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How Entrepreneurs Can Scale And Save Money Without Startup Capital If you're not getting rewarded for every dollar you spend, you're doing it wrong

By Immanuel Debeer

Opinions expressed by Entrepreneur contributors are their own.

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Unless you're running the next big tech startup, chances are venture capital is not pouring in your doors. And like many entrepreneurs and small business owners, you will need to bootstrap your way to success.

So how can a startup or small business finance and scale their business fast? The answer lies in credit cards. But not just any card. Selecting the right type of card for your business can mean a world of difference. And then, of course, you need to use it wisely.

Credit card vs charge card

Credit and charge cards are the number one tool for business owners looking to scale their operation.

The key difference between the two is that credit cards have a set spending limit which is usually pretty low. Charge cards, however, do not have a pre-set limit, which means if you're looking to scale your business and exponentially increase your cashflow, a charge card is the way to go.

If however, you're looking to fund your business, a credit card might be a better option since the balance can be carried forward (charge cards are to be paid in full on their due date).

Earn rewards, always

If you're not getting rewarded for your expenditure, you're doing it all wrong.

Despite the volume of programmes available, frequent flyer miles and rewards are still an incredibly underutilised resource for businesses. If you're a startup or small business owner and you're not tapping into frequent flyer points, you're potentially missing out on thousands of dollars worth of "free' travel (and travel will return!) and even cashback on your total balance.

While rewards points can seem insignificant at first, this all changes when you're running hundreds of thousands of dollars worth of expenses through your card each month.

Not all frequent flyer credit cards are created equal. When shopping around for the best deals, there are a few things you need to keep in mind.

  • Earn rate: Make sure the card you go for earns at least 1 mile/point per dollar.

  • Bonus offers: Premium cards usually come with a hefty annual fee but this is easily offset by their sign up bonuses. It's very easy to get at least $1,000 worth of value right out of the gates.
  • Other perks: Different cards offer different perks. Be sure to consider what you and your business needs most. Lounge access, travel credits, insurance and other bonuses are often associated with rewards cards.
  • Integration: Some business cards even integrate with your accounting platforms; it's worth considering streamlining your operation in this manner.
  • Flexible rewards: More often than not, people have an affinity towards a particular airline. Earning miles directly might seem like a no-brainer but don't be fooled. Flexibility is critical when you run a startup, so make sure you earn flexible rewards which can be transferred to multiple airline programs or can even be used as a cash credit on your card.

Key factors to consider

Using credit cards for your startup is a delicate balance of risk and reward. If you're not financially savvy, credit can quickly become a trap which costs you more in the long run. It's crucial to see credit/charge cards as a tool to further your business and not as a long-term loan.

Three tips to keep you on your toes when it comes to cards:

Don't forget about interest: "Compound interest is the most powerful force in the universe," Albert Einstein famously said. It is also one of the many things misunderstood by credit card users. Don't fall for this trap. Make sure your balance is paid in full on the due date.

Use balance transfers: balance transfers can be a powerful tool to get an interest-free loan. Always make sure you find an offer with 0 per cent interest rates and zero fees. Balance transfers allow you to transfer an existing card balance to another card from a competing bank. As long as you stay on top of your finances, it can be a smart way to free up capital at no cost.

Foreign exchange fee: If you're doing international commerce and spend a lot of money buying supplies overseas, you need to make sure the foreign exchange rate on your card is zero or close to it. There's nothing more counterproductive than getting hit with a 3 per cent conversion fee. Alternatively, use a service such as TransferWise to facilitate your international transactions.

Summing Up

In business, it's essential to get your credit card to work for you instead of you working for your credit card.

Credit isn't a quick fix but rather a tool to create value for your startup. Make sure you earn rewards, points or miles on every single dollar you spend and in doing so, you will access a world of savings on future business travel.

Immanuel Debeer

Founder & Editor of Flight Hacks


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