for a business credit card than for other lines of credit such as a business loan, especially when the business do not have a well-established credit history.

  1. Work on that credit record

We all know that establishing a credit record can be challenging for businesses starting out. A business credit card can help to build on your credit record to secure other lines of credit when you are ready to expand. 

Always use business credit cards responsibly 

As with any line of credit, interest will be charged on the business credit card if the balance is not repaid in full by the time that payments are due. Remember that the interest rates for business credit cards are usually much higher than small business loans and other lines of credit, such as overdraft facilities. You should therefore remain committed to adhere to credit limits and repay amounts due within the set interest-free period so that your business credit card works FOR your business and not against it.  You will appreciate the bargaining power it will give you to negotiate lower interest rates in the future when your business credit card is in good standing.

It is also vital to be aware of the security risks that are associated with business credit cards. Security measures should always be in place to ensure that the credit card information is not stolen by hackers or fraudsters when using it.

We all know how easy it is to swipe, so remember to keep a close eye on the business credit card spending to ensure you are on track with your budget. By using your business credit card effectively, you can capitalise on the ‘free’ financing that you obtain during the interest free period. This can be of great value to your business on its growth trajectory, while saving valuable time in the process.