Bank Debt Operations: Leveraging A Business Credit Card

A bank business credit card can be used by a business to provide debt leverage. Leverage allows the business to meet certain expenses, or “float” cash, in advance of a payment due. Business credit cards make it possible for a business to relieve the burden on its cash flow and meet debt obligations, without having to deplete its current cash flow.

Credit Card as a Form of Debt Financing

A credit card is a form of debt financing for a business that is similar to a loan. A business credit card carries an interest rate and requires the cardholder to make periodic payments on an installment basis. In this way, a business credit card provides an additional funding source for the business.

Applying for a Business Credit Card

A business applies for a credit card in the same manner as individuals do when they consider the use of credit.  The amount of credit extended by a bank or lending institution depends on the size and income of the business. Once established, the amount of credit extended to the business helps it meet the costs associated with running the business.

Working with a Bank Credit Card Issuer

Extending credit to a business via a business credit card allows the bank to relieve cash flow burdens. If a business faces a cash flow gap, or has an unexpected expense, the account can be addressed immediately.  The credit card provides instant relief and the resulting debt can be addressed by the business.

Seeking Low Interest Rates

A business should seek a business credit card with an interest rate that is low to help save in interest rate costs. Lower rates can make credit cards a practical leverage tool. Higher interest rates may act as a deterrent for the business in either obtaining a credit card or using it to finance an immediate need that should be addressed before it receives income or revenue.

The bank, working with a business, can help provide a solution that makes sense for the business using a business credit card.  A business credit card may provide a less expensive form of short-term debt financing for the business and should be accessed on an as-needed basis.

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