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.
Avoiding Costly Loan Rates
Sometimes, obtaining a loan might be the most reasonable and exigent thing to do, especially in certain critical and unexpected situations. But how do you negotiate the overall cost of a refund, including the total loan cost?
Whether it is a loan for personal, business or education purposes, you cannot forfeit the cost of borrowing the loan - the interest - lest your loan amount accrues massively, with your interest rate capitalizing rapidly over your principal balance. It is, therefore, important to understand the dynamics of loan repayment and how to reduce your total loan cost. This article will show you effective, practicable and quick ways to lower interest rates.
Factors Causing Costly Loan Rates
Typically, total loan cost and interest rates are calculated using the formula of the principal amount borrowed, the attached interest, and the allocated repayment time. A breach in any of these components invariably alters the cost of refinancing a loan.
The total cost of installment loans is impacted directly by factors like;
Total loan borrowed: Generally, higher loan amounts attract increased interest rates and overall total loan cost.
Repayment duration: Your repayment plan option, either required by the loan lenders or chosen by you, directly impacts the eventual cost of your loan. For instance, a 20-year mortgage automatically costs more than a 10-year mortgage.
Interest rate: it is important to note and compare loan offers from the percentage amount charged on the loan amount at a specific repayment duration. This is because higher interest is directly proportional to a higher loan cost.
Interest type: Essentially, fixed interest rates are stable, while variable rates increase gradually and increase the loan over time.
Fees and charges: Some installment loans attract additional charges like origination fees, late payment and prepayment penalty fees, which eventually accrue loan costs. For example, most loans attract late payment penalties, which means a percentage increase in interest rate after the due payment duration.
Credit score: oftentimes, your credit score determines the interest rate offered by your financial institution. A higher credit score will often mean a lower interest rate.
Effective Ways to Reduce Your Total Loan Cost
With the following tips, you can save yourself the burden of overwhelming debt or a burdensome repayment plan. Before obtaining a loan, check for these tips to reduce your overall loan cost.
Compare Loan Offers
It is important to research loan lenders and compare lenders’ offers. Many loan lenders offer loan interest rates that slightly differ from the others. Comparing loan offers will help you determine the financial institution with the lowest interest rates that would get you a hassle-free loan repayment plan.
For instance, most federal loans in the US offer reduced interest rates than some private loan lenders. So, if you qualify for some federal loans, such as student loans, you should consider going for such loans.
Improve Your Credit Score
Almost all loan lenders in the US use credit scores as criteria for determining loan interest rates. Your existing creditworthiness and FICO score generally influence your qualification for a loan. A high credit score earns you a reduced loan interest rate because lenders can trust your ability to pay your debt.
Therefore, consider improving your credit score before you obtain a loan.
You can increase your credit score by making timely, updated payments on your credit card, bills and online loans. 35% of your FICO score is derived from your payment history. An up-to-date payment on your credit score will pay off well in your loan rates and overall loan terms.
Another way to increase your loan score is to minimize the amount of previous debts. This automatically improves your credit score and debt-to-income ratio ( DTI). Paying down exclusive debts will attract impressive loan rates and repayment terms.
Choose Loans with Fixed Interest Rate
It is better to consider a loan option with a fixed interest rate to make for a sustainable and easier way to repay your loan. Choosing a fixed-rate loan over a variable-interest loan calls for a predictable repayment schedule for an installment loan.
Refinance Your Loan
One easy way to obtain a more favorable interest rate is to refinance a loan. Refinancing a loan means changing the existing terms of agreement by obtaining a new loan to pay off the existing debt. This way, you can achieve better loan terms, including low interest rates and fees.
Opt for Loans with Shorter Repayment Term
A practical way to reduce the calculated interest for a loan is to shorten the repayment duration. Although this may mean you have to pay more each month, in the long run, you would have avoided increasing interest rates that accrue over a longer period.
Pay Beyond the Minimum Loan Refund
Exceeding the monthly minimum repayment range helps you pay the principal balance faster and better positions you for reduced interest rates. Also, you can reduce the total loan cost in the long term by using this method.
You should, however, check your loan repayment terms for any penalty fees against early repayment to avoid extra charges.
Getting a loan can sometimes be necessary. But, you must find ways to reduce the interest rate and, ultimately, your total loan cost. Fortunately, by applying the tips above, you will be able to reduce your interest rates and total loan costs.