What is a business credit card? To give you a simple explanation in brief, business credit cards are credit cards meant to use by businesses instead of using in personal use. These cards are meant for businesses of all sizes. They do help businesses built a credit profile for improving future credit borrowing terms. Here, the small business credit cards are backed by personal guarantee that integrates personal liability to help in structuring credit terms.
How a Business Credit Card Works?
Various lending institutions do offer business credit cards. The method of applying is same like the standard credit card application where the borrowers do apply with/without any employer identification number. As such, the process makes it easy for every type of business to avail business credit cards.
Advantages and Disadvantages of Business Credit Cards
Are you thinking to obtain the best business credit cards for travel? If yes, then you should complete an application. Usually, these cards are easier to apply than non-revolving business loans as the method is automated with an immediate credit decision. They do come with various advantages and so have high interest rates unlike the conventional loans. Here, the credit card debt is unsecured that raises financing costs because of high risks for lenders.
Business owners can apply the form through an employer ID number if they have one established. However, they can also use their personal social security number. The lenders will go through some under writing analysis over the entire info that are present in a new credit application. Business has credit reports and establishes a credit history in the way that individual does. As such, any activity that makes use of employer ID number will reflect on the business credit report.
Some essential points to note down
- Business credit cards are used by firms for professional expenses, as opposed to personal credit cards that are used by individuals
- The cards do help small companies to build credits in order to have better credit borrowing terms in upcoming days.
- The cards are easy to apply than non-relieving business loans and come with gains and high interest rates than conventional loan types.
- The cards are helpful for small businesses, for bookkeeping and keep professional expenses separate than personal one.
Business Credit Cards for startup
Business credit card for newer business is sometimes misleading. The age of your business here doesn’t matter and your odds of approval usually depend on the personal credit standing. This is the reason why issuer requests the social security number and is why you cannot get a newer business credit card without a credit check. Bearing that in mind, you can find business credit cards for startups of all credit levels displayed. The customization of offers is based on the credits that stands and the desired rewards and rates to make it easy for finding the best card according to your requirement.
Instant Approval Credit Cards
Instant approval business credit cards are cards that determine the application in real-time. Now, many applicants can decide – either approved or denied the right way that depends on the credit card company’s ability to validate your identity. In case the issuer is unable to validate your identity, they will request some additional info and take a few days to process the application.
If you’re thinking to raise the odds of getting instant approval, you need to focus on cards that are suitable to make your credits stand out. the more high is your credit score, more there will be.
Understanding business credit cards
Firstly, the small business credit card seems more like consumer cards. It comes with same signup fees, rewards and bonuses. However, the consumer and business cards are unlike in some ways. Below is given some tips you ought to know prior to applying.
You’ll have to sign a personal guarantee
Virtually, all small business credit card application includes personal guarantee and clause that states that you’re liable for the debt accrued. This means you are responsible for the balances even if your business goes belly-up. Bear this is mind while applying and prevent borrowing more than you are able to payback.
Your personal credit may be affected
While applying for small business credit card, the application will show up as an inquiry on the personal credit report. This will cost you some point on the credit score for less duration. This is because your issuer will ensure that you are over the solid financial footing prior to letting you borrow money.
These cards usually fall into two categories: some report to both commercial bureaus; while other to your account payment history only to commercial credit bureaus. In the former case, your good/bad spending habits affect both of your business and personal credit.
Who can apply for a small-business card
Anyone who operates a business can apply
Here, you do not require incorporating or have a formal structure like LLC or partnership. Sole proprietors are eligible and your business can be your full time job, a side hustle, or a part time operation. You should be prepared to answer queries over the application that includes things like:
- Your business name and contact info
- The industry you are in, how long you have been in business and how many staffs you have
- Your business spending and annual revenue
How to choose a small business credit card
There are times where you will use your small business credit card so little, so ensure you get one with some favorable terms. Some tips to consider here like:
Take stock of your business’s spending habits
If you plan to carry balances months after another, getting a card with 0% APR period or less ongoing interest is crucial than seeking for generous rewards. Otherwise, in case you plan to pay in full every month, a card with lucrative rewards and big signup bonus can be perfect.
Figure out what type of rewards you should go for
Is earning higher rewards you goal? If yes, then you should give more concern to your costs. For businesses that spend more on office supplies and travels, a card that renders bonus rewards will serve a good choice. Also, for companies with spending that doesn’t fit into category, you can opt for flat rate reward.
How to compare small-business credit cards
You can narrow down your choices according to the business’s requirement. This is how to determine and compare the features of various cards.
Many best small business credit cards charge annual fees in hundreds of dollar range. The rewards you earn here from your total sending can easily makeup. So, you shouldn’t miss the idea to pay fees out of your hand. Here, high volume businesses gets rewards that dwarf the fee and so annual fees get deductible business expenses.
In case you go for rewards credit card, you will have two choices viz:
- Flat rate card
- Bonus category card
Another choice is whether you want your rewards as points or cash back.
Points card gives you miles or points for each dollar you spend, rather with bonus points of flat-rate categories. These rewards will be redeemed for travel even if you have other options like cash back or merchandise. Whereas, the cash back card pays you back a certain percentage of every purchase and this is most commonly redeemed like credit against your account.