How to grow your business in the new year using business credit cards
Take advantage of sign-up bonuses, flexible payment options and spending limits ? and rewards
Making complex credit topics simple
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Business owners are looking toward the new year with optimism. According to a survey from digital payments processor Bill.com, 83 percent of small-business owners think 2019 is a prime time to invest in growth projects.
If expanding your business and increasing revenues are on the agenda for the new year, you’ll need working capital to make it happen.
Your business rewards credit card can come in handy for covering expenses, while generating points, miles or cash back in the process.
These tips can help you leverage your rewards card as you pursue growth plans.
4 tips for growing your business in 2019 using rewards business cards
- Keep your credit line in perspective.
- Consider a card with no preset spending limit.
- Leverage cards to increase your return on investment.
- Take advantage of intro bonuses for larger purchases.
Keep your credit line in perspective
Make sure your budget for growth spending works with your card’s credit limit.
“For smaller purchases, business credit cards can be a great option,” says Brock Blake, CEO and founder of small business marketplace Lendio.
Buying a $250,000 piece of equipment, for example, may not be feasible if you have a $100,000 credit limit. A business loan may be the better choice in that scenario.
On the other hand, if you want to spend $30,000 to take advantage of a deal on inventory or $15,000 to overhaul your e-commerce site, a rewards card could be a natural fit.
Susana Yee, founder of L.A.-based digital marketing firm Digital Everything Consulting, says a rewards card is more attractive for smaller spending because it can be easier to qualify for than a business loan.
“It’s definitely not easy to get approved for a loan that’s under $50,000 and it’s better to get a credit card that you can pay off as your company makes money,” says Yee. She uses rewards cards to earn airline miles and cash back, with the latter applied as statement credits.
Consider a card with no preset spending limit
A card with no preset spending limit may be good for larger purchases, or if you think you’ll need some leeway in how much you can spend on growth projects from month to month.
These cards have no preset spending limit:
- The Business Platinum Card® from American Express.
- Plum Card® from American Express.
- American Express® Business Gold Card.
The Platinum and Plum cards are both charge cards. Ordinarily, that means you’d have to pay the balance in full each month. However, American Express makes some concessions to offer business owners more flexibility.
- Business Platinum card members can enroll in Pay Over Time, which allows you to carry a balance on certain purchases and pay them off with interest.
- The Plum card allows you up to 60 days to pay your balance without interest when you make your minimum payment by the due date.
Blake offers a caveat for using these cards to finance growth in the new year.
“No preset spending limit doesn’t mean you have unlimited credit,” he says, but “it does mean you can adjust your spending power to fit your business needs.”
Leverage cards to increase your return on investment
What you charge is just as important as how much you spend when using a rewards card to drive business growth.
Jonathan Faccone, managing member and founder of Halo Homebuyers LL, a Bridgewater, New Jersey, real estate development company, uses his Capital One Spark Cash for Business card to earn unlimited 2 percent cash back on renovation expenses. This allows him to better manage cash flow, while collecting cash back savings.
“This availability of cash is essential for keeping projects continuously moving and running smoothly,” says Faccone. “I feel comfortable utilizing this method for these types of expenses because the money that’s spent is actually going into the equity of the projects themselves.”
On the other hand, he says he’d be less likely to charge a new marketing campaign to his card because “marketing is never guaranteed to produce profitable results, especially when trying out new mediums.”
Considering the ROI, in terms of the potential payoff to your business, rewards earnings and the cost of paying the balance off with interest can help you decide whether it makes sense to use your card for growth expenses.
Tip: Compare your card statement to revenue numbers month to month. “Most credit cards give you a chart that breaks down your expense categories,” says Digital Everything Consulting founder Susana Yee. “This way, you can track all your expenses easily on your business rewards card and see how much you spent versus how much you made monthly to track ROI."
Take advantage of introductory bonuses for larger purchases
Signing up for a new business rewards card to net an introductory bonus may be a no-brainer if a growth purchase easily satisfies the minimum spending requirement.
These cards currently have very generous introductory bonus offers:
- Capital One Spark Miles for Business: You can earn 50,000 miles when you spend $4,500 in the first three months.
- Capital One Spark Cash for Business: If you prefer cash back, you can take advantage of a $500 cash back signup bonus when you spend $4,500 on purchases in the first three months.
- Chase Ink Business Preferred Credit Card: When you sign up for Chase Ink Business Preferred, you’re eligible for an 80,000-point introductory bonus after spending $5,000 in the first three months.
- The Business Platinum® Card from American Express: Members can earn 50,000 Membership Rewards points after spending $10,000 and an extra 25,000 points after spending an additional $10,000 within the first three months.
If you’ve already worked out your budget for the year, including what you want to invest in growth, you should have an idea of which bonuses may be the easiest to earn. Think about whether it makes sense to try to capitalize on more than one introductory bonus offer in the new year.
“One way to maximize your ability to access rewards from business credit cards is simply to have more than one card from more than one bank,” says Blake. “No card comes with all the perks offered by every other card and holding a few cards from different companies opens you up to more benefits.”
- Before opening one or more new rewards cards, consider how your personal and business credit scores may be affected.
- And keep your essential expenses and cash flow in mind as you charge growth-related expenses.
“Make sure your credit card balance is not so high that you cannot pay your employees, utilities, rent, etc.,” says Yee.
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