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.
Ready to go House Hunting?
You’ve decided you’d like to buy a home, but you can’t afford to pay for it in cash. That’s no problem. A mortgage can help you get the home of your dreams. Getting a mortgage can seem like a daunting task, but it doesn’t have to be. In this article we’ll tell you everything you need to know about getting a mortgage.
How Much of a Down Payment Do You Need?
A down payment is the money you pay ahead of time in order to get a mortgage. It’s subtracted from your mortgage loan and represents your home equity at the beginning.
Lenders usually prefer that you make a 20% down payment; however, as a first-time homebuyer, that can be a daunting task. Thankfully, you can buy a home with a much smaller down payment — in fact, as little as 3.5%.
The Federal Housing Administration (FHA) is a government agency that helps homebuyers get approved for mortgages. It accomplishes that by guaranteeing part of the mortgage loan. This is how you’re able to only put down 3.5% and possibly still get the lowest mortgage rates available.
If you’re putting down less than 20% on a property, most lenders usually require that you purchase private mortgage insurance (PMI). No, this isn’t insurance that protects you — it’s insurance that protects your mortgage lender in the event that you fail to repay your mortgage. PMI gets added on top of your mortgage and represents an added cost for homebuyers, so be sure to factor in its cost if you’re putting down less than 20%.
Making a down payment of 20% on a property does have its advantages if you can afford it. In this case, you won’t need to buy PMI, plus you may get more favorable mortgage terms, including a lower mortgage rate.
Don’t make the mistake of putting every penny toward your down payment. It’s important to set some money aside for closing costs. These are the expenses that you’re required to pay out of pocket when buying a home. Examples include a home inspection fee, land transfer tax, real estate lawyer fees and moving expenses.
How to Get Pre-Approved
Before you start looking at properties, it’s a good idea to get pre-approved for a mortgage. A pre-approval involves a lender looking at your income, assets and credit, and confirming the maximum purchase price you can afford to spend on a home.
It’s important to note that a pre-approval isn’t a guarantee that you’ll get a mortgage. Although a mortgage pre-approval is helpful in the sense that you’re more likely to only look at homes within your price range, the missing piece of the puzzle is the property itself. If the lender doesn’t like the property for whatever reason, it could turn down your mortgage approval.
Now that you have a better understanding of what a mortgage pre-approval is and what it isn’t, let’s take a closer look at how to get pre-approved.
When getting pre-approved for a mortgage, your finances are basically an open book for your bank. Your bank will ask you for various documents to verify who you are and that your finances are in order (more on this below).
Once you’ve submitted the documents to the lender, it usually takes about two to four weeks to get pre-approved. Once you’re pre-approved, the lender will usually provide you with something in writing. Once you have this in hand, you can confidently go out and start looking at properties.
What Information/Items Do You Beed Before Meeting with a Mortgage Broker?
Whether you’re getting pre-approved for a mortgage at the bank or through a mortgage broker (someone who acts as an intermediary between homebuyers and lenders), it’s important to come prepared. Here are some of the information/items you’ll need before meeting with the bank or a mortgage broker:
- Personal Information: A mortgage represents a large sum of money. To verify your identity and make sure you are who you say you are, your mortgage broker will most likely ask you for personal information such as your date of birth and government issued photo identification. You may be asked for your social security number (SSN) so your mortgage broker can do a credit check.
- Employment Documentation: If you’re a salaried employee, your mortgage broker will usually ask you for a letter of employment, most recent pay stubs and W-2s for the last two years. If you have any other sources of income like a side hustle, you may be asked for additional income documentation.
- Asset Information: To ensure you’re a responsible borrower, the lender will most likely want to see information on your assets. Assets are things that you own. Examples of assets include investments, vehicles and any other properties you might own.
- Down Payment: Related to your assets, the lender will want to know the source of your down payment. As such, you’ll likely need to supply financial statements for the last 30 to 90 days. If you’re receiving money as a gift toward your down payment, you might be asked to come with a gift letter as well.
What Options Are There for Mortgages: Pros and Cons
Once you’ve found a home that you like, you’ve made an offer and it’s accepted, it’s time to get a mortgage approval from a lender. There are two main types of mortgages: conventional mortgages and FHA mortgages.
A conventional mortgage is when you’re making a down payment of at least 20%. Conventional mortgages come in two main varieties: fixed rate and adjustable rate.
Fixed rate is, as the name implies, when your mortgage rate stays the same for the length of your mortgage term. So, if you have a 30-year fixed rate mortgage, your mortgage rate and payment will stay the same for 30 years.
A variation of that is the adjustable rate mortgage. With the adjustable rate mortgage, your mortgage rate and payment may change during the life of your mortgage. The advantage of this is that if interest rates were to fall, you’d pay less by way of your mortgage; but if rates were to rise, you’d pay more. Before taking an adjustable rate mortgage, it’s important to make sure you’re okay with this added risk.
An FHA mortgage is one that’s backstopped by the government. With an FHA mortgage, you can make a down payment of as little as 3.5%, making it a lot more affordable for first-time homebuyers to get into the real estate market.
How to Find a Mortgage That Fits Your Needs/Resources/Lifestyle
There isn’t a one-size-fits-all mortgage for everyone. The reality of the situation is that everyone’s finances are different. What may work for your neighbor may not work for you.
If you’re someone who’s risk adverse or a first-time homebuyer, you’re probably better off sticking with a fixed rate mortgage. That way you’ll know exactly what your mortgage payments will be, making it a lot easier to budget. If you’re someone who’s less risk adverse, you might consider an adjustable rate mortgage.
The bottom line is that you want to choose a mortgage that fits your needs, resources and lifestyle.