The Purpose of Corporate Credit Cards

Corporate credit cards help business owners grow and expand their business.

Sometimes businesses need credit to assist with expansion or to cover expenses before they turn a profit. The size of the corporation as well as the length of time it has been in business determine how easy it will be for it to obtain corporate credit cards. Typically a business must have a high credit score as well as generate a specific level of revenue before being approved for corporate credit cards.

Security

Many corporations may have more than one person who is responsible for purchasing goods or services to ensure the organization functions. Having a corporate credit card allows multiple employees to make purchases. If cash was given, especially for large purchases, the organization will be risk of theft either from the employee or a criminal.

Leverage

Some businesses may be in their beginning stages and lack consistent revenue for their business to function. Sometimes the use of corporate credit cards allows a business to pay pertinent expenses while it is waiting to turn a profit or achieve positive cash flow. Living on credit cards is not advised for a business as it increases debt, but sometimes it is necessary.

Record Keeping

Corporate credit cards allow the accounting department to keep adequate records of purchases made. When businesses are looking for places to cut costs, they need to know where their money is going. Credit card statements allow the accountants to see what type of supplies are being purchased as well as do comparison shopping to ensure they are getting a good deal. If cash was paid for the items, it would be a challenge for accounting to collect receipts in a timely manner.

Credit Building

Some businesses may need to use credit cards to build their credit record. For new businesses, having a corporate credit card builds trust with new creditors that it is a responsible, viable business. As a result they may offer more credit. Creditors usually know the difficulty of obtaining corporate credit cards, so having an active corporate credit card suggests that the company has a high credit rating.

Deposit

Sometimes a corporate credit card is necessary to use as collateral for goods and services. For example, a corporate credit card may be necessary to have on file to rent a car. Some businesses that offer net 30 terms, a form of trade credit, may require a credit card on file before extending their services. Businesses relying on travel to hotels or on airlines need a corporate credit card to ensure a form of back-up or emergency payment.

References

• Business.com: Small Business Credit Card Directory
• CreditorWeb: Small Business Credit Card Benefits