Personal VS Business Credit Cards

personal vs business credit cards

Let’s say you’re about to take a running leap into the great unknown and launch that business you’ve been thinking about for years. Congratulations! You’re about to join a class of people who receive more performative displays of respect (if nothing else) from the powers that be than anybody this side of The Troops and Olympic gold medalists: small business owners.

As you begin your journey amidst the peril and the pitfalls, you might be tempted to get a business credit card. It’s what you’re supposed to do, right? They wouldn’t put “business” in the name otherwise, would they?

As it happens, a business card may well be a sensible option for you. Or it might not be! A personal credit card may well fit your enterprise just fine. It all depends on the nature of your business, how you plan to use your credit card, and how you weigh the relative risks. Let’s go through some of the ways personal and business credit cards differ from one another.

Personal Credit Cards Have Stronger Consumer Protections

One difference that isn’t widely recognized is the fact that the Credit CARD Act of 2009 gives users of personal credit cards legal protections that do not apply to users of business credit cards. Among other reforms, the Act mandates that credit card companies give cardholders at least 45 days notice of a rate increase, that consumers get at least 21 days to pay their bill, that low introductory rates be offered for at least 6 months, and that payments are applied to the consumer’s highest interest rate balances first.

Now, if you have a business card, that doesn’t necessarily mean that your credit card company is going to engage in all the practices outlawed by the Credit CARD Act. In fact, many issuers of business cards extend most of these protections to consumers as a courtesy. However, not all credit card companies offer such protections, and the majority may not offer all of the protections listed above. For instance, your business card issuer may apply your payment to your lowest interest rate balance so they can leech more in interest charges. What’s more, history and experience suggest that big financial companies aren’t the most meticulous institutions when it comes to protecting consumers’ interests in the absence of legal mandates (and even then, their record is spotty, to put it mildly).

If you plan to sign up for a business credit card, read the fine print on the agreement before pulling the trigger. You should also closely monitor your charges and your monthly statements. Of course, you’re no dummy — you probably knew to do that already!

Personal CCs & Business CCs Tailor Their Rewards Programs Differently

Here’s one difference that shouldn’t come as a surprise: Business credit cards often have rewards programs that offer perks tailored towards the kinds of purchases typically made by businesses, such as office supplies and phone services. Meanwhile, the rewards programs offered by personal credit card issuers normally focus on categories average consumers spend on.

Naturally, many business owners and entrepreneurs will be attracted to business credit cards on this basis. But what if you don’t spend much on typical business categories in your particular enterprise? You might be running your business from home and have little use for, say, rewards programs geared toward office supplies. Suffice it to say, you should pay attention to the rewards categories offered by the credit card company in question (whether it be a personal or business credit card) and think long and hard about whether said rewards make sense for you and your business.

Business Credit Limits Are Often Higher

Businesses tend to spend more money than consumers. Therefore, it shouldn’t come as a surprise that those applying for business credit cards normally qualify for a higher credit limit than those applying for personal credit cards.

This means that with a business credit card, not only will you be able to spend more and not hit your limit, but this higher credit limit can boost your credit score as well. Business credit-reporting bureaus Equifax and Experian (not Dun & Bradstreet) use your credit utilization to determine your business credit score. A higher credit limit can therefore boost your standing, as you’ll be using less of your total available credit when your high credit limit kicks in.

A Business Credit Card Builds Your Business Credit

One advantage of using a business credit card is that it establishes and helps build your business credit; you cannot build credit for your business by charging business expenses to a personal credit card. Your business credit score can determine whether or not your business qualifies for loans, credit lines, and other financial products. It can also affect the price you’ll pay for business insurance.

If you’re an entrepreneur with no business credit history to your name, a business card can be an essential tool for building credit.

Business Cards Can Affect Your Personal Credit Too

When considering which type of card to use, know that how you use your business credit card can affect your personal credit as well as your business credit.

Getting a business credit card usually involves a personal guarantee, making you personally liable for your business’s debts if your business misses payments, so your business card issuer will likely consider your personal credit score when determining how much credit to extend to you. In addition, some business card issuers, like American Express and Capital One, report your business card activity to both business and personal credit bureaus. Others, like Chase, report your activity to business credit bureaus only. So while using your business card can definitely affect your personal credit, the exact mechanisms by and the degree to which it will do so can differ. Do your due diligence!

Final Thoughts

This is admittedly a familiar refrain at this point, but do your homework and examine the terms and conditions closely when applying for a credit card, whether it be personal or business. As for which one to choose when you’re starting a business, that all depends on your expected spending habits and your priorities.

If your goal is to establish business credit and your business expenses jibe with the reward categories offered by most business cards, a business credit card may be the way to go. If, on the other hand, you’re a sole proprietor who doesn’t anticipate spending much on the reward categories of business cards and building business credit isn’t your priority, you could definitely get by with a personal credit card.

Just remember that credit card issuers are in the game for profit, not public service. Trust your investigative ability, not the purity of their motives.

The post Personal VS Business Credit Cards appeared first on Merchant Maverick.

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8 Ways To Finance Your Small Business

Business financing is often a necessary part of growing a business, but when it comes to finding capital, it can be difficult to know where to start. Should you get a credit card? What about a loan from your local bank? Is there useful financing out there that you haven’t even heard of?

Read on, and we’ll point you in the right direction. This article discusses the most common (and some less common) ways of getting financing for your business. And, if you find the right type of financing for your business, we’ll give you the next steps to continue your search.

Want help finding a business loan? Apply now to Merchant Maverick’s Community of Lenders. We’ve partnered with banks, credit unions, and other financiers across the country to bring you fast and easy business financing.

1. Business Loans

As you might expect, business loans are one of the most popular and versatile ways of financing your business. Most businesses will qualify for a business loan of one sort or another, and they can be used for many business purposes, from working capital to business expansion to refinancing.

Business loans come from many different places. While everybody knows that you can get a business loan from a bank, you might not be aware that other financial institutions offer business loans. Many offer loans that are easier to qualify for and have faster applications than bank loans. Here are places that commonly offer business loans:

  • Banks and credit unions offer business loans and other types of financing.
  • Nonprofits, not-for-profit institutions, and microlenders offer small business loans and other types of financing to create jobs and fuel community growth.
  • The Small Business Administration partners with financial institutions to offer business loans. Read more about SBA loans in our guide to their programs.
  • Online lenders, also called “alternative lenders,” offer business loans and other types of financing with fast, semi- or fully-automated application processes.

