Key takeaways
- Company bank cards are playing cards the place the enterprise entity, reasonably than the enterprise proprietor, is legally chargeable for any prices made with the cardboard.
- Company playing cards are usually out there to massive firms with a longtime credit score historical past and thousands and thousands of {dollars} in income.
- Your corporation will probably want a strong credit score historical past with the intention to get accredited for a company card.
It’s the perfect state of affairs for a small enterprise proprietor: Your organization is experiencing year-over-year progress, your enterprise is worthwhile and your income will increase each quarter. That is the type of progress most small enterprise house owners dream of.
Once you begin to see your organization shift from a small startup to a longtime company, it’s time to consider transitioning your monetary instruments. This would possibly imply switching from a enterprise bank card to a company bank card — however earlier than you start the prolonged company bank card software course of, it’s price asking your self whether or not a company card is admittedly the correct selection for your enterprise.
Let’s take a better take a look at how company playing cards work, easy methods to handle an organization card and easy methods to determine whether or not your small enterprise is able to make the transition from a enterprise bank card to a company bank card.
What’s a company bank card?
A company bank card is a sort of card issued to an organization. Which means the enterprise entity, not the enterprise proprietor, is legally chargeable for all prices made on the cardboard. Due to this, company bank cards are typically solely issued to massive firms with a observe document of success and a longtime enterprise credit score historical past. If your enterprise is an LLC, S-Corp or C-Corp with a strong enterprise credit score rating and income within the thousands and thousands, your organization is perhaps eligible for a company bank card.
Company bank cards might include sure useful perks, corresponding to money rebates and frequent flyer miles. Nevertheless, the most important profit to a company bank card is that particular person workers might be issued their very own playing cards to deal with their work-specific enterprise bills. Whether or not it’s paying for airplane tickets or renting workplace house, having a company bank card could make dealing with enterprise bills for a big company far more environment friendly.
Company bank cards vs. small enterprise bank cards
Company bank cards and small enterprise bank cards aren’t one and the identical. Whereas company bank cards are designed for companies with a number of workers and income within the thousands and thousands, enterprise bank cards are designed to satisfy the wants of small enterprise house owners, together with freelancers and people with facet hustles. Figuring out which choice is finest for your enterprise will show you how to apply for the correct card — and having the correct line of credit score is a good way to assist your enterprise develop.
Which choice is best for you?
When you have a facet hustle, run a contract enterprise or have a small enterprise with income of lower than one million {dollars} per yr, you’ll most likely desire a enterprise bank card. Enterprise bank cards have lots of benefits, together with the flexibility to earn rewards on enterprise bills and construct your enterprise credit score rating. When you have workers who want entry to your enterprise line of credit score, you can also make them licensed customers on your enterprise bank card.
Enterprise bank cards additionally require a private assure, which suggests you might be personally answerable for any prices made on the account (together with licensed customers’ prices). If your enterprise doesn’t herald sufficient cash to repay your enterprise bank card invoice, count on to make funds out of pocket.
In case your small enterprise is legally categorized as an organization, has income within the thousands and thousands and has a number of workers who want entry to a company credit score account, it is perhaps time to contemplate a company bank card. Company playing cards don’t require a private assure, so it’s a good suggestion to verify your enterprise has constructed up a strong credit score historical past earlier than making use of.
How do company bank cards work?
In some ways, company bank cards perform loads like private bank cards or small enterprise bank cards. You should utilize your company bank card to make purchases for your enterprise, and plenty of company playing cards permit your enterprise to earn rewards on company purchases. Your corporation might want to make common funds in your company bank card account, and your company card utilization and fee historical past will issue into your enterprise credit score rating.
Nevertheless, company bank cards additionally include a number of options that small enterprise bank cards might not provide. These embody the flexibility to subject worker bank cards with out having to imagine private legal responsibility for the costs. Company bank cards additionally usually embody entry to accounting software program and companies designed to assist your enterprise handle its company line of credit score, and your organization might obtain reductions on widespread enterprise bills and retailers.
