Paying for Business Expenses Applying for a business credit card is something a small business should seriously consider for itself. Business credit cards can provide a range of benefits to a business. They allow a company to build up credit for better borrowing conditions down the road. They’re also quite easy to apply for. In this article, we’ll go over how to apply for a business credit card and other important points to note. What Is a Business Credit Card? A business credit card is a credit card that is intended for business expenses. These cards are not meant for any individual’s personal use, but they are available to businesses of all sizes. What Is a Business Credit Card Used For? Business credit cards are meant for business expenses, and as such, they come with several perks that you wouldn’t get with a normal credit card. Business credit cards typically have far higher credit limits than normal cards, but they are also harder to qualify for. [youmaylike] As a business phenomenon, business credit cards vary their offers greatly, and certain cards are meant for certain businesses. They are also highly customizable when it comes to individual payment terms. Businesses don't always have consistent incomes like individuals do, and business credit cards handle this problem. These cards are used to gain access to a long line of credit, to control employee spending on business expenses and more. One of their other common uses is to make accounting easier, as putting all business expenses on one separate account makes reporting to the Internal Revenue Service easier. In the end, there are many uses for a business credit card. Why Would I Need a Business Credit Card? You might not need one, but if you run a business, you’ll be leaving money on the table by not at least looking into them. Business credit cards can solve many of the problems business owners face. If you need employees to make purchases for the business, a business credit card is the safest option. These cards can be given to authorized users, a status you can easily give to any of your employees. From here, these cards make it easy to monitor employee spending and spot any discrepancies. You can attach customized user privileges to each card to limit spending and place limits on where the card can be used. As mentioned, if you feel like your credit is too limited, business credit cards are a sure way around low credit. According to the American Bankers Association, the average monthly payment on a business credit card is twice as high as the average payment on a normal one. If you’ve found yourself annoyed with the Internal Revenue Service over the complicated reporting processes for business owners, you’re not alone. This is where a business credit card can solve another problem. Simply handing over your business credit card statements to your accountant will make them love you. It will also provide them with the information they need to predict future spending. Another great use for a business credit card is lifting your liability for debts. Liability for credit card debt is determined by the liability offered by the card. If you’re using a personal credit card for business expenses, you are liable for all debts. On the other hand, if you use a business credit card with commercial liability, your business is liable for any debts, which changes the game. Keep in mind that some cards offer joint liability, which leaves both you and your business liable for any debts. Make sure you know what you’re getting into before signing any paperwork. Lastly, just as personal credit cards offer rewards programs, so do business cards. The main difference here is that business credit card rewards are tailored to your business needs. How to Apply for a Business Credit Card Before you apply for a business credit card, you should make sure you’re eligible. For the most part, you only require the following to be able to apply for one: A legal name for your business. A business structure to apply with, such as a Limited Liability Corporation. An explanation of the nature of your business. You’ll typically be given a list of industry types to choose from. A tax ID number issued by the Internal Revenue Service Your roll in the business you’re representing Various business/financial information including: Annual revenue. Number of employees. Length of time in business. Estimated monthly expenses. If you have this information ready, you can apply for a business credit card. At this point, it would be wise to shop around and find the best option for your business. Your decision on the business credit card you choose will have larger ramifications than your choice of a personal credit card. Applying for a business credit card is much the same as applying for a personal one. There are a few differences, but the main thing to remember is that business credit cards are taken more seriously than normal ones, so you’ll have to face a higher bar of entry. This doesn’t mean getting a business credit card is hard, but it does mean you need to arrive more well-prepared than you normally would. To make things easier, you can prepare for certain obstacles in advance. You may need to sign a personal guarantee that you will pay off any debts. Also keep in mind that if you’re the one applying for a business credit card, and your business doesn’t already have one, they will conduct a personal credit check. It may be best to try to optimize your personal credit if you plan on applying for a business credit card in the future. Some Options at a Glance Here are some of the most popular options for small business credit cards: Chase Inc Business Preferred This is a great option for a few reasons. With the Business Preferred card from Chase Inc, you get 80,000 ultimate reward points when you spend $5,000 with the card in the first three months. The card also provides generic, but highly useful benefits for business owners. Business Platinum Card from American Express The Business Platinum is ideal for businesses that spend a lot on flights and travel. This card offers numerous rewards on flight and hotel expenses and makes sure you get something serious back if you use it for these expenses. Chase Inc Business Unlimited The Chase Inc Business Unlimited offers unlimited 1.5% cash back. While we’ve said enough already, they also offer several other perks that are overshadowed by their first one.