Loans come in many different forms. The most common are installment loans, in which the money is granted to the business in one lump sum and then repaid via incremental, fixed, payments. However, some loans might have special fee and repayment structures — you might find loans with fixed fees (like short-term loans), loans that have repayment rates based on the percentage of money you make every day or month, or other arrangements. In other words, with a little looking, most merchants will be able to find something that is suited to the needs of their business.

For more information on small business loans, check out our free Beginner’s Guide to Small Business Loans. Or, to read reviews of individual lenders, head over to our small business loans review category.

2. Business Lines Of Credit

Business lines of credit are a sort of hybrid between business loans and credit cards. Like business loans, with a line of credit, you can borrow a sum of money which is (normally) repaid along with interest in installments over a set period of time. Like credit cards, you can request funds at any time, up to your available credit limit.

If you occasionally need funds to make ends meet or grow your business, or you simply want a safety net in case of emergencies, a line of credit is an excellent tool at your disposal.

Credit lines can be especially useful to businesses on a timeline because you don’t need to apply every time you need to borrow funds. When you are approved for a credit line, you’re granted access to a certain amount of money from which you can draw at any time. If you have a revolving line of credit, the amount you can borrow will replenish as you repay outstanding debts.

Some credit lines, such as asset-backed lines of credit, can work a little differently. If you have access to a credit line secured by unpaid invoices, inventory, or other assets, the amount you can draw at any given time will depend on the value of the assets you have outstanding. These credit lines are normally best for B2B businesses.

Credit lines carry a few drawbacks — most credit lines have variable interest rates, which mean that your rates might change without notice. And, if you aren’t very good at managing money, you might find that you don’t have emergency funds when you need them. However, lines of credit are useful tools for many businesses.

In the past, it was difficult for all but the most well-established and prosperous businesses to get credit lines. With the advent of online loans, it’s becoming easier for businesses of all sizes to access this useful financing tool. Check out our guide to business lines of credit for more information, or, if you’re interested in procuring one, take a look at our favorite line of credit services.

3. Business Credit Cards

There are many reasons to get a business credit card for your business.

For starters, most credit card issuers offer rewards and benefits to merchants who have signed on with their services. By using the card, you could be earning savings in the form of cash back points (that can be redeemed for travel or other expenses). These rewards add up in the long run, and you might be able to save your business quite a bit of money. Additionally, many credit card issuers offer benefits to cardholders, such as extended warranty, price protection, roadside assistance, and other perks.

Credit cards are also convenient ways to keep track of expenses and smooth out cash flow. If you put all your purchases on your credit card, you can easily see what you’ve been spending money on and where you might be able to cut costs. Because the money isn’t coming out of your own account right away, you can defer payments until a more convenient date. You don’t have to struggle to come up with money for expenses if you don’t have it at the moment, or it would be more convenient to pay later.

Of course, credit cards do have some downsides: the APRs can be expensive, so if you don’t pay your bills in time you could wind up with hefty fees that can be difficult to pay off. Additionally, some credit cards carry extra fees, like annual fees and balance transfer fees, which could eat into the money you save by using the card in the first place. However, if you are good at managing money, and spend time choosing a card that will maximize your savings based on how much you plan to utilize the card, credit cards can be excellent tools for many businesses.

Interested in getting a business credit card? Check out a list of our favorite business credit cards. Or, if you are starting a business, you might be interested in our favorite personal credit cards that can be used for business.

4. Merchant Cash Advances

If you need a one-time amount of funds, it might be worth considering a merchant cash advance. This type of financing can be useful for B2C businesses with strong daily sales.

In practice, merchant cash advances are similar to business loans, with the exception of how they’re repaid. Cash advances are repaid by deducting a small percentage of your daily sales; the amount you are repaying each day will vary along with your cash flow. These financial products don’t have a set repayment date, but are normally repaid in a year or less.

Merchant cash advances are an excellent tool for B2C businesses that need a small infusion of cash for working capital, business growth, or other reasons. Know, however, that cash advances have a few downsides: they can be very expensive, and the cost might not be immediately apparent because the fee structure is different than a traditional loan. Instead of interest, cash advance fees are calculated using a factor rate, which can obscure the true cost of the advance.

Head over to our comprehensive article on merchant cash advances for more information, or take a look at our reviews of merchant cash advance providers if you’re interested in finding an advance.

5. Personal Loans

While business loans are based on the credibility and strength of your business, personal loans are based on your personal creditworthiness and financial health. For this reason, these loans can be useful for entrepreneurs, startups, and other businesses that don’t yet have a credit history. You’ll want to give this option a pass if you have separated your business and personal finances, but if you’re not there yet, a personal loan can help you get your business up and going.

Personal loans are normally available from banks, credit unions, and online lenders. You’ll have to have a steady source of income, a solid debt-to-income ratio, and fair credit to qualify for reasonable rates.

Take a look at our guide to personal loans for business for more information, or check out our startup business loan reviews for reviews on personal lenders.

6. Crowdfunding

Rising to prominence due to the internet and some changes in legislature, crowdfunding allows you to finance your business via a network of your peers.

Crowdfunding is normally used by entrepreneurs to get a startup off the ground, or by creators who need money to fund a product. In a crowdfunding arrangement, the entrepreneur creates a campaign, which usually includes a description of their business or product, information about the founders and their partners, a rough timeline, potential problems, and other frequently asked questions.

Perhaps the most well-known type of crowdfunding, popularized by services such as Kickstarter (read our review) and Indiegogo (read our review), is rewards crowdfunding. You may not be aware that there are actually quite a few different type of crowdfunding available:

  • Rewards crowdfunding, from services like Kickstarter and Indiegogo, allows contributors to receive products in exchange for backing the business or project.
  • Donation crowdfunding, on sites like Razoo (read our review), involves funds that are donated to your cause. This type of crowdfunding is typically only used for nonprofits or other charitable projects.
  • Debt crowdfunding, from services such as Kiva U.S. (read our review), works similarly to a business loan — backers contribute money with the expectation that it will be paid back, normally with interest.
  • Equity crowdfunding, from company’s like Fundable (read our review), works when backers contribute money in exchange for equity in your business.

Between all the different types available, most entrepreneurs should be able to find a type of crowdfunding that will suit their business or project. Some less-than-sexy businesses, however, might find that they have trouble appealing to casual investors. While debt and equity crowdfunding — which tends to attract more serious backers — might solve that problem, some businesses might still need to look at other financing options.