How do you qualify for a company bank card?
To search out out whether or not your enterprise will qualify for a company bank card, contact a company bank card issuer immediately. In contrast to client bank cards, company bank cards usually embody prolonged software processes — and chances are you’ll be required to offer documentation proving that your enterprise’ earnings and bills are excessive sufficient to justify taking out a company line of credit score. The appliance might even embody a monetary audit, so be ready.
Are you able to get a company bank card with weak credit? Technically, sure. Since company bank cards don’t require a private assure, a credit score issuer most likely gained’t do a tough inquiry in your private credit score. Which means you would have a low private credit score rating and nonetheless have your enterprise qualify for a company bank card. However, if your enterprise has weak credit or has solely developed a restricted credit score historical past, you may need a more durable time taking out a company line of credit score.
Ideas for managing a company bank card
Company bank cards include extra perks, however in addition they include extra components to handle. To start utilizing your company bank card correctly, it is best to:
Set up insurance policies for all cardholders
Once you open a company bank card, be prepared to speak to your workers about your organization’s new bank card insurance policies, in addition to easy methods to use their firm playing cards. Be sure that workers perceive that they need to solely make enterprise purchases on the cardboard, in addition to the significance of maintaining with funds and monitoring receipts.
In case you’re an worker utilizing a company bank card on behalf of your employer, one of the best ways to handle your organization card is to observe the rules set by your employer — and ensure to submit all receipts, expense experiences and different mandatory documentation promptly. When you have any questions on how your company bank card must be used, speak to your supervisor or attain out to a crew member in accounting or finance.
Monitor and handle bills
Managing funds for big companies takes work, however most company bank cards include high-level expense reporting instruments that may make that work slightly simpler. Whether or not you wish to observe bills by class, monitor worker spending or reallocate your price range in real-time, one of the best ways to handle your company bank card is to take full benefit of those instruments.
And if your enterprise is massive sufficient to have a company line of credit score, it’s most likely massive sufficient to have an accountant (or accounting division) who can assist you perceive the place your enterprise’ cash goes, whether or not you might be staying inside your price range and what you have to do to maintain your company line of credit score in good standing.
How do company playing cards influence credit score scores?
Your company bank card utilization will influence your enterprise credit score rating the identical manner utilizing a private card will influence your private rating. In case you fail to make minimal funds or make late funds, your enterprise credit score rating will take successful.
However, a company bank card also can show you how to proceed to construct your enterprise credit score historical past. Credit score bureaus — Experian, Equifax and Dun & Bradstreet for enterprise credit score scores — think about issues like on-time funds and the age of your organization when factoring your rating, so the longer you retain your company bank card open and in good standing, the extra your enterprise credit score rating will enhance.
What are the most effective company bank cards?
The perfect company bank cards are those providing flexibility, rewards and expense monitoring your enterprise requires. It additionally permits you and your workers to pay for the supplies and provides you want whereas getting rewarded for it. Usually some of these playing cards require full fee of the steadiness each month,which retains you from accruing curiosity however might create some money circulate points for extra fledgling firms. Listed here are a couple of Bankrate’s suggestions for the most effective company playing cards:
The underside line
Many profitable small enterprise house owners might wonder if it’s time to transition from a enterprise bank card to a company bank card. If your enterprise has a crew of workers, a strong credit score historical past and — most significantly — annual income within the thousands and thousands, it is perhaps time to contemplate making use of for a company line of credit score. If your enterprise is doing nicely however isn’t but hitting that type of income, a small enterprise bank card remains to be most likely your only option.
*Details about the Brex Card, the Ramp Visa® Company Card and the American Specific Company Platinum Card®, Company Gold Card and Company Inexperienced Card has been collected independently by Bankrate. The cardboard particulars haven’t been accredited or reviewed by the issuer.
