Business credit cards offer many attractive perks and rewards, providing a potential solution for paying off big purchases or managing expenses more easily. There are distinct differences between small business credit cards and corporate credit cards in terms of eligibility requirements, debt liability obligations and utility considerations.
Small business credit cards typically require a personal guarantee and report card activity to major credit bureaus under the name of their owners; corporate cards don’t usually require one and won’t have an impactful effect on an owner’s personal credit score.
Requirements for a Corporate Credit Card
Corporate credit cards are typically only available to companies with millions in annual revenue and must meet stringent eligibility requirements in terms of business size, revenue and eligibility criteria such as business credit score. Perks such as dedicated customer service representatives or expense tracking tools may also be included as part of this offering. Furthermore, such cards typically require formal business structures like an S-Corp or C-Corp for approval as they often only accommodate companies with certain employees and annual revenues.
Corporate credit cards hold the company rather than individual accountholders responsible for any debt accrued, though some come with joint and several liability. If the business defaults, creditors could seek repayment from both personal assets as well as business assets owned by owners of such cards; many require personal guarantees from business owners as well. Furthermore, these cards typically report late payments directly to credit bureaus which could impact anyone making late payments personally.
Small business credit cards, on the other hand, are open to any small company with an employer tax ID and at least one employee. Although credit card issuers don’t check personal credit when considering applications for such cards, an application may still trigger an inquiry on your report and lead to hard inquiries on your personal credit report. Typically you’ll also need to sign a personal guarantee agreement and could become responsible for paying any outstanding balances should your business cease making payments on its balances.
Small business credit cards offer the ideal solution for individuals and small companies alike who need to keep personal expenses and company spending separate, yet lack sufficient income or revenue to afford corporate cards. Not only can it help build your credit history and earn rewards that you can reinvest into your company, it can also give more control over spending by enabling budgeting and increasing limits for individual cards. Most cards do not report directly to credit bureaus so won’t affect personal credit unless late payments occur, though some do include their history in your company’s public record.
Accessibility
However, corporate cards are typically reserved for S-Corps and C-Corps with venture capital funding and millions in annual revenue. Some corporate cards require that applicants have pre-established business credit scores in order to be considered while others use factors like company size and investor history as criteria for approval.
Corporate credit cards typically offer additional perks that small business cards don’t, such as enhanced purchase protection and higher spending limits. Furthermore, these cards may provide access to more sophisticated analytics and reporting. Finally, since corporate cards have just one debt liability on record versus multiple personal cards which makes reimbursement easier.
Yet despite these advantages, corporate credit cards often have more stringent approval criteria than smaller cards. Most require companies to have at least a certain annual revenue before being approved and may only allow one individual to be responsible for any debt incurred through card use.
Businesses with strong credit histories can often obtain corporate cards with minimal restrictions; those who struggle will typically need to provide personal guarantees or other forms of security as part of the agreement. Such requirements may be waived if used for legitimate business purposes, though such restrictions might not always be necessary in startups or other new businesses that are just getting started.
One reason a business might switch from a small to corporate credit card is its higher rewards. Whereas small business cards typically allow the primary cardholder to accumulate individual rewards, corporate cards typically share them among all employees at their company, including in terms of points earned and earnings rates. Furthermore, certain corporate cards include travel insurance as well as relationship agents to address customer service needs more efficiently.
Based on its features, businesses may gain access to financing options not offered through traditional small business credit cards – such as zero percent purchase interest and invoice factoring. Some cards can even be endorsed to multiple employees at once for increased spend while limiting risk.
Rewards
Credit cards can be an indispensable tool when expanding a small dining-room table business to a wide-reaching enterprise, helping unleash creativity and expand customer bases. But without an effective plan in place to manage spending and make payments on time, the results could be devastating: out-of-control debt, late payments and harm to your company’s credit score.
Small business credit cards provide tools that allow you to manage both personal and professional expenses independently, streamline accounting procedures and reward employees with rewards. Some cards also come equipped with expense management features or flexible terms which could allow you to avoid paying interest altogether.
Corporate credit cards provide additional advantages to companies requiring larger credit lines and rewards on larger expenditures, typically available to large established corporations with millions in annual revenue and high business credit scores. They may require personal guarantees from cardholders and do not fall under CARD Act protections as consumer cards do.
But the good news is that many corporate credit cards have been designed specifically for small businesses. Some cards feature no or low annual fees and an easy interest rate structure; additionally, many cards provide employee cards to limit employee expenditure and offer rewards on employee-related purchases.
To compare business credit cards, pay attention to approval requirements, annual fees and rewards rates to find one that’s suitable for your company. To reduce interest costs further, use an interest calculator such as Business Credit Card Payoff Calculator; this will help determine how much each card costs to use based on what your company could earn in rewards and how long it would take you to repay its balance.
Keep personal and business finances separate to streamline bookkeeping and reduce liability if your business goes bust. Credit cards for business can make managing day-to-day spending easy; just be sure to clear off the balance each month without incurring interest charges!
Utility
A business credit card can help a company stay organized with expenses, monitor employee spending and earn valuable rewards on purchases. Furthermore, using it responsibly can build up its credit profile, making it more likely that it can qualify for loans or lines of credit at lower interest rates in the future.
However, business credit cards typically require their owners to personally guarantee all debt incurred by their company; in such cases, personal assets of both owner and firm could be put at risk in case debt goes unpaid or the firm cannot repay balance due. Newer small businesses may find it easier to apply for secured business credit cards that require owners to put down a security deposit as collateral against any outstanding balances.
Corporate cards don’t require personal guarantees; however, they typically come with requirements such as minimum annual revenue or bank account balance and certain cardholder numbers. Furthermore, these cards often boast robust features like dedicated customer service representatives and enterprise software for tracking expense data and payments.
Corporate cardholders enjoy several distinct advantages that reduce personal liability. Most card issuers only report nonpayment issues under their company name to credit bureaus, meaning non-payment issues do not negatively impact employees’ personal credit reports directly. Furthermore, this allows card issuers to pool points across employee cardholders thereby expanding the overall rewards potential of the card.
Even with all its advantages, a business credit card can still drain a company’s financial resources if not managed appropriately. Unintentional misuse can result in high interest rates and fees which quickly add up, so the key is creating an efficient monitoring and assessment system so the card doesn’t end up costing more than its worth in terms of convenience and flexibility.
Business credit cards provide small-business owners with access to a revolving credit limit that they can use to purchase or withdraw cash, just like with consumer cards. Each billing cycle, however, the balance becomes subject to an interest charge which applies if it remains outstanding – an indebtedness can develop rapidly over time and damage both the business’s credit score and that of its owners if payment becomes delinquent.