Crowdfunding also tends to take a long time. Typically, the entrepreneur has to create a campaign and enter into a one- to three-month funding period. The funding period might require a fair amount of marketing, networking, communicating with current and potential backers, and other work to get your project funded.

Interested in crowdfunding? Head over to our startup business loans review category to read reviews of crowdfunding services.

7. Invoice Factoring

Invoice factoring is a financial solution for B2B businesses that invoice their customers. If you have cash flow struggles due to slow-paying customers, invoice factoring is a potential solution. Factoring is commonly used in industries such as construction, manufacturing, printing, and other B2B businesses.

Invoice factors purchase your unpaid invoices at a discount. While you’ll have to take a bit of a loss, invoice factoring can get you the money you need, when you need it, to keep your business going.

When you sell an invoice to a factoring company, you will receive most of the money up-front, and the factor will place a small amount on reserve. Then, when your customer pays the invoice, the funds are diverted to the factoring company, and you will receive the rest of the money in the reserve, minus the invoice factor’s fee.

There are many invoice factoring arrangements, depending on the factoring company and the needs of your business. You can find factors that require you to sell a lot of invoices or ones that let you pick and choose more carefully. Some factors require that your customers know about the arrangement, while others will keep it a secret, and so on.

Invoice factoring has gotten a bad rap in the past because some factoring companies employed poor practices, such as failing to disclose extra fees, requiring long-term contracts and monthly minimums, and other reasons. However, if you do your due diligence, you will be able to find an invoice factor that suits your business’s needs without employing poor tactics. Check out our Basic Introduction To Invoice Factoring to learn what to look for, and take a look at our comprehensive invoice factoring reviews to learn about individual factors.

8. Equipment Financing

If you run a business that relies on computers, manufacturing equipment, restaurant equipment, vehicles, or other equipment that might be difficult to pay for out of your business’s own pocket, equipment financing might be right for you.

Equipment financing covers two types of financing: equipment loans and equipment leases.

Equipment loans are similar to traditional business loans, but the equipment is generally used as collateral. In a typical equipment loan arrangement, the lender will cover 80% to 90% of the equipment, and you will be responsible for paying the other 10% to 20%.

Equipment leases are arrangements in which you rent the equipment for a certain period of time. In practice, some lease arrangements are similar to loans, because you have the opportunity to buy the equipment at the end of the leading period, but other arrangements are designed so that you can return or trade in the equipment after a certain period of time. Because you don’t have to purchase the equipment, leases can be a good option for businesses that only need equipment for a short time, or frequently need to upgrade expensive equipment (like computers) due to changes in technology.

Equipment financing, especially equipment loans, will most likely be more expensive in the long run than purchasing the equipment outright. However, if you can’t afford what you need, an equipment loan or lease is an excellent way to get financing.

Head over to What Is Equipment Financing? to learn more about this type of financing, or our equipment financing review category to learn about individual financiers.

Final Thoughts

Business owners have many financing tools at their disposal, but finding the right tool for the job can take some work. The above resources will point you in the right direction.

Need some more help? Merchant Maverick’s Community of Lenders is there for you. We’ve teamed up with banks, credit unions, and other financiers across the country to provide our readers with fast and easy business financing. With one short application, you can check your eligibility for all participating financial institutions. Read more about the service, including a step-by-step guide through the application process, in Mirador Finance & Merchant Maverick: Making Small Business Loans Easier.

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The Best Charge Cards For Small Businesses

You may have heard the terms used interchangeably in casual conversation, but charge cards and credit cards aren’t the same thing. While small businesses can make great use of both types of cards, charge cards come with a unique set of risks and rewards.

A credit card is a revolving line of credit. A bank extends you a credit line, and you can spend up to your limit, paying interest on any balance you carry beyond the first month. When you pay off your debt, the full line of credit becomes available to you once more.

A charge card, on the other hand, doesn’t come with a credit limit. Instead, it may have a limit that can vary month to month based on a variety of factors ranging from your payment history to prevailing economic conditions. The catch? You need to pay off your entire balance every month. If you don’t, you’ll be hit with fees and interest rates that usually far exceed anything you’d see with a credit card. You will likely forfeit your reward points as well. In some cases, you may be able to spread out your payment on certain purchases through programs like American Express’s Extended Payment Option. Because they’re less likely to earn money on carried balances, charge card companies tend to have higher annual fees.

Note that charge cards aren’t quite as widely accepted as credit cards, so it’s best to have another payment method as a backup.

Think a charge card is right for your business? Here are some of our favorite options.

American Express Platinum

Charge cards are American Express’s wheelhouse, and its Platinum Card is one of the most well-known and prestigious charge cards around. With extremely generous reward tiers and a laundry list of benefits, it’s quite a powerful little piece of plastic for travelers. Be prepared for some sticker shock when you look at the annual fee, however.

American Express Platinum
Annual Fee $550
APR N/A
Signup Bonus 60,000 points
Rewards 5 pts./$1 on flights and hotels through Amex Travel; 2 pts./$1 on other travel
1 pt./$1 on all other purchases
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A glance at Amex Platinum will tell you that it’s a card heavily weighted toward people on the go. The 5x reward tier offers an insane return on travel expenses, as long as you can make them through Amex’s first party system. The 2x return on expenses that you don’t book through Amex isn’t too shabby either. Points can be transferred to participating reward programs at variable rates. They can also be used as statement credit as long as you have at least 1,000 points.

The $550 annual fee is pretty brutal, but if you make strategic use of the card’s other perks, it’s not quite as bad as it looks. You’ll get:

  • $15 worth of Uber rides/mo, plus $20 in December
  • $200 airline fee credit
  • Hotel and resort benefits/upgrades
  • $100 TSA fee credit for global entry

If you aren’t a heavy traveler, however, this card is probably not a great investment. Businesses that are less focused on travel and more focused on large purchases may want to consider the business version of the platinum card. It replaces the 2 point tier with a 1.5 point tier for qualifying purchases. You’ll lose the Uber credits and some of the other perks, however. On the bright side, the Platinum Business Card is $100 cheaper per year.

American Express OPEN Business Gold Rewards

If the Platinum Card sounds too expensive and travel focused, Amex also offers more general-purpose charge cards. Amex OPEN Business Gold may not come with the incredible 5x reward tier of Platinum, but it’s cheaper and extends a 3x reward tier to a broader variety of purchases.

