Construction Companies and Traditional Credit Cards: Why Your Small Business Can Do Better

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Zaid Rahman
November 1, 2021

It’s basically impossible to run a small business these days without using credit, especially if you’re in the construction industry. 

Unfortunately, traditional credit card companies likely don’t provide you with the benefits and rewards you need to manage your cash flow in the best way.

Read on to find out why traditional credit cards are probably not the best  solution for construction companies and what you can do to remedy the situation.

5 Facts and Statistics Indicating That Traditional Credit Cards Aren’t Valuable for Construction Companies

#1: Traditional Small Business Credit Cards Can Hurt Your Personal Credit Score

Many small business credit card issuers require a personal guarantee before they will approve an applicant.

This means that if you need to use a traditional credit card for many business expenses and have to wait so long for your revenue stream to come in that you can’t pay it off in time, this can hurt your personal credit score. 

A survey by the Federal Reserve Bank reported that 53% of small businesses regularly use credit cards to manage their finances, but many owners don’t properly separate business and personal expenses. 

And even when they do, the use of a personal guarantee to secure credit can still negatively affect business owners.

#2: With Most Construction Credit Cards, You Won’t Receive the Same Consumer Protections as Individuals

The Credit CARD Act of 2009 was created to protect consumers from many issues with credit cards.

It introduced safeguards such as:

  • Card issuers having to give cardholders 45 days’ notice for rate increases; and
  • Capping of fees like late charges and over-limit charges

But small business credit cards are not covered under these protections. And as a result of being excluded from the act, business cards generally have higher fees than personal cards.

#3: Traditional Credit Cards Can Be a More Expensive Way for Construction Businesses to Acquire Additional Funding

According to the U.S. Census Bureau’s Annual Survey of Entrepreneurs, 13.7% of construction companies attempted to use credit cards for additional funding, with an 83.2% success rate. 

But since most small business credit cards charge higher interest rates than a small business loan or fixed line of credit banks would give, this may not be in a construction company’s best interests.

#4: Traditional Credit Cards Don’t Always Provide Construction Companies With the Capital They Need

According to the NSBA Small Business Access to Capital Survey, 20% of small business loans are denied due to credit. 27% of the businesses who responded said they were unable to get the funding they needed through any means, including credit cards.

When a credit limit is based on a personal score or cash in the bank instead of counting on future invoices as income, construction businesses are usually unable to get the cash flow they need from traditional credit card companies.

Some of the challenges specific to construction are that:

  • 30% of contractors say it is a challenge to find new sources of financing.
  • Over 30% feel they don’t have enough options to cover their needs.
  • 39% believe that access to capital will have one of the biggest impacts on their business this year.

#5: It Takes a Long Time To Improve Credit With a Traditional Small Business Credit Card

The U.S. Small Business Administration reports that most businesses need 12-18 months to improve their credit scores.

In the fast-paced world of the construction industry, time is money. Waiting on your credit numbers to increase before you can get the capital to complete a big job can cost you big time.

Looking for a Credit Card That Offers Maximum Benefits for Your Construction Company? Try Flexbase

Flexbase offers a credit card that was created specifically for construction businesses. 

With …

  • No security deposit
  • Cash rewards that you can earn in seconds
  • Easy receipt tracking and expense managing; and
  • Higher credit limits that are based on future invoices and forecasts

… the Flexbase card is one of the most valuable tools in your construction business management arsenal.

Flexbase is more than just a credit card — it’s a comprehensive cash flow solution.

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Finally, a credit card built for construction companies.

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