Given that we offer debit cards, it’s not a surprise that we think they are a better option for small businesses than credit cards. On the other hand, we intentionally set up our business around debit cards. That’s because we think that you shouldn’t need to draw on your credit to run your business better.
Expense management comes first
On a standard income statement, the money to pay for principal and interest comes after other business costs are covered (that is, earnings before interest and taxes). In the real world, some businesses may pay their lenders before they pay suppliers, but that’s more an act of desperation than a long-term financial strategy.
Over the long haul, businesses need to do two things to be successful. First, they have to know what their expenses are. This includes the broad categories like payroll, utilities, and costs of goods sold as well as the finer details, like what vendors are used to purchase office supplies and how much online advertising takes to bring in a new customer. Armed with this information, managers can make future plans. They can negotiate preferred vendor arrangements and figure out the costs of adding a new product line. And, they can determine their capacity for making investments to expand the business.
Expanding the business means expanding the balance sheet, at least if you’re thinking like an accountant. On the one side, you have the assets; on the other, liabilities, equity, and retained earnings. If you increase assets, you have to pay for them. Earnings before interest and taxes determine not only how much you generate from operations for future investments, but also how much money you can use to pay off debt or generate returns for investors.
In other words, you can’t grow until you know what your expenses are and why you are incurring them. Then, you can use that information to build plans for the future.
Bento’s founders knew that small businesses provide the foundation of the US economy, but that they struggle because they don’t have access to tools they can use to understand their expenses. As a result, too many businesses fail before they even get traction with customers. We chose a debit card as our core product because we didn’t think a company should need good credit—or any credit—to get better expense management.
The best credit card for business isn’t available to many small businesses; neither is the second-best one. Let’s face it, most startups can’t get credit. Banks may issue credit cards and loans based on the owner’s personal credit, but that can interfere with the owner’s personal and family financial goals. In fact, Small Business Administration loan applications consider the founder’s credit score.
Some financial companies will extend credits to startups, but only if there are physical assets that can be repossessed or if there is significant cash on the books from venture capital investments. Other businesses have to operate for enough time to show their banks that they are a decent credit risk.
All that being said, many small businesses can get credit and use it well. They borrow money to add locations, expand manufacturing, or invest in new technologies. That helps grow communities as well as companies.
Some businesses use credit cards or other lines of credit to help manage cash flow for daily operations. That’s an advanced strategy for established companies with good credit. Most small businesses aren’t there. They more they need expense management help, the less likely they are to qualify for credit.
How are you managing your cash?
We’ve noticed that some small business credit card companies require daily or monthly settlement. They don’t want the risk of customer balances given the rate of small business failure.
Bento’s comprehensive card program with better expense controls leads to big savings. It prevents unauthorized transactions, but it also saves the time and hassle of dealing with mistakes, like an employee pulling out a company card instead of a personal one. In fact, it gives employees the power to get their jobs done with a minimum of fuss. More importantly, our customers get real-time data they can use to manage their businesses better.
And so, if you are looking for the best credit card for business use, consider a Bento debit card.