American Express OPEN Business Gold Rewards
Annual Fee $175 ($0 first year)
APR N/A
Signup Bonus 50,000 points
Rewards 3 pts./$1 for the first $100,000 spent on a category of your choice–airfare, advertising, shipping, gas stations, or computer hardware and software; 2 pts./$1 for the first $100,000 spent on the other four categories.
 1 pt./$1 on all other purchase
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The American Express OPEN Business Gold Rewards card is one of the more interesting pieces of business plastic on the market. Rather than coming out of the box with a set reward tier structure, it lets you choose one of five different categories to be your 3x reward tier. You don’t even have to worry too much about buyer’s remorse, because the other four categories will still be rewarded at 2x. It gives the card a modular, customizable feel that can be fitted to most types of business.

The $175 annual price tag is still on the steep side, though Amex waives the fee for the first year. Note that you’ll have to spend at least $5,000 during the first month to qualify for the 50,000 point signup bonus, so plan your purchases accordingly if you decide to go with this card.

Overall, Amex OPEN Business Gold provides a pretty good value–and more versatility–at a lower annual price than some of their elite cards. The trade-off is that you won’t be getting the 5x reward tiers, statement credits, and some of the perks that come with a card like Amex Platinum.

American Express Premier Rewards Gold Card

If the Platinum Card looks like overkill and the OPEN Business Rewards Gold Card too unfocused, you may want to consider the Premier Rewards Gold. Like Platinum, it’s oriented around travel, but it comes in at a more affordable annual fee.

American Express Premier Rewards Gold Card
Annual Fee $195 ($0 first year)
APR N/A
Signup Bonus 25,000 point
Rewards 3 pts./$1 on directly booked flights; 2 pts/$1 at supermarkets, gas stations, and restaurants in the U.S.
 1 pt./$1 for all other purchases
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If the Platinum card caters to the well-heeled, international jet-setter, Gold Premier is for the business owner whose work takes them around the US. You’ll still get some nice airline-related perks, so long as you book those flights directly; no Kayak or Priceline bookings. You’ll also get a smaller version of the Platinum card’s airline credit, giving you $100/yr. in statement credits for things like baggage fees, which can offset more than half of the significant annual fee.

Rather than rewarding you for fancy resort spending, the Premier card’s 2x tier is focused on more pragmatic expenses you’re likely to encounter during your domestic travels.

As is usually the case, you’ll need to spend a minimum amount of money in the first three months to get the signup bonus ($2,000 in this case).

As is the case for all Amex charge cards, remember that they’re not as widely accepted as Visa or Mastercard credit/debit, so be sure to have a plan B in your wallet.

American Express Plum Card

If the reward programs outlined above sound like more trouble than they’re worth, or if your spending habits and cash flow would make those cards hard to use, there’s another option. Enter American Express’s Plum Card, a charge card that sacrifices lavish words for flexibility.

American Express Plum Card
Annual Fee $250 ($0 the first year)
APR N/A
Signup Bonus None
Rewards 1.5% early payment discount
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If a charge card could be “controversial,” the American Express Plum card would be a top contender for that title. Why is that?

While the Plum Card is a technically a charge card, it functions almost more like a cash back credit card. For starters, you’re given 60 days to pay off your balance without incurring a late fee. Pretty neat, right?

Well, there’s a catch. If you pay off your card early, within 10 days of your statement closing date, you’ll get a 1.5% discount on your bill. This is comparable to the 1.5% return you’ll see with most business credit cards that offer cash back, but with a little less leeway for earning your rewards. If you want that type of reward system in a charge card, however, the Plum Card can accommodate you.

Final Thoughts

Charge cards fill an increasingly small but still popular niche, offering some distinct advantages and drawbacks to the businesses that use them. Though business credit cards have been rapidly closing the gap, charge cards still offer some of the highest rewards tiers, albeit with high annual fees.

Looking for other options? Check out our business credit card and personal credit card comparisons.

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The Best Personal Credit Cards For Business Expenses

credit cards for startups

If you’re launching a new business, you may naturally be attracted to the idea of getting a business credit card to use for your business expenses. And why not? “Business” is right there in the name.

However, there are a number of reasons why you might want to go with a personal credit card instead, especially when getting your startup off the ground. For one thing, the CARD Act of 2009 regulates personal credit cards. By law, personal credit card providers can’t jack up your APR overnight or charge excessive fees for minor infractions. While most credit card companies extend these safeguards to business credit card holders as a courtesy, many do not. Similarly, introductory rates associated with personal credit cards must be offered for the first six months. Not so with business cards.

What’s more, the incentive programs associated with personal credit cards may be more fitting for your needs than the rewards associated with business credit cards. Your startup likely does not yet need a large office, for example, so a business card that offers discounts on office supplies probably doesn’t hold any special appeal.

Let’s take a look at the best personal credit cards for entrepreneurs.

General Cash Back Cards

Most embryonic businesses will want to select a personal credit card with a solid, all-purpose rewards program. The following cards can help you maximize your profits on the everyday purchases you make for your budding business, whether you’re spending on gas for your car, paint for your office, printer paper, or new-client lunches.

Chase Freedom Unlimited

For entrepreneurs who require flexibility in a credit card, the Chase Freedom Unlimited card is an ideal choice. It’s a flat-rate cash-back card, so there are no bonus categories — you get cash back on all purchases, and you are allowed great flexibility in how you redeem your rewards.

Chase Freedom Unlimited
credit cards for startups
Annual Fee $0
APR Variable, 16.24% – 24.99%
Signup Bonus $150 if you spend $500 in the first three months
Rewards Automatic 1.5% cash back on all purchases
Can use your rewards to book travel with Chase
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The Chase Freedom Unlimited card has no annual fee, and you also get an introductory 0% APR for the first 15 months. (Unfortunately, there is a 3% foreign transaction fee.)

When you’re starting a new business, you may find yourself making all manners of unexpected purchases. To this end, the Chase Freedom Unlimited credit card automatically gives you 1.5% cash back on all purchases. You won’t have to keep track of the categories your purchases fall into; everything is covered. And you can redeem for cash back in any amount you wish — there’s no minimum redemption.

Your redemption options continue from there. Beyond getting a statement credit or a direct deposit to your checking or savings accounts, you can also redeem your rewards by booking trips through Chase’s travel portal, which is great if your startup has you shuttling around. And if you use the Chase Freedom mobile app, you can redeem your rewards at certain participating stores.

