Why Small Businesses Need Business Credit Cards
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Running a small business comes with its own set of challenges and opportunities, and having the right financial tools can make all the difference. One such tool is a small business credit card. These cards are designed to meet the unique needs of small business owners, offering benefits that can help manage expenses, build credit, and even earn rewards.
Explore what small business credit cards are, their key features, the best options available, and the pros and cons of using them.
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What are small business credit cards?
Small business credit cards are financial products specifically tailored for business owners. They work similarly to personal credit cards but come with features and benefits designed to help manage business expenses. Business credit cards typically offer higher credit limits, expense tracking tools, and rewards programs that cater to business spending categories such as office supplies, travel, and advertising.
Fast and flexible financing for your business
Running a business takes everything you have. Getting fast and easy funding doesn't have to.
- Apply Online In Minutes
- Decision as fast as 24 hours
- Receive between $25k-$6m
Features of small business credit cards
Small business credit cards offer a variety of features that can be highly beneficial for business owners. These features are designed to address the unique needs of small businesses, making it easier to manage finances, track expenses, and earn rewards. Here are some of the key features in detail:
Higher credit limits
Small business credit cards generally offer higher credit limits compared to personal credit cards. This is crucial for covering larger business expenses such as inventory purchases, equipment upgrades, and other significant investments. Higher credit limits also provide greater flexibility and help maintain a healthy cash flow, allowing businesses to take advantage of opportunities and manage unexpected costs without depleting cash reserves.
Expense tracking
One of the standout features of small business credit cards is the built-in expense tracking tools. These tools allow business owners to monitor their spending in real-time, categorize expenses, and generate detailed reports. This can simplify accounting and help with budgeting by providing a clear overview of where the money is going. Many cards also integrate with popular accounting software, streamlining the process of reconciling accounts and preparing for tax season.
Rewards programs
Business credit cards often come with rewards programs tailored to business spending categories. These programs can include cash back, travel rewards, or points that can be redeemed for business-related purchases. For example, a card might offer higher rewards rates for office supplies, telecommunications, and travel. By using a business credit card strategically, owners can earn significant rewards on their everyday expenses, which can then be reinvested into the business or used for travel and other perks.
Employee cards
Small business credit cards typically allow the issuance of additional cards to employees. This feature is particularly useful for businesses with multiple employees who need to make purchases on behalf of the company. Business owners can set spending limits for each employee card and track their expenses separately. This not only helps in monitoring employee spending but also simplifies the reimbursement process and ensures better control over the company’s overall expenditure.
Introductory offers
Many business credit cards come with attractive introductory offers to entice new customers. These offers can include 0% APR on purchases or balance transfers for a specified period, which can be incredibly beneficial for managing cash flow and reducing the cost of borrowing. Introductory bonuses, such as a large number of rewards points or cash back after meeting a minimum spending requirement, can provide immediate value and help offset initial business expenses.
Qualifying for a small business credit card
Securing a small business credit card can provide your business with essential financial flexibility and a host of benefits. However, qualifying for one requires meeting certain criteria and demonstrating your business's financial health. Here are the key factors that credit card issuers consider when evaluating your application:
Business structure and information
The type of business you run can impact your eligibility. Most small business credit cards are available to a range of business structures, including sole proprietorships, partnerships, limited liability companies (LLCs), and corporations. When applying, you'll need to provide detailed information about your business, such as:
- Business name and address. The official name and address of your business.
- Tax Identification Number (TIN). For most businesses, this will be an Employer Identification Number (EIN). Sole proprietors may use their Social Security number.
- Years in business. The length of time your business has been operating.
- Annual revenue. Your business’s gross annual revenue.
Personal credit score
Even though you’re applying for a business credit card, your personal credit score plays a significant role in the approval process. Issuers use your personal credit history to gauge your creditworthiness and assess the risk of extending credit to your business. Generally, a higher personal credit score increases your chances of approval and access to better terms and benefits. Most issuers look for a credit score of at least 670, though requirements can vary.
Business credit score
In addition to your personal credit score, issuers may also consider your business credit score, especially for established businesses. Your business credit score is based on your business’s credit history, including payment history, debt levels, and the length of credit history. Building a strong business credit score can improve your chances of qualifying for a card and securing favorable terms.
Financial documents
Some credit card issuers may request financial documents to verify your business’s financial health. These documents can include:
- Bank statements. Recent statements to show cash flow and financial stability.
- Tax returns. Business and possibly personal tax returns to demonstrate income and profitability.
- Profit and loss statements. Documents that provide a snapshot of your business’s financial performance.
Business plan
While not always required, having a solid business plan can strengthen your application, especially for new businesses or those with limited credit history. A business plan outlines your business model, revenue projections, and strategies for growth, giving issuers confidence in your ability to manage credit responsibly.
Collateral and personal guarantee
In some cases, issuers may require a personal guarantee, meaning you agree to be personally liable for the business’s debt if it cannot repay. This can be a significant commitment, so it’s important to understand the implications. Additionally, some issuers might ask for collateral, particularly for businesses with weaker credit profiles. Collateral can include business assets like equipment or inventory.
