Credit cards are a powerful leveraging tool for small businesses to tackle the myriad expenses they incur. Here are nine common small business expenses that financial experts and experienced business owners say typically crop up, and the credit cards and types of accounts they recommend.
One hallmark of a successful business owner is the ability to borrow money effectively. Credit cards in particular are a powerful leveraging tool, and their appeal is widespread.
According to a 2018 Federal Reserve Bank survey, 51 percent of small employers regularly use credit cards for their company’s needs. This makes sense because these accounts do everything from providing working capital to valuable perks.
It’s important to get the right cards and then use them advantageously. New entrepreneurs may not pursue the best accounts for them or project for all the costs that may arise.
9 common small business expenses to pay for with a rewards card
1. Travel necessities and extras
If you’re planning to travel frequently, a credit card with plenty of travel benefits will help you save money and remain comfortable.
According to small business expert Barry Moltz, the card should come with more than just the ability to rack up airline miles and hotel points.
“You’ll be eating out and maybe using Uber, so look for a card with those benefits,” says Moltz. “Think about what kind of business travel you’ll doing before picking out a card. Do you want extra insurance for things you’ll be bringing with you, or membership into airlines clubs so you can work on the road?”
Many travel cards have annual fees, so make sure it’s worth your while first. For example, The Platinum Card® from American Express has an annual fee of $550, but it offers a 60,000-point welcome bonus (after you make $5,000 in purchases in the first three months), up to $200 in annual Uber credits and access to the Global Lounge Collection.
2. Marketing and advertising
Small business owners often fail to plan for the amount of money it takes to acquire a customer, says Moltz.
It can be a lot higher than you anticipate. Building a strong social media presence, presenting at trade shows and paying for ads can set you back many thousands of dollars.
“Marketing is really important, so make sure you have a credit card with a credit line that can handle it,” says Moltz.
Be aware, however, that you can’t shop for a credit card that has a specific limit. The issuer sets the line based on your credit history and cash flow.
If you have a healthy income and high credit scores you’ll have a decent line of credit on the card. And if you use the card often and in large amounts while always paying on time and keeping the debt low, the issuer will likely increase it.
See related: Small business: Rewards debit cards vs. rewards credit cards
3. Downtime and offseason expenses
“Downtime costs can strangle a business,” says Francesco Stillitano, CEO of BarTab, a financial management company specializing in the food and drink industry. “This is when you may need to use your credit card’s line of credit instead of the cash that was flowing in.”
You don’t want to stop buying essential inventory during this slow time either, says Stillitano.
“Charging it makes sense because many suppliers offer discounts if you pay within 10 days of receiving the merchandise,” he said. “With the card you’ll have 30 days to delete the bill before interest kicks in.”
A cash back card, such as the Bank of America® Business Advantage Cash Rewards Mastercard® credit card, is right for this. The rebate can be used as a statement credit (thus lowering your bill) or to buy other items you may need to keep your doors open.
There are times when you may need to impress a client or inspire more customers or clients to come to you. Don’t neglect the fine art of schmoozing, says Levi King, CEO and co-founder of the business financing website Nav.
“You can get someone’s attention by comping a great meal or inviting them for a round of golf,” says King. “Doing things like this can get you the deal, but it can [cost] much more than you ever thought. Depending on your business, it can be $2,000 a month or more, and this is where a rewards credit card comes in.”
Search for a card that is equipped with the kinds of perks that your customers or clients would appreciate.
For example, if taking VIPs out for a day on the green will work in your favor, either the Chase Sapphire Reserve card or Chase Sapphire Preferred Card would be smart choices, since they’re the official credit cards of the PGA. Cardholders get access to grounds passes and swanky dining experiences at tournaments.
5. Responding to online criticism
If your business relies on positive social media reviews, prepare to shell out big bucks to keep up with what people are saying about your products and employees.
You’ll want to address criticism immediately. You may be able to do this yourself in the beginning, but as your business grows you may want to hire a third-party company to help out. King said that could cost hundreds of dollars on a monthly basis.
