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.
Get the Loan You Need for Your Education
Bad credit is often an impediment when you apply for a loan or a credit card. Happily, the story is different for student loans, because the federal government bases these loans on financial need, not credit score.
However, if you need additional student loan proceeds or do not qualify for a federal loan, you can turn to a private student loan, where credit is definitely a big factor. In this article, we will explore the student loans available to you and how to get them, in particular student loans for bad credit. Be sure to consult a loan calculator so you are aware of all the aspects of a loan you need to consider before signing on for one.
What Are Student Loans?
Student loans help pay for the costs of attending college. They are a form of financial aid, as are grants and scholarships. Access to student loans makes college and graduate school attendance possible for millions of Americans each year.
Most student loans are issued by the federal government, but you can also get a non-federal private loan from a school, state agency, credit union or bank.
Federal Student Loan Programs
The federal government’s William D. Ford Federal Direct Loan Program offers four types of direct loans:
- Direct Unsubsidized Loans: You can get these even if you do not demonstrate a financial need. Loan interest accrues when the money is disbursed.
- Direct Subsidized Loans: The interest on these is deferred when you are in a non-payment status — during school attendance or during the grace period after graduation.
- Direct Consolidation Loans: Combines separate federal loans into one.
- Direct PLUS Loans: For professional/graduate students and parents of dependent undergraduates.
In addition, the Perkins Loan Program consists of loans made by the school to students with exceptional financial need.
Private Student Loans
These are student loans from banks, credit unions and other private sources. The lender sets the terms and rates, which are generally higher than the federal government’s. Rates are fixed or variable. A credit check is mandatory, and repayment begins immediately. These loans lack many of the options provided by government loans.
What Options Are Currently Available?
Generally, you will get a better deal by choosing a federal student loan over a private one, for the following reasons:
Interest Rates
Federal student loan interest rates are lower than those available from private sources. Rates for private student loans can be fixed or variable, and vary by lender and borrower — those with high credit scores pay lower private loan interest rates.
The initial teaser rate on private variable student loans might start out lower than the federal loan rate, but typically rise considerably after the first year, sometimes as high as 18%.
Repayment Benefits
Federal student loans offers several borrower-friendly repayment options not available on private loans. Federal student loans for undergraduates may be subsidized, meaning the government pays the interest for as long as the loan payments are deferred, including while the student is attending school at least half-time and for a period following completion of study (the grace period).
Private student loans are not subsidized and usually require repayments right away, while you are still attending school. Federal student loans can be postponed, and monthly payments can be based on your income, two features not necessarily available from private loans. You may also obtain federal loan forgiveness if you work in public service after finishing school, a feature not available from most private loans.
Co-signing
Federal loans are based on need, not ability to repay, and therefore do not require cosigners to help guarantee the debt. Private student loan access and cost are based on credit scores. If you have a low score, you might need a co-signer to help get a private student loan.
Obviously, this creates risks for cosigners, as they are on the hook for missed payments and may suffer credit score damage for late or missing payments. Co-signers increase their credit utilization ratio, which could raise the cost or availability of future credit.
Prepayment
Federal student loans have no prepayment penalty fees. You will have to check the fine print of a private loan for any prepayment penalties.
Consolidation
Federal student loans (but not private ones) can be combined into a Direct Consolidation Loan featuring a single monthly payment and access to an income-based, income-contingent or pay-as-you-earn plan. The interest rate on a consolidation loan is a mix of the rates on existing loans. Private loans can be privately refinanced, but this may require a higher interest rate.
Application
A single application form, the FAFSA, is used for all federal student loans. If you apply to multiple private borrowers, you will have to fill out an application form for each.
Taxes
You may be able to deduct the interest on your federal student loan from your income. No such tax break exists for private loans.
Scams
You avoid scams when you borrow student loans from the federal government. No such assurance exists for private loans. Fraudulent private lenders might ask for an upfront payment, or falsely promise lower payments or relief from garnishment. Another scam is to charge a fee for refinancing your loans.
Research
The Department of Education’s Student Aid website is a valuable resource to learn about all aspects of student loans. Some private lender websites are also good, some not so much.
Private loans are still a viable choice if you have a good credit score and do not qualify for a federal loan. Also, you can refinance a mix of private and federal student loans but cannot include private loans in a federal Direct Consolidation Loan. Ultimately, your financial situation will dictate whether you qualify for federal student loan, but if you can, it is definitely your best choice.
How to Apply for These Specific Loans
You obtain federal student loans by filling out the Free Application for Federal Student Aid (FAFSA). Students with good, bad or no credit are treated equally. State agencies may also use the FAFSA or provide their own application forms.
If you prefer a private loan, you must complete the lender’s application paperwork. If you have bad credit, you will need a cosigner who has good credit in order to get most private student loans. Alternatively, some private lenders accept applicants with bad credit and no cosigner, but be prepared to pay a high interest rate.