Business Credit Cards and How to Pick the Right Card for Your Business

The US News report Best Business Credit Cards of 2017 highlights the importance of credit to the growth of small businesses, as well as the numerous benefits you receive with a premium business credit card. The report, published on November 7, 2017, also tells you what you need to do before you apply for a credit card for your business, and how to figure out exactly what you can expect to earn in extra benefits from each business credit card.

Understanding Business Credit Cards

Business credit cards are similar to personal credit cards in many ways, but there are several notable differences.

For starters, business credit cards usually have higher limits than personal credit cards. Moreover, the credit limit of a business credit card is at least partially determined by the sales/cash flow of the enterprise.

The owner of a business can choose to give some or all employees access to a company credit card, but the owner is still responsible for repaying all charges made by employees.

Also keep in mind that most banks that issue business credit cards report credit-related information to both consumer (personal) and business credit bureaus.

Note that business credit cards are not covered by most of the federal and state consumer protection laws that are focused on personal credit cards. This means that the issuing bank could make changes to payment grace periods or interest rates with minimal notice.  However, several business-card issuers have voluntarily extended many of the consumer protections outlined in federal law to business credit card holders.

The rewards for these cards are aimed at business owners, and may offer a discount on FedEx shipping or generous frequent flier bonuses on a specific airline.

Financial advisors warn small business owners it is not a good idea to use personal credit cards to finance a business. Personal credit cards are much easier to qualify for, but the payment data will not be reported to the business credit bureaus. Making business and personal purchases on the same credit card is also unwise as it could put your personal assets at risk with a lawsuit.

Breaking Down the Benefits of Business Credit Cards

Business credit cards offer a variety of benefits. One major benefit is instant capital that owners/managers can use for almost any business need. You can use credit cards for rent, licenses and administrative expenses, as well as inventory, advertising, and even employee-related expenses.

Credit cards are particularly useful for small businesses when a cash outlay is required before payment by the customer. Business credit cards are also useful for purchasing or leasing capital equipment (including machinery for production, furniture, IT or personal electronic devices) to help the business grow, and you have the flexibility to repay the loan over time.

It is important to clearly separate your personal and business finances, and a business credit card is a key step in this process. Keeping your personal finances separate from your business is essential to ensure you cannot be held personally responsible for business liabilities.

Most business credit cards today offer valuable accounting and expense management solutions including near-real-time reports on activity for all cardholders on the account, setting spending limits on or canceling/suspending individual cards, access to past activity for each card, account alerts, setting cash advance limits, and automatically breaking expenses down into categories for expense management

Business credit cards also make it easy to maximize tax deductions. You can, for example, use credit for capital equipment purchases to take advantage of short-term tax planning opportunities.

Finally, the reporting and accounting features included with premium business credit cards today allow you to download detailed reports regarding all charges on a card. Moreover, you can choose to have this data automatically migrated to several well-known small-business accounting software suites.

What to Do Before Applying for a Business Credit Card

A storefront, warehouse or hard assets are not necessary to qualify for a business card. Good personal and business credit scores are the key requirement for a business credit card. Note that many non-traditional businesses, including online businesses, freelancers, independent contractors and consultants, and self-published authors, are eligible to apply for a business card

Small business experts highlight that you don’t have to be profitable or have so many years in business before you qualify either, the decision is mainly based on income and credit scores.

Business owners with poor credit can still get a secured business credit card where your credit limit is based on the amount you deposit.

Beef up your business credit score before you apply for a business credit card. Your business creditors report your payment history to business credit bureaus, who keep track of your balance and payment history from banks, business credit card issuers, trade associations, vendors, and manufacturers that ship goods on credit.