Business credit cards allow you to make purchases on credit, just like a personal credit card. Instead of paying for purchases at the time of the transaction, you will pay on a specified future date.
The difference between a business credit card and a regular credit card is that business credit cards are used to pay for business expenses. The application process for a business credit card is very similar to that of a personal credit card, as well as its everyday usage.
For many businesses, credit is a useful source of capital. No matter the size of your business, having a business credit card can enable you to easily make the purchases you need in order to help your business operate. Let’s take a look at the pros and cons of applying for business credit cards so that you can determine whether this is the right move for you!
The Pros of Business Credit Cards
What’s great about business credit cards is that they are easier to apply for business loans. Your application is also likely to be approved more quickly due to the application process being automated. While business loans come with fixed monthly repayments and interest rates, the amount owing on a credit card is only influenced by your monthly spending. If you experience a low-spending month, you won’t be charged the same costly installments that are associated with business loans.
Business credit cards are also customizable. You can determine whether you want the business to be liable for all debts, select which employees can become authorized users, and even keep track of their spending. You can also determine the credit limits of each user. The payment structure on these cards is also flexible- you can sometimes receive an extension on your payment due date so long as a minimum payment is made.
There are also great reward programs associated with business credit cards. Some reward programs give you points after each purchase that can later be redeemed, while some credit card issuers have agreements with certain retailers to provide discounts to cardholders.
The Cons of Business Credit Cards
There are far more conditions that have to be met in order to be eligible for a business credit card than a personal one. Issuers will review your business’s credit history as well as your personal credit history in order to determine what terms you are eligible to receive. Factors such as whether or not your business licenses and insurance policies are up to date will also be taken into account by the issuer.
Another factor to consider is that credit limits for business credit cards are often much higher than they are for personal credit cards. This is primarily because businesses are known to have higher expenses than individuals. While this may seem like an advantage, having a higher credit limit can be an issue as it means that you could possibly have a much higher debt than is possible with a personal credit card. It is therefore important to keep a close eye on your business’s spending patterns.
Business credit cards often allow you to choose between making the business liable for all debts or allowing yourself and others to be held personally liable for a portion of outstanding debts. While this may seem like an advantage, making the wrong call in this regard could potentially harm either your personal financial standing or that of the business. If you are going to allow yourself to be held liable for some debts, ensure that you have a solid income and sufficient savings in case you do have to cover some debts.
Applying for Business Credit Cards
Once you have applied for a personal credit card, the application process for a business credit card won’t look all that different. The first step will always be to do an internet search of all the business credit cards available and deciding on the one that best suits your business needs. Once you have done so, you will most likely be required to fill out an application form online. While each credit card company has its own forms, there are some pieces of information that you will need to know no matter which credit card you choose.
This information includes your legal business name, tax identification number, the form of business, annual revenue, number of employees, and contact details. Once the application process is complete, you just have to wait for your business credit card to arrive in the mail. The typical waiting time is between seven and 14 business days. You will probably be required to activate the card upon receipt, after which you will be able to make purchases. Use it wisely!
A Business Credit Card is Worth Considering
Despite a few drawbacks, there are numerous benefits to having a business credit card as a source of capital. Start off by doing an internet search of all the business credit cards available to your business, and compare their terms, interest rates, and reward programs so that you can get the best deal. By using a suitable business credit card, you can avoid the need to take out a loan or rely on your personal income for business expenses!