If you have other Chase cards, you can also transfer rewards to them to take advantage of their particular redemption options.

All in all, Chase Freedom Unlimited is a very versatile card.

US Bank Cash+ Visa Signature

This is another card with versatility up the wazoo. Want to pick your own bonus categories to fit your startup? The US Bank Cash+ Visa Signature card might be the one for you.

US Bank Cash+ Visa Signature
credit cards for startups
Annual Fee $0
APR Variable, 15.24% – 24.24%
Signup Bonus $150 if you spend $500 in the first 90 days
Rewards 5% cash back on two categories of your choice ($2,000 purchase limit per quarter)
Unlimited 2% cash back on an everyday category of your choice (gas, groceries, restaurants, etc)
1% cash back on all other net purchases
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The US Bank Cash+ Visa Signature card has no annual fee, though the introductory 0% APR for the first 12 months only applies to balances transferred within 60 days of opening the card.

Here’s where the versatility comes in: You’ll get 5% cash back on the first $2,000 worth of purchases per quarter in two categories of your choosing. According to US Bank, category options are subject to change on a quarterly basis, but as of January 2018, these categories are:

  • Ground Transportation
  • Select Clothing Stores
  • Cell Phones
  • Electronics Stores
  • Car Rentals
  • Gyms/Fitness Centers
  • Bookstores
  • Fast Food
  • Sporting Goods Stores
  • Department Stores
  • Furniture Stores
  • Movie Theaters

Furthermore, you’ll get unlimited 2% cash back on one “everyday” category of your choosing:

  • Gas Stations
  • Groceries
  • Restaurants

Lastly, all other eligible net purchases earn 1% cash back.

Unfortunately, you’ll have to remember to log in to choose new bonus categories every quarter. Also, the cash rewards expire after three years, you can’t transfer the cash to other rewards programs, and there is a 3% foreign transaction fee. The credit score requirements are pretty steep as well. On the plus side, there are no limits on the total amount of cash back you can earn and no minimum redemption amount.

Capital One Quicksilver

The Capital One Quicksilver Cash Rewards card is a good option for the new business owner whose expenses don’t fit neatly into approved categories.

Capital One Quicksilver Cash Rewards
credit cards for entrepreneurs
Annual Fee $0
APR Variable, 14.24%-24.24%
Signup Bonus $150 if you spend $500 in the first three months
Rewards Automatic 1.5% cash back on all purchases
50% back as a statement credit on your monthly Spotify Premium subscription (runs through April 2018)
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The Capital One Quicksilver Cash Rewards card bears some similarities to the Chase Freedom Unlimited card. There’s no annual fee, and you’ll get a 0% intro APR for 9 months. It’s a shorter 0% APR period than that provided by some other cards, however.

This is another card for those who can’t be bothered keeping track of rotating categories of rewards-eligible purchases. The Capital One Quicksilver will see you earning unlimited 1.5% cash back on all purchases, with no caps on how much you earn and no minimum redemption thresholds.

If you like to have music on while in the office (whether that office is an actual office space or your living room), you’re in luck. From now through April 2018, you’ll get 50% back as a statement credit on your Spotify Premium subscription. Keep on rockin’ in the fee world!

(See what I did there? Do you think that was tweet-worthy?)

One advantage this card has over Chase Freedom Unlimited is that Capital One Quicksilver has no foreign transaction fee. On the downside: the card carries a 3% balance transfer fee.

Discover it – Cashback Match

Let’s say you’re an entrepreneur who makes a lot of purchases through Amazon or wholesale clubs. You might want to consider the Discover it – Cashback Match card.

Discover it – Cashback Match
credit cards for startups
Annual Fee $0
APR Variable, 12.24% – 24.24%
Signup Bonus Discover will match all the cash back you earn at the end of your first year
Rewards 5% cash back on rotating bonus categories, changing quarterly
1% cash back on all other purchases
Rewards are usable at the Amazon.com checkout
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In addition to the above, you’ll get an introductory 0% APR on both purchases and balance transfers for the first 14 months.

With this card, you can get 5% cash back on rotating bonus categories on your first $1,500 spent per quarter. Discover’s bonus categories for 2018 are:

  • Q1 2018: Gas stations and wholesale clubs
  • Q2 2018: Grocery stores
  • Q3 2018: Restaurants
  • Q4 2018: Amazon.com and wholesale clubs

With Discover matching all the rewards you earn over the first year, you should accumulate a healthy supply of cash back. You can put that cash back to use in the following ways:

  • Pay with rewards at the Amazon.com checkout
  • Gift cards with at least $5 added to each
  • Deposit to your bank account or apply to your Discover credit card bill
  • Make a charitable donation

It’s not a spectacular card for the frequent flyer (though there is no foreign transaction fee), but for the land-bound entrepreneur who doesn’t mind keeping track of the rotating categories, the Discover it – Cashback Match card provides plenty of value.

Travel Cards

Not all entrepreneurs need to travel for business, but for those who do, a travel rewards program can be a godsend. The following personal credit cards can help you maximize your current travel spending and earn valuable points towards any future hotel stays, flights, and car rentals you’ll book as your business continues to grow.

American Express Premier Rewards Gold Card

Here’s a great card for the entrepreneur who travels a lot: the AmEx Premier Rewards Gold card.

AmEx Premier Rewards Gold
credit cards for entrepreneurs
Annual Fee $0 for the first year, $195 subsequently
APR N/A (charge card)
Signup Bonus Make $2,000 in purchases within the first 3 months and get 25,000 rewards points
Rewards $100 annual airline fee credit for incidental fees
3 reward points per dollar when you book a flight directly with an airline
2 points per dollar at gas stations, supermarkets and restaurants in the US
1 point per dollar on all other purchases
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Keep in mind that this is a charge card, not a traditional credit card. In other words, you’ll have to pay the entire balance every month.

If your startup has you going to and fro, you’re in luck, because this card’s rewards are tailored to the frequent traveler and will easily offset the $195 annual fee that kicks in the second year. First off, there’s a juicy signup bonus: you’ll earn 25,000 rewards points if you make $2,000 in purchases within the first three months of signing up (terms apply).

The big rewards come when you book flights. You get three reward points per dollar when booking a flight — the only drawback is that you’ll have to book the flight directly with the airline, and airline websites suck (the prices are higher, too). You’ll get a further two points per dollar at US gas stations, supermarkets and restaurants, and one point per dollar on all other purchases.