Be Aware of All the Expenses
Buying a house is getting more expensive with every passing year. In fact, the average millennial today faces housing prices 39% higher than their parents did in the 1980s, according to Business Insider. To add fuel to this fire, young people face a ceaseless student loan debt burden that millennials cite as the largest single obstacle to home ownership.
In such a challenging economic environment, it’s important to know exactly what you’re getting into when you choose to buy a house. Down payments on a mortgage are just the beginning of the expenses of buying, preparing and maintaining a new home. After that’s all dealt with, you’ll still have a laundry list of expenses you’ll want to have covered before surprise expenses start to wear you down.
Mortgage Rate
The first financial obstacle you’ll have to overcome is getting a mortgage. Your mortgage will make home ownership possible, but it will come with long-term costs that you’ll need to keep up with.
Your mortgage is probably the largest financial decision you’ll ever make, so it’s important to keep a level head while you approach one. The typical bank or lender will cover 80% of the cost of a new home, and you’ll pay it back over time with interest.
The interest rates on a mortgage are either fixed-rate or come with adjustable interest rates. In most cases, mortgages will require you to pay the same amount of money on a monthly basis. Mortgages are typically amortized, meaning that the ratio of interest to principal (the money you borrowed) will change as you pay back your loan. Each month you pay back a piece of your mortgage, this ratio will change.
Mortgage Payment Calculator
When you apply for a mortgage, your lender will come up with an amortization formula that will be used to form your payment schedule. The life (length) of your loan also plays a part in how much you’ll have to pay every month. Each month you pay back a piece of your mortgage, the ratio of interest to principal will change.
If your mortgage is fully amortized, you’ll have to make payments as scheduled until the life of your mortgage comes to its end.
If your mortgage is a fixed-rate one, every amortized payment is the same amount.
If your mortgage is an adjustable rate one, the fully amortized payment changes with every change to the interest rate on your loan.
In the end, a loan with a longer life translates into a lower monthly rate that will be paid off over a longer period of time. This comes with a downside, as the longer your mortgage goes without being paid off in full, the more you end up spending on interest.
After these more technical aspects of a mortgage have been covered, you’ll want to consider all the other expenses that come with buying a house.
Down Payment
The first major expense you’ll have to cover on the long road to paying for a house is the down payment. As mentioned, a bank or other lender will typically cover 80% of the cost of buying a home. They will require you to make a down payment of 20% immediately, and you’ll pay the rest off over time as per your arrangement with the lender.
20% is the golden standard for a down payment, though this figure can vary for a variety of reasons. The more you pay on your down payment, the less you’ll have to pay moving forward, and the less you’ll lose to interest in the long run. For these reasons, it is ideal to pay more upfront, when possible.
Insurance
Insurance is a major expense that varies widely depending on your location and what you need to be covered. Home insurance can be a complex subject and is broken down in many ways. The most important home insurance is coverage for the structure of your home.
Coverage on the structure of your home can be further broken down into a myriad of disasters that can damage your house’s structural integrity. These costs vary based on location, but you should make sure you’re covered for the most likely disasters to affect you in the very least. If you’re buying a home in certain parts of the American Southeast, be sure to consider flooding and hurricanes. If you’re buying a home in California, be sure to consider wildfires.
In any case, fire, flooding, lightning and routine wear-and-tear should be included in a good home insurance policy. To forgo on these factors could cause serious financial trouble down the road.
If you feel it necessary, you can also get coverage for personal belongings (highly recommended). Another common addition to home insurance is liability protection. With liability protection, you get coverage for lawsuits over bodily harm or property damage that you or a family member have been found to have caused someone else.
Lawyer Fees and Health Inspections
Don’t forget about the lawyer fees! These won’t add up to much compared to your other expenses, but you’re looking at anywhere from $1,000 to $2,000 altogether. These lawyer fees should cover registration for the mortgage, a tax certificate and a title search on the property.
Property Taxes
Property taxes vary by locality, but you will have to pay an annual rate for owning the property. This rate depends on what municipality or county your property resides in, the size of the property and several other variables.
Furnishing Your Home
This is a completely subjective expense, but you’ll want to consider it ahead of time. If you want a well-furnished home, you should set aside at least $20,000 for it. The average cost for furnishing a studio apartment in the United States with all the essentials is $3,000 (and this is for the cheapest unused furniture available), according to Furnishr.
Optimizing Your Future Passive Expenses
Lastly, you’ll want to consider how you can optimize the bills you’ll be paying for the property. This is where you can save some real money with creativity.
For starters, good insulation will save you some serious money on climate control. Many architects are interested in designing homes so they receive more sunlight during the winter and less during the summer. For you, the buyer, there are also countless ways to minimize the passive spending that will come once you’ve moved in.
Yes, this is all a pain to think about, but dealing with these factors in advance will save you a world of heartache and trouble in the future.