Fast and flexible financing for your business
Running a business takes everything you have. Getting fast and easy funding doesn't have to.
- Apply Online In Minutes
- Decision as fast as 24 hours
- Receive between $25k-$6m
Applying for a small business credit card
When you’re ready to apply for a small business credit card, gather all necessary information and documents. Compare different card options to find one that best suits your business needs, considering factors such as rewards programs, interest rates, and fees. Submit your application online or through a financial institution, and be prepared to provide additional information if requested.
Best small business credit cards
Chase Ink Business Preferred Credit Card
Ink Business Preferred® Credit Card
Card Name
Ink Business Preferred® Credit Card
APR
21.24%-26.24%
Recommended Credit Score
Excellent, Good
Annual Fee
$95
Special Offer
Earn 120,000 bonus points
Special Offer Terms
after you spend $8,000 on purchases in the first 3 months from account opening.
Rewards Rate
Earn 3 points per $1 on the first $150,000 spent in combined purchases on travel, shipping purchases, Internet, cable and phone services, advertising purchases made with social media sites and search engines each account anniversary year. Earn 1 point per $1 on all other purchases-with no limit to the amount you can earn.
Why We Like It
- Points don't expire.
- Points are worth 25% more when you redeem for travel through Chase Ultimate Rewards®.
The Business Platinum Card by American Express
The Business Platinum Card® from American Express
Card Name
The Business Platinum Card® from American Express
APR
19.49% - 28.49%
Recommended Credit Score
Excellent, Good
Annual Fee
$695
Special Offer
Earn 150,000 Membership Rewards® points
Special Offer Terms
after you spend $20,000 in eligible purchases on the Card within the first 3 months of Card Membership.
Rewards Rate
5X Membership Rewards® points on flights and prepaid hotels on AmexTravel.com, and 1X points for each dollar you spend on eligible purchases. Earn 1.5X points (that's an extra half point per dollar) on each eligible purchase at US construction material, hardware suppliers, electronic goods retailers, and software & cloud system providers, and shipping providers, as well as on purchases of $5,000 or more, on up to $2 million per Card Account per calendar year. Purchases eligible for multiple additional point bonuses will only receive the highest eligible bonus.
Terms
Why We Like It
- CLEAR® membership reimbursement.
- Access to more than 1,4000 airport lounges.
Capital One Spark Miles for Business
Capital One Spark Miles for Business
Card Name
Capital One Spark Miles for Business
APR
26.24%
Recommended Credit Score
Excellent, Good
Annual Fee
$0 intro for first year; $95 after that
Special Offer
Earn a one-time bonus of 50,000 miles - equal to $500 in travel
Special Offer Terms
once you spend $4,500 on purchases within 3 months from account opening
Rewards Rate
Earn unlimited 2X miles per dollar on every purchase, everywhere, no limits or category restrictions, and miles won't expire for the life of the account. 2 Miles per $1 on every purchase, everywhere. Unlimited 5X miles on hotels, vacation rentals and rental cars booked through Capital One Travel.
Terms
Why We Like It
- Generous bonus offer.
- More than 15 travel loyalty programs where miles can be transferred.
- Instant redemption on miles instantly for any travel-related purchases.
- One statement credit for either TSA PreCheck® or $100 Global Entry application fee.
Pros and cons
Pros
- Increased purchasing power. Higher credit limits allow you to make larger purchases without tying up your cash flow.
- Expense management. Tools for tracking and managing expenses can simplify your bookkeeping and make tax time easier.
- Rewards and benefits. Earning rewards on everyday business expenses can add up quickly, offering significant savings or travel perks.
Cons
- High-interest rates. If you carry a balance, interest charges can add up quickly, potentially negating any rewards earned.
- Fees. Some business credit cards come with annual fees, foreign transaction fees, and other charges that can eat into your savings.
- Risk of debt. Relying too heavily on credit cards can lead to debt accumulation, which can be detrimental to your business's financial health.
FAQs
Can I get a small business credit card if I’m a sole proprietor?
Yes, sole proprietors can apply for small business credit cards. You typically need to provide your Social Security number and information about your business's revenue and expenses.
Do small business credit cards affect my personal credit score?
It depends on the card issuer. Some issuers report business card activity to personal credit bureaus, while others do not. It's important to check with the issuer to understand how the card will impact your personal credit.
What should I look for in a small business credit card?
Consider your business’s spending habits, the rewards and benefits offered, the card’s interest rate, and any fees associated with the card.
Fast and flexible financing for your business
Running a business takes everything you have. Getting fast and easy funding doesn't have to.
- Apply Online In Minutes
- Decision as fast as 24 hours
- Receive between $25k-$6m
The bottom line
Small business credit cards can be powerful tools for managing expenses, earning rewards, and building business credit. By understanding the features and benefits of these cards, you can choose the best option for your business needs. Whether you prioritize cash back, travel rewards, or expense management tools, there's a small business credit card out there that can help your business thrive.
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