Another factor for the frequent-flying entrepreneur to consider is that the Premier Rewards Gold has no foreign transaction fee. Of course, American Express is less accepted internationally than Visa and Mastercard, so you’ll want to carry a backup card when traveling.

Capital One Venture Rewards

Here’s another card from Capital One — this one’s a versatile travel card for the entrepreneur on the go.

Capital One Venture Rewards
credit cards for startups
Annual Fee $0 for the first year, $95 subsequently
APR Variable, 14.24% – 24.24%
Signup Bonus Earn 50,000 miles once you spend $3,000 on purchases within the first three months (equal to $500 in travel)
Rewards Earn two miles per dollar on every purchase
Use your miles to fly any airline and stay at any hotel
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The Venture card is designed to immediately reward the frequent traveler. Earn the equivalent of $500 for travel after spending $3,000 on purchases in the first three months. After that point, you’ll earn unlimited 2x miles per dollar on all purchases. This means that if you rack up $500 in charges on your card in a given month, you’ll get 1,000 miles that month. Not too shabby!

The Venture gives you a great deal of flexibility in how you use your travel rewards. You can either book flights, hotels, and rental cars directly through Capital One or you can book these things anywhere you like and use the company’s Purchase Eraser tool to get a statement credit for what you spent. This way, you won’t be locked into using a particular airline or hotel chain or booking site.

Unfortunately, if you want to redeem your miles for cash back or non-travel purchases, they will be worth half of what they would be worth if applied to travel purchases. Thankfully, the card has no international transaction fees. Plus, there are no blackout dates, no expiration dates, and no limits on the number of miles you can accrue.

Chase Sapphire Preferred Card

Here’s a travel-oriented card that might be even more flexible than the Venture: the Chase Sapphire Preferred card.

Chase Sapphire Preferred
credit cards for entrepreneurs
Annual Fee $0 for the first year, $95 subsequently
APR Variable, 17.24% – 24.24%
Signup Bonus Get 50,000 bonus points after spending $4,000 on purchases in the first three months ($625 when redeemed through Chase Ultimate Rewards)
Rewards Two points per dollar on travel and restaurants
One point per dollar on all other purchases
Get 25% more value for your points when making travel purchases through Chase Ultimate Rewards
Transfer your points to leading airline and hotel loyalty programs on a 1:1 basis
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The Chase Sapphire Preferred card comes with some sweet bonuses. Not only will you get 50,000 bonus points after spending $4,000 on purchases in the first three months, but you’ll also get another 5,000 bonus points if you add an authorized user in those first three months and they make a purchase.

With this card, not only do you get two points per dollar when spending on travel and restaurants and one point per dollar on all other purchases, but you can transfer your points — on a 1:1 basis — to the following airline and hotel loyalty programs:

Airlines

  • Air France/KLM
  • British Airways
  • Korean Air
  • Singapore KrisFlyer
  • Southwest
  • United
  • Virgin Atlantic

Hotels

  • Hyatt
  • Marriott
  • Priority Club/InterContinental Hotels Group
  • Ritz-Carlton

What’s more, your points will be worth $0.0125 apiece if you redeem them for travel booked through Chase Ultimate Rewards. There’s no foreign transaction fee, either. You will have to pay a $95 annual fee after the first year, though.

Citi/AAdvantage Executive World Elite Mastercard

This next card isn’t for everyone, but the well-heeled flight-hopping entrepreneur with something to prove should enjoy the Citi/AAdvantage Executive World Elite Mastercard.

Citi / AAdvantage Executive World Elite Mastercard
credit cards for entrepreneurs
Annual Fee $450
APR Variable, 16.99% – 24.99%
Signup Bonus Get 50,000 American Airlines AAdvantage bonus miles after you spend $5,000 in purchases in the first three months
Rewards Admirals Club membership for you and your guests
Earn 10,000 AAdvantage Elite Qualifying Miles after you spend $40,000 in purchases within the year
Earn two AAdvantage miles for every dollar spent on eligible American Airlines purchases and one AAdvantage mile for every dollar spent on other purchases
First checked bag is free on domestic AA flights for you and eight companions
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For the entrepreneur with the means to get around in style, the Citi/AAdvantage Executive World Elite Mastercard has quite the bag of perks. From the 50,000 AAdvantage bonus miles if you spend $5,000 within the first three months to the automatic Admirals Club membership (a $550/year value) to the AAdvantage miles you’ll be racking up, this card brings significant value the table. However, that value doesn’t come cheap — note the eye-popping $450 annual fee! If you really want that Admirals Club membership, however, it’s a cost-effective way of getting it.

For this card to be worth it for you, you have to be a frequent American Airlines flyer with a burning desire to hang out in AA Admirals Club lounges. If you spend a big chunk of your life in airports and want to get away from the hoi polloi, this card gives you the opportunity to pay for that privilege. You’ll also get 25% savings on in-flight purchases, a $100 credit for the TSA PreCheck program every 5 years, and the absence of a foreign transaction fee.

Final Thoughts

Entrepreneurs deserve a credit card that fits their particular needs. For many, a personal credit card can do the job just fine, and with greater legal protections. If it’s a business card you’re after, check out our piece on the best business credit cards for 2018.

The post The Best Personal Credit Cards For Business Expenses appeared first on Merchant Maverick.

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Which Business Credit Card Rewards Provide The Most Value?

Confused about the different types of business credit card rewards?

Let’s take a look at the three biggest categories of small business credit card rewards and some of their pros and cons. Note that any of these reward types may come with limitations on what you can earn during a given period. You’ll also want to take annual fees into account when making comparisons.

But for now, let’s concentrate on the fun stuff.

Cash Back

The oldest reward incentive program is cash back. The formula is simple: a small percentage of each purchase you make with your card will be returned to you in the form of a check, account credit, or gift card.

Pros

The biggest advantages offered by cash back are simplicity and versatility. Depending on the program, you may still see different reward tiers with a cash back credit card, but it’s not unusual for them to offer a flat return on purchases (often somewhere around the 2 percent mark).

If you find that you don’t have the time, resources, or inclination to micromanage your spending, the simplified cashback reward system can take a lot of the burden off your back. Even better, you’ll face no real limitations on what you can spend your rewards on.

Cash back is a good choice for businesses with variable expenses or expenses that aren’t particularly clustered in one area.

