Nerd Wallet says that prepaid cards can be good for small business, despite its normal hatred for them when it comes to consumer products. The publication profiled PEX Card, which offers prepaid cards as a replacement for petty cash to small businesses.
“It’s petty cash on steroids,” Toffer Grant, the company’s founder and chief executive, tells NerdWallet. “This is an app that a company uses to manage time and money.”
With his company’s prepaid card, he adds, “you can load 15 bucks to buy Cokes or Windex for the office or something like that.” This is an ideal service if running your small business requires making a lot of small and big purchases. “If more people can spend, we can get more done,” Grant says.
PEX offers companies the ability to load cards on the fly and to take money off and move it to another card if necessary. Small businesses can benefit from this kind of cash management if they want to closely manage funds or distribute funds to employees without incurring additional debt.
While prepaid has gotten a lot of interest from people interested in cash management for small businesses, nevertheless the concept faces some headwinds. First is cash flow: a business needs to have the money to load on the cards ahead of time. Small startups may rely on credit for liquidity in order to make it through the month. Additionally, many employees like to use personal credit cards to earn rewards while doing business.
Nonetheless, prepaid cards can offer useful management tools for businesses in the same way that they do for individuals. The key is whether their value proposition is good enough to justify their use over other payment types. For those companies who want to operate on a cash basis, prepaid cards are superior to company credit, and provide insulation for company bank accounts unlike a debit card.
Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group
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