You probably have some favorite tools in your bakery. Some of these can be very basic: the perfect sifter, thermometer or spatula that you rely on to get solid results every time. 

When it comes to your bakery’s financial tools, the workhorse for your business can also be a deceptively simple tool: a business credit card. 

But misconceptions often get in the way of using business credit cards to their full potential in your business. Let’s clear those up here. 

Misconception #1: Your Business Must Be Large or Well-Established

REALITY: Business credit cards are often available for operations of all sizes—from home-based cottage bakeries to multi-location establishments. Card issuers understand that small businesses and startups need financial tools too.

In fact, you can start your business today and apply for a credit card tomorrow. 

Unlike many types of small business financing, card issuers often don’t have a time in business requirement. As long as you meet the minimum requirements, which are heavily weighted toward credit and income, you’ll probably qualify. 

Another plus: issuers rarely restrict cards based on industry, which is also common in small business lending. 

And when it comes to minimum income requirements, most issuers let you qualify based on household income, not just income from the business. Again, this means brand-new businesses may qualify. 

Tip: If you plan to form a business entity like an LLC or corporation, get your business credit card after you’ve done that so any payment history you generate will be matched to your business entity’s credit profile. 

Misconception #2: You Need Perfect Credit to Qualify

REALITY: While good credit improves your approval odds and terms, many issuers offer cards specifically designed for business owners with fair or little credit history.

To be clear, most issuers will check your personal credit history when you apply, and most do require good to excellent credit. 

But there are also options such as business secured cards or business charge cards that are more flexible in their credit requirements. A secured card requires a security deposit while a charge card requires payment in full, either daily or monthly. 

Tip: Check your personal credit before you apply for a personal or business credit card to make sure there are no unknown issues hurting your credit scores. 

Misconception #3: Business and Personal Credit Cards Are Essentially the Same

REALITY: Business credit cards offer distinct advantages for your bakery operations:

• Separate business expenses: As long as you use your business card for business purchases only, you’ll have a clear record of expenses made for the business, which makes bookkeeping and tax preparation significantly simpler. 
• Higher credit limits: If you have strong qualifications, you may be pleasantly surprised at the credit card limits you get. 
• Business-specific rewards: Many cards offer enhanced rewards for common business expenses, or bonus rewards for categories of expenses your business uses most. 
• Employee cards: Get cards to give your employees for business purchases, while using spending controls to manage those costs. 
• Business-oriented benefits: Cards may come with detailed expense tracking, integration with accounting software, or specialized customer service

Tip: If you’re not sure what type of business credit card reward is best for your business, consider a cash-back card. Every small business owner can use cash! 

Misconception #4: Applying Will Damage Your Personal Credit

REALITY: Business credit card applications typically generate a hard inquiry on one of your personal credit reports and may lower your credit score by a few points. But that effect is fairly small and often relatively short-lived. 

Most importantly, many business credit card issuers only report to business credit on a regular basis. These cards will only appear on your personal credit cards if you default. This helps you build business credit without affecting your personal credit utilization ratio (a comparison of your balances to your available credit limits).

Tip: If you want to build both personal and business credit, choose a card that reports to both. 

Misconception #5: Credit Cards Are Too Expensive

REALITY: While many credit cards do feature fairly high interest rates (19.8%--23% is common), there are ways to use credit cards without any interest charges at all. 

• 0% intro APR credit cards: Some credit cards offer anywhere from 6-18 months interest-free on purchases during a promotional period. As long as you pay on time and pay the balance off before that intro rate expires, you’ll be able to access interest-free financing.
• Grace period: Cards that offer a grace period give you time to pay for purchases without incurring interest. If you time your purchases, by making as many as possible near the start of your billing cycle, you may be able to get up to almost 2 billing cycles interest-free. 

Tip: Set up automatic payments on your business credit cards to make sure you don’t pay late, as that can trigger an increase in your interest rate. 

Misconception #6: Business Credit Cards Are Only Useful for Financing Purchases

REALITY: While access to credit is valuable, business credit cards offer numerous operational benefits beyond financing:

• Cash flow management: Bridge timing gaps between ingredient purchases and sales revenue. Pay in full on a card with a grace period and it’s like getting net-30—net-60 terms on your purchase. 
• Expense tracking: Detailed reporting helps identify cost-saving opportunities
• Fraud protection: Superior to debit cards or checks for vendor payments, credit cards limit liability in the case of loss or theft, and can allow your business to dispute purchases when something you buy isn’t delivered as agreed. 
• Working capital: Maintain adequate inventory levels during seasonal fluctuations. Consider a 0% intro APR credit card for short-term financing during slow seasons. 
• Emergency funds: Handle unexpected equipment repairs or other expenses without disrupting operations or having to apply for a loan. 
• Relationship building: Establish a strong business credit history to help your bakery qualify for other types of financing in the future. 

Tip: Evaluate your business credit cards at least yearly to see if they still meet your business needs. 

The Bottom Line for Bakery Owners

For bakery businesses, a business credit card can be more than just a financing tool—it's a versatile asset for managing cash flow, tracking expenses, and building credit.

Before applying, research cards that align with your specific spending patterns and business needs. If you need short-term financing, consider a card with a 0% introductory APR. If your focus is rewards, look for welcome bonuses (also called sign-up bonuses), and rewards that could return significant value to your bakery through everyday business spending.

By understanding how credit cards benefit a new or growing business, bakery owners can make more confident decisions about adding them to their financial toolkit.

ABOUT THE AUTHOR 

Source: Gerri Detweiler

Gerri Detweiler has several decades of experience guiding individuals through the confusing world of credit, and has earned a reputation as a reliable and independent source on personal and small business credit. Today, Gerri serves as Education Consultant for Nav, a financial health platform that helps small businesses owners build and manage their business and personal credit, track cash flow patterns, and understand their financing options before they apply.