Cons

If you guessed that the cons of cashback are an inversion of the pros, congratulations! The versatility of cash back comes at a price: a lower potential return on your purchases than you could get with a more limited return system.

To compare a cash back system to a rewards system, find out the cash value of each reward point. You’ll then need to itemize your monthly expenses and see how many points or how much cash you’d get back from your purchases. In many cases, you’ll find that you can get a larger return on your purchases with the right rewards card.

That doesn’t necessarily mean you should avoid cash back cards, but be aware of the trade-off.

Another factor to look out for? You may need to manually request reimbursement from your bank or set up the thresholds at which they’ll cut you a check (or credit, or gift card). This usually isn’t very burdensome, but if you end up wondering where your cash is, check your account.

Travel

A very popular category of business credit cards reimburses companies in airline “miles.” These miles can be cashed in for rewards, usually additional flights.

Pros 

Airline miles are similar to other rewards programs, but they allow businesses to get a return on their flight expenses. For businesses that do a lot of flying, this can be an extremely efficient type of business reward card. Additionally, many cards will allow you to retroactively add recent flights to your mile total when you sign up. Some will allow you to earn miles with travel-related expenses or by making purchases at approved retailers.

Most airlines also allow you to upgrade your seating with flyer miles.

Cons

Airline miles are probably the most confusing type of reward to quantify and redeem. The first thing to realize is that the “miles” you accumulate don’t represent the number of free miles you can travel: they’re the miles you’ve accumulated through travel. So flying down the coast might earn you 1,000 or so miles, but those miles don’t become a free trip from New York to Miami. Instead, you’ll cash in, say, 20,000 miles or so for a flight.

Flyer miles often lock you into a particular airline, so choose one that goes to the places you want to be and offers a pleasant flying experience. You should also note that airlines usually only make a percentage of their seats available for flyer miles, and often don’t allow them to be spent around the holidays, so plan ahead before you book a flight with your airline miles.

Be aware that you may still be responsible for taxes and fees, and you need to book the flights directly through the airlines to get your points.

Other Rewards

“Rewards,” in this context, is a catch-all for business credit cards programs that don’t fall into one of the previous categories. Many cater to specific types of spending–telecommunications, for example–while others reward more generalized spending.

Rewards cards compensate you in points. These points have a cash value (usually around a penny each) and can be redeemed for a limited selection of rewards.

Pros 

Rewards programs are varied enough to suit a wide array of business spending. In practice, this usually means a tiered system for points. Restaurant expenditures might be compensated at three times the rate of general expenditures, for example. If you pick a card that matches your spending habits, you can earn points very efficiently.

Cons 

The specificity of reward programs can be a straightjacket, especially for businesses that don’t have especially concentrated expenses. You may also find the limited selection of things on which you can spend your reward points uninspiring, or in rare cases, completely useless. Do your due diligence on the rewards card you’re considering to see if they are a good fit for your needs and habits.

Otherwise, you may want to consider a cash back card. See the process of comparing cash back and reward cards above.

Final Thoughts

While there’s no type of business credit card reward that is objectively the best, there probably is one that is best for your business and your habits.

Looking to compare specific cards? Check out our 2018 comparison guide.

The post Which Business Credit Card Rewards Provide The Most Value? appeared first on Merchant Maverick.

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Corporate Credit Cards VS Standard Business Credit Cards

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If you’re new to the world of business credit cards, you may be surprised by how dissimilar they are to personal credit cards. But there is even another type of credit card, one that caters to larger corporations. And corporate cards can differ from regular business cards just as much as business cards differ from personal cards.

Is a corporate card right for you, or should you stick with a more traditional business credit card? Read on, and we’ll take an in-depth look at the similarities and differences between types of business credit cards.

Table of Contents

Who Qualifies?

Ultimately, the biggest dividing line between small business credit cards and corporate credit cards is your company’s bottom line. In many cases, your business must make at least $4 million in annual revenue to qualify for a corporate credit card.

By contrast, most small business credit cards don’t have stringent revenue qualifications. You just have to be willing to accept the terms and pay any applicable fees.

Additionally, qualification for a corporate credit card will depend on your company’s credit rating rather than your personal credit rating. Small business credit cards issuers, on the other hand, may opt to check your personal credit history, or look at both your personal and business credit scores. To obtain a corporate credit card, your business will need to have a good, established credit history, existing expense policies, and credit card transactions

Who Is Responsible For The Debt?

One of the biggest differences between small business and corporate credit cards is liability.

In most cases, signing up for a small business credit card means making a personal guarantee. A personal guarantee holds the signatory ultimately responsible for paying the debt. That means that if your company goes out of business, the credit card issuer can come after your personal assets.

It’s different with corporate credit cards. In most cases, your business entity is liable for paying all charges on a corporate credit card. (In some rare agreements, the employee who makes the purchase may be liable for the debt, and may also need to pass a personal credit check. Individual liability is becoming increasingly uncommon for corporate credit cards, however.)

Note that using a corporate credit card is not a viable way to build or repair your personal credit since it won’t be reported to a personal credit bureau.

What Are The Advantages Of A Corporate Card?

As we touched on above, one of the biggest advantages of a corporate business card is reduced liability for individuals. It’s far easier to keep up the corporate/personal partition with a corporate card than with a small business credit card.

Beyond liability, there are a number of perks offered by corporate cards. Dedicated service reps allow corporate cardholders to circumvent the normal customer service lines. Many cards also come with some form of emergency assistance benefits for employees or insurance protection for rentals.

Account management is another advantage. Large organizations create a lot of unnecessary work if they try to reimburse each employee for business expenses. A corporate credit card can provide a way to consolidate all of the organization’s travel expenses under one account.

Corporate accounts may also get to play by a different set of rules. These rules can vary greatly between banks. Payment periods may be considerably longer or shorter than a month. The bank may not charge interest at all (though expect late fees if you miss a payment window). Spending limits may also vary.

Corporate cards have rewards programs, not unlike small business cards, but the cost of maintaining a corporate account makes them less of a selling factor.

What Are The Costs?

Both types of business credit cards come with maintenance fees, but in the case of small business credit cards, those fees are mostly small and annual.

On the other hand, corporate cards come with significant costs. Rather than a membership fee, you’ll often be assessed a charge per authorized cardholder. In a large organization, this can add up pretty quickly. Capital One, for example, charges $19 per cardholder.

