Are you thinking about using credit to help your business grow? Although you want to retain as much financial independence as possible, certain situations make it wise to consider borrowing money or entering a delayed-payment arrangement. As a small company, however, you haven’t had time to accumulate a credit history that reflects positively on your organization.
Fortunately, using business credit cards to build credit isn’t the only option. Prepaid cards that operate on debit models give you all of the perks without the hassle.
How do business prepaid credit cards build credit?
Business credit card alternatives work by letting you preload your cards with funds so that employees can make purchases with greater autonomy. As Trustpilot reviewers note, this makes it easy to offer per diems, control expenditures and grow. What many people aren’t aware of is that these business prepaid credit cards build credit in interesting ways while they’re being used.
The old ways: How non-prepaid business credit cards build credit
Traditional business credit cards build credit by extending you a line of credit and judging your performance. If you pay your bills on time, then you reap the rewards of a better history.
Unfortunately, this system can also hurt you if you encounter unforeseeable circumstances that stop you from paying properly. What’s more, a single negative incident can wipe out the positive benefits that you’ve worked so hard for over the years. According to Bankrate, corporate cards may even hurt your workers’ personal credit scores, which can strain employee relations.
Modern improvements: How business prepaid credit cards build credit
Prepaid business credit cards build credit using a lower-risk system. Instead of making you take out a line of credit that’s essentially a double-edged sword, these options give you the benefits of collateral backing. Similar to how secured credit cards work, prepaid business credit cards build credit by letting you make everyday purchases, boost business and establish good habits that your card issuer shares with credit reporting agencies.
They build credit in another important yet overlooked way. Because you have to preload funds, you learn wiser money management strategies. This helps you develop a better sense of business finance and make smarter purchase decisions.
Since you’re not paying issuance, interest, transaction, withdrawal, cancellation or decline fees, you don’t accrue further debt as a penalty for minor mistakes. You also get to check your account from anywhere, which puts you in the habit of cultivating fiscal awareness. In the long run, you may find that your prepaid business credit cards build credit indirectly by helping you make better spending decisions with other payment methods.
Although regular business credit cards build credit, they’re a catch-22
One of the biggest problems with the way traditional credit cards build credit is that you can’t get them without already having credit. Many companies have even been denied cards even though they had independent funding sources.
When you turn to Bento for Business for cards that enforce healthier expense management, you don’t have to go through a credit check to obtain a valid payment method. You also don’t have to commit to a plan that might compromise your credit in the long run. With the ability to reload on the go, control expenses online, stop credit-damaging fraud and manage employee spending, Bento for Business was designed specifically for small companies that don’t want to lose purchasing freedom just because they prefer to manage their finances responsibly. Learn more by starting your 60-day free trial or calling 866.220.8455.