Business credit cards are used for business purposes rather than personal. Businesses all sizes can apply for a credit card. The business credit card can help a business to boost their future credit borrowing agreement.
How a Business Credit Card Works
A wide range of leading companies offers business credit cards. The applying process is similar to the standard credit card application. Businesses can apply for the card with or without the employer identification number, and this makes it easier for any company to acquire a business credit card.
Advantages of Business Credit Cards
To get a business credit card, the applicants are required to fill in an application form. Getting a business credit card is much easier than non-revolving business loans since the application process is automated with an immediate decision. A business credit card comes with extra benefits; as a result, the credit cards come with slightly higher interest rates than the traditional loans. Credit card debt is unsecured, increasing the financial cost, thus the higher risks for lenders.
Business owners can apply for a business credit card using their employer identification number or personal social security number. Lenders base all underwriting analyses on the information in a new credit application. Businesses have credit reports and history similar to individuals, so activities from the employer identification number reflects the business’s credit report.
Personal Guarantees
Most businesses don’t meet the set minimum requirements needed for income analysis and credit score; they rely on the backing of a personal guarantee. A personal guarantee is a business card that holds the applicant responsible for card payments and fees. Most business credit cards include a personal guaranteed provision in business credit card terms and conditions despite their eligibility measures. Applicants need to read and understand the terms of the business card agreement.
Special Considerations
Business credit cards are perfect tools to manage and itemize expenses. In addition to providing conveniences associated with credit cards, business credit cards help businesses to keep the costs separate from personal spending. This separation helps accounting, tax process, providing a more natural way for employees to make purchases and businesses to regulate employees’ business purchases.
Business credit cards have great benefits set to entice business owners. These benefits might differ from the benefits offered to individual customers. Most business credit cards offer cash back when purchasing at stores such as office supplies. Most business credit cards provide a sizeable sign-up bonus than the regular individual credit cards, expecting higher business spending. Much financial company offers 0% interest on the business stores credit cards as an introductory rate for a specified period.
Traveling bonuses are another common benefit since most businesses have substantial travel expenses. A business credit card might grant the cardholder the benefits to use a flight ticket VIP lounge when they use a specific airline or receive discounts when they stay in a particular hotel during their business travels. Most business credit cards provide flexible repayment terms expressly set to attract business with irregular cash flow.