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.
Different Financial Situations Call for Different Loans
Throughout the nation and world, everyone has a different financial position and set of circumstances. Due to that, we all have different problems that might result in taking out a loan; unfortunately, this might be difficult for someone with bad credit or no credit.
Before pursuing any type of financial assistance, it is imperative to know the options out there for you and consider the pros and cons that each option provides. Below, I will introduce a variety of potential alternatives for individuals without a credit check – be sure to analyze each alternative and select the option that best suits you.
Consider the Risks of Each Option
Below, I will cover a handful of loan options that will not require a credit check. The below content will be divided by low risk, medium risk and high risk – please note that everyone has different circumstances and will consequently need to pursue different options.
While you can pursue a personal, no-credit-check loan, it is important to understand that there are alternative options. Unfortunately, most personal loans come with extremely high APR and other disadvantages – Below, we will cover a range of alternative options that should be considered.
A good rule of thumb, though, is to try and land the lowest risk option for your given situation!
Low-Risk Options
Co-Signer Loan
Pros
- Some creditors offer a lack of credit checks when applying with a co-signer with excellent credit.
- Favorable interest rates on the loan.
- Does not require any collateral.
Cons
- Requires someone to sign with you.
- Failure to pay the loan will hurt your and your co-signer's credit.
Unfortunately, no-credit-check loans will always have some dynamic risk that those with fair or good credit will not face. With that said, a co-signer loan is the best option for those who can go this route.
In my life, for example, I was fortunate enough to have supportive parents who were willing to co-sign on my first vehicle as I didn’t have the credit score and history to receive the necessary financing. If you can pursue this option, you should. Remember though, the co-signer is betting on you and risking their credit on your behalf – don’t make them regret it.
Medium Risk Options
No-Credit-Check Installment Loan
Pros
- Lower APR than a payday loan and other alternatives.
- Relatively large borrowing sum.
- Paid back via fixed monthly payments.
Cons
- Still have relatively high APR
Secured Credit Cards
Pros
- No credit checks from some issuers.
- If you can’t get approved for an unsecured credit card, typically easier to get approved for a secured one.
Cons
- Requires collateral, similar to a secured loan.
- Must have enough cash upfront to put down equivalent to the card credit line. (Failure to make payments results in forfeiture of the deposit.)
The two options above, no-credit-check installment loans and secured credit cards are considered medium-risk options due to their lower APR and their payment cycles. Unfortunately, a secured credit card will require enough liquidity from the applicant to cover the line of credit requested – this will make it difficult to be an emergency funding source. An installment loan, on the other hand, gives the applicant a larger borrowing sum that they pay back via fixed monthly payments; unfortunately, the risk here is that the APR rates are still relatively high.
High-Risk Options
Secured Loan
Pros
- Lower interest rates than other options.
- Easier to get approved with little or no credit (oftentimes, it does not require a credit check).
Cons
- Requires collateral to back the loan.
- Defaulting on the loan will lose you the asset collateralized. (Could lose house, boat, car, etc.)
Payday Loan
Pros
- No credit check required.
- Short-term (2-4 weeks) loan to be repaid on next paycheck.
Cons
- Extremely high APR (upwards of 400%).
- Should only be viewed as an emergency.
The above options are high-risk and should be viewed as an absolute last resort. Secured loans require the applicant to put up collateral; this is often in the form of your house, car or boat. Unfortunately, defaulting on the loan could cause more damage than you’d expect – you will ultimately lose your collateral. On the contrary, a payday loan does not require collateral but it does have an APR upwards of 400%. A payday loan should be viewed as a last resort option for short-term liquidity.
No-Credit-Check Loans and Alternatives Can Vary
It is important to realize that these loans and alternative options will vary based on creditor and applicant. While the information presented above is a great general overview, you should consider your situation and circumstances before making a decision. Consider how important the funding is at this moment – it might be in your best interest to hold off and attempt to build your credit in the meantime.