“But it’s really important to do,” King said. “You almost don’t have a choice because this is your reputation and you want to be quick to respond if a review is unfavorable.”
His card of choice for such an expense? Any, as long as you pay the bill in full. Debt will accumulate quickly if you don’t consistently delete the balance. If you have to maintain a balance, get a card with the lowest APR possible.
6. The never-ending bills
Claude Burns, founder and CEO of Office Libations, recommends paying operating bills with a reward-rich card. His said his company received a “healthy” credit line when it signed up for Chase’s Ink Business Unlimited Credit Card, and that the limit has been automatically increased by Chase as business has grown.
“Many of our recurring bills, such as phone, utilities, software, insurance and advertising, are set up to autopay on the card, which reduces time spent paying,” Burns said. “It’s great because not only do we earn rewards on purchases, but it also reduces our time spent with reimbursements.”
Burns approaches these bills all at once each month instead of making many small purchases. Although he usually maintains a zero balance, sometimes carrying over debt for a short time is unavoidable. The assessed interest increases the costs, but Burns says it’s cheaper than many short term loan options.
7. Website design and maintenance
Don’t discount the need for a good, new-fashioned website. While some small businesses have opted to rely on Instagram and other social sites to create an online presence, a real (and beautifully crafted) website will give your business an air of credibility.
The average price for a professionally designed small business website is between $5,000 and $7,500. A card with an especially generous sign-up bonus can be an ideal way to pay, since you’re guaranteed to meet the minimum spend.
Kristine Thorndyke, founder of Test Prep Nerds, paid for her company’s website with her Ink Business Preferred Credit Card, which offers an 80,000-point sign-up bonus if you spend $5,000 in the first three months.
“I chose this card because it offers a large sign-up bonus,” says Thorndyke.
It was an easy way to come out ahead while also ensuring that she wasn’t in over her head.
According to Dominic Lawson, host of The Startup Life podcast, novice entrepreneurs usually neglect networking expenses. Meeting people and making a positive impression isn’t cheap.
“It starts before you even go to an event,” says Lawson. “Maybe you don’t have a tie … or need a box of business cards printed up. You don’t always think about these things, but they make an impact.”
And then there are conventions and conferences. To get in and be handed a lanyard with your name and business, you’ll probably have to shell out hundreds if not thousands of dollars.
“Get a cash back card so you can purchase the swank sports jacket and earn enough for the business cards,” says Lawson.
Lawson uses cash back earned from his Capital One® Spark® Cash for Business to pay for gas, since he does a lot of driving.
“I also use it for making copies of documents that I’ll be handing out at events,” he said. “Since they need to be nice and colorful, they’re expensive and the cash back allows me to get a few copies for free.”
See related: How business credit cards affect your personal credit
9. Assorted taxes and fees
Finally, to start and run a business, be aware that many hands will be out to collect taxes and fees, starting with the government. These costs include the price of setting the business up.
“A designation such as an LLC or a C corp can be $300 a year, and that doesn’t include other state taxes you may be responsible for,” says Lawson. “Legal fees are another major cost that a lot of people don’t think about. For example, Legal Zoom is much less than a lawyer, but for me it was still $500.”
Such expenses can come out of left field and you’ll need to have a way to pay immediately. If you don’t have the cash, a credit card will do, but you must be sure to have enough credit available. It’s important to keep your credit utilization ratio low.
“Most cards allow you to set up a balance alert if you’ve spent too much,” says Lawson. “Having an open line of credit that can cover essential taxes and fees will give you peace of mind.”
Get the best card for your business, and keep your debt in check
When you have the correct credit card for your venture, you can carry on in virtually any circumstance. The preceding line items are just a few of the expenses that may not be adequately accounted for in an initial business plan.
Don’t be caught off-guard. Apply for the account equipped with the best benefits and features for your business — and keep debt firmly in check.