Company Credit Cards: An Introductory Guide

Most businesses, regardless of their size and of the industry in which it operates, would benefit from obtaining a business credit card. They allow you to keep your personal finances separate while building credit and increasing your flow of cash. However, when it comes to finding the right card, the abundance of choice can be a little overwhelming. This is why we have put together this introductory guide to help you learn more, so let’s get into it.

What is a Company Credit Card?

There are several forms of company credit cards, but they are all, in essence, the same thing. The only difference between them is that some of them are better for smaller businesses, and some of them are better for large businesses. The card is issued to a business instead of to an individual. Monthly payments are still expected, and interest is still added on. Think about the size of your business when it comes to choosing a company card; larger businesses with more employees should look into corporate cards like the ones provided by Payhawk, which have a number of uses and benefits, including integrated software to allow the user to analyse the data.

Data Analysis

As mentioned above, there are some providers – like Payhawk – that provide you with the software needed to conduct an analysis of your business’s spending habits. The data that the software produces can become invaluable. It allows you to make better financial decisions in the future, as well as allowing you to provide detailed spending reports that can come in handy when you want to secure capital from other sources. You can find areas where you can cut back and save the business some money. It can also help should you need to investigate each employee’s spending habits and whether they are behaving and spending business funds responsibly.

Personal and Professional Finances Should Remain Separate

One of the best pieces of advice you can heed as a business owner or indeed as an employee is to keep personal and professional finances separate. If you are expected to pay for things for the business or if you have business expenses paying for them out of your own pocket can muddy the water. You need to then keep track of your expenses, including receipts, so that you can be reimbursed properly. In addition to creating confusing, it also has the potential to cause problems with your taxes. Finally, should the business experience financial difficulty, your personal finances will be safe.

Building Credit for Your Business

To build your personal credit, you need to have and use a credit card. It makes sense then that this is also a way that you can build your business’s credit. Your business’s credit will be affected by any spending that you do on behalf of the business using your company card. The ultimate goal for a lot of businesses is to grow or expand; building your business’s credit can help in this regard because it puts you in a better position to secure a loan or other financing should you need it. In addition, having a higher credit score can improve your business’s standing by making it more stable and secure.

Accessing Working Capital

A business credit card can actually become integral to the day-to-day running of your business, especially if you own a new business or a small business. This is because a credit card provides you with access to the working capital that you might need on a day-to-day basis to secure assets or equipment. Often, smaller or fledgling businesses struggle to access the capital that they need through other means. It can be hard to secure a business loan or financing from other sources. However, a business credit card often has a simpler application process which makes them easier to secure, and you can have access to the funds that you need.

Choosing a Company Credit Card

When it comes to choosing a company credit card, there are several things to consider, including your eligibility, but more on that later. In addition, you need to think about how much credit you are going to need and the interest rates on offer. However, one element that a lot of people don’t consider is the perks. There are a lot of credit card companies out there which offer incentives to their customers in order to get them to sign up. Think about whether these perks matter to you. The rewards can aid in the growth of your business.

Eligibility Criteria

The application process for a business credit card is pretty straightforward. You will need to provide them with a number of details, including the name of your business and its entity. The necessary contact information, what industry you operate in. They also tend to ask how long you have been in business for and how many employees the business has working for them. You will also need to provide the necessary tax information as well as the revenue and estimated expenditures. Some providers will want some personal information from you or the owner of the business (if that isn’t you). This is likely to be your income, your contact information and your credit score. Finally, they may ask you to act as a guarantor should the business become incapable of making the repayments.

The Downsides to Having a Business Credit Card

While there are a number of benefits to procuring credit cards for your business, there are also downsides, too, and it is important that you are aware of them before your progress through the process any further. Firstly, unless you find a good interest rate you, it could become a very expensive way to access the capital that you need for your business. Therefore, you will need to come up with a solid repayment plan to ensure that you don’t end up paying way over the odds. You may also be surprised by the credit limits that you will encounter; while generally higher than personal cards, they might not work for your business.

Choosing the Right Time to Apply

In all honesty, there is not really a right or a wrong time to apply for a business credit card. It all depends on your business. Some providers only cater to established businesses that can provide at least a couple of years’ worth of accounts, others offer cards to start-ups, so there are no real obstacles in that respect. The sooner you apply, the sooner you can reap the benefits. However, if you apply too soon and your business fails, then you are still on the hook; you still have to pay back everything that you have borrowed.  

The Takeaway

Choosing to obtain credit cards for your business can be an incredibly shrewd business move. They offer a number of benefits like aiding in the growth of your business and allowing you to keep your personal and professional finances separate. However, it can be a tricky thing to navigate. There are so many choices out there in company card providers, some of which are better than others. You need to think about the needs of your business and find a provider that best meets those needs. Consider where you are willing to compromise and the elements that are non-negotiable. Finally, remember to take into account the potential downsides and whether you are prepared for them.

Author: Editorial Team

Share This Post On