What You Need to Know about Business Credit Cards

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If you are an entrepreneur or just starting a new business endeavor, you need to start now developing your business credit history. One way to do this is with a business credit card. Many credit card companies today offer credit cards just for people like you. However, there are some things that you need to know before you sign on the bottom line.

  1. Personal Guarantee: If you have are a new business or have yet to establish your business legally, you may be required to guarantee the debt personally. This means even if your business fails, you will be personally responsible to repay the debt in its entirety. To protect yourself personally, look for business credit cards that allow for commercial or joint liability. Know before you sign!
  2. Qualification Process: When you apply for a business credit card, the decision will be made based on your personal and business credit history if you have one. Just like the personal credit bureaus, there are credit bureaus focusing just on the creditworthiness of businesses. The main business credit bureau is Dun & Bradstreet. Managing your personal credit history and business credit history is a must; routinely pull your reports and pay your bills on time.
  3. Credit Limit: Many new business owners and entrepreneurs are surprised at the credit limit granted on business credit cards, as it is generally higher (sometimes significantly) than what is granted to personal accounts. While it may be tempting to use the expanded credit line, guard against using your business credit card for personal expenses or purchases.
  4. Use Business Credit Wisely: Business credit cards can be a great way to pay for unexpected expenses or make capital expenditures. Just be sure to budget properly to allow for a 6-12 month payoff of the debt. In addition, business credit cards can be a great way to manage expenses while building your business’ credit history. With a rewards card, you can reap the benefits of paying for monthly expenses including utilities, phone, entertainment expenses, travel, seminars and other recurring costs. Use the card for expenses that you pay off monthly for best results.
  5. Consolidate Expenses: As mentioned above, you can use a business credit card to manage your expenses, making it easier at tax time for your small business accountant. Many of these cards offer the ability to print receipts, run analysis on expenditures and much more. Prior to signing up for a card, take a look at these features.
  6. Added Benefits: There is competition so carefully look at all your options. Some cards will offer travel rewards and travel insurance, others will double the warranty on some expenditures. Shop around and find the card that is best suited to your current needs but be aware of your long-term goals.

As with all credit, it is vital that you do not spend over what you can comfortably repay. Pay balances off immediately when possible. The exception to that rule is with credit cards that have a 0% interest rate for a short period of time. Just be sure to pay off as much as you can prior to the interest rate jump.

Business credit is a valuable commodity, treat it as such and it can help your business thrive!

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