As mentioned above, corporate credit cards don’t necessarily charge interest, opting instead for late fees (usually a flat percentage of the amount that’s overdue). Your company may or may not be charged a fee for exceeding your credit limit.

Final Thoughts

As your organization grows, you’ll find that new credit options become available to your business. While these offer some distinct advantages, you’ll still want to weigh the pros and cons with your accounting team to determine whether the benefits outweigh the costs.

If a corporate credit card seems like overkill, or if your business isn’t yet big enough to qualify for one, check out our 2018 business credit card guide to see what your other options are.

Chris Motola

Chris Motola is an independent writer, journalist, programmer, and game designer who has mastered the art of using his laptop in no fewer than 541 positions, most of them unergonomic. When he’s not pushing keys or swiping screens, he’s probably out exploring urban or natural environs, experimenting in the kitchen, or delighting/annoying his friends with his ideas and theories.

Chris Motola

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Business Financing: Should You Take Out A Loan, A Credit Card, Or A Line Of Credit?

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When it comes to business financing, merchants have many options to choose from. Three of the most popular sources of financing are small business loans, business credit cards, and lines of credit. All are useful options, but each carries its own separate advantages and disadvantages.

Which is best for your business financing needs: a business loan, line of credit, or business credit card. Or should you get some kind of combination of the three? Keep reading to learn everything you need to know.

Table of Contents

Loan, Credit Line, & Credit Card Uses

Your ultimate intention for borrowed funds is very important when considering the right type of financial product for your business. While there is a lot of overlap, some financial products are better suited to different situations and uses than others.

Here is a table illustrating what each loan or credit card is typically used for:

Loan & Card Uses
Small Business Loan Line Of Credit Business Credit Card
• Business growth projects
• Asset purchasing
• Bridge loans
• Working capital
• Cash flow needs
• Disaster assistance
• Debt consolidation and refinancing
• Business growth projects
• Bridge loans
• Working capital
• Cash flow needs
• Disaster assistance
• Emergency funds
• Everyday purchasing
• Saving money by earning points or cash back
• Working capital
• Cash flow needs
• Emergency funds

Small business loans are a very popular financing option, and it’s easy to see why — they can be used for many business purposes, such as asset purchasing, business growth projects, and debt consolidation or refinancing. However, there are times when lines of credit or a business credit card are better options for your business.

In particular, lines of credit and credit cards are better for situations where you need money quickly or need only a small sum of money. While you wouldn’t take out a business term loan without a fair amount of planning and a fairly long application process, lines of credit and business credit cards are designed so that you have the cash available when you need it; they are better for cash flow problems, emergency funds, and other situations where you don’t have time to apply for a business term loan.

Credit cards have an additional advantage because you can use them to solve cash flow problems by deferring everyday payments to a later date. And, because credit cards offer rewards programs for using the card, you might be able to save a little money via cash back or points simply by using your card.

Naturally, however, there are many overlaps between potential uses for these three types of financing — all are commonly used for working capital and other cash flow needs. You’ll need to consider the scope of your project, as well as the following advantages and disadvantages of each financial product, to decide which is best for your business.

Small Business Loan Pros & Cons

Small business loans are usually installment loans (also called “term loans”), but might also be short-term loans. Loans are dispersed as one lump sum, and repaid in installment over a set period of time.

Loans usually involve high borrowing amounts and lower rates than other options, but they also have long application processes and you might have to pledge a personal guarantee, lien, or other assets in exchange for funding.

Pros

  • High Borrowing Amounts: If you need a large amount of money, a small business loan is your best bet. At a minimum, small business lenders will offer 15% to 25% of your annual revenue, but many lenders are willing to offer more. The size of your loan will depend on your annual revenue and projected revenue, your intended use of proceeds, the creditworthiness of your business, and other factors.
  • Low Rates: Some business loans, such as those offered by a bank or the SBA, will have lower rates of borrowing than credit cards. For example, while credit cards have APRs from 10% to 25% or higher, interest rates for a 7(a) loan from the SBA currently range from about 6.7% to 9.75%. That said, some online loans will have higher fees; use our Small Business Term Loan Calculator to calculate the APRs (and other borrowing metrics) on your potential business loans.
  • Longer Time To Repay: Business term loans carry longer times to repay than lines of credit and business credit cards. Some loans, such as some SBA loans, carry term lengths up to 25 years. For this reason, small business loans can carry small incremental payments, even if you are borrowing a large sum of money.
  • Unsecured & Secured Options: Businesses with collateral can leverage it to borrow money with very low interest rates. On the other hand, if you don’t have specific collateral, you will still be able to find a business term loan; the fees will be a little higher than they would be with a secured loan, but you will still have the money you need to grow your business.

Cons

  • Long Application Process: Business term loans tend to have a more detailed application process than credit cards. You will need to submit a fair amount of documentation and spend some time talking to an underwriter before you’re approved for a loan. Non-traditional online loans tend to have shorter application processes, but you will have to pay higher rates and fees. The application process can take anywhere from a few days to a few months, depending on the lender you’re working with. As a general rule of thumb, the longer the application process, the better rates and fees you’ll receive.
  • Long-Term Debt: While a small business loan generally entails smaller payments than other options, it also means that you’ll be paying your debt off for a long time. Outstanding debt might make it more difficult to find financing in the future, and you risk not being able to pay it back if something goes wrong with your business.
  • Blanket Liens & Personal Guarantees Required: While you can find loans that don’t require you to put up specific collateral, you’ll likely have to sign a personal guarantee and/or agree to have a blanket lien placed on your business assets.

Head over to our guide to installment loans for more information on small business loans.

Line of Credit Pros & Cons

When you gain access to a credit line, you’ll be able to draw from a sum of money, up to your available limit, at any time — no application required. You only have to pay interest on the amount that you borrow, and once it’s repaid, you’re free to borrow that money again.

Despite the benefits, lines of credit carry some drawbacks: the initial application can be somewhat time-consuming, and if you have variable interest rates they could change over time.

Pros

  • No Application To Borrow: After you gain access to a credit line, you will not have to go through an application process whenever you need funds. Typically, you’ll receive access to requested funds between a few hours and two days, depending on how your lender transfers funds.
  • Low Rate Of Borrowing: Lines of credit have very affordable rates and fees. In general, these will be lower than credit card rates and fees, and might even be lower than those of many small business loans. As you might expect, however, some online lines of credit will carry higher fees than you would be charged by a bank, credit union, or the SBA. To get an idea of what sort of rates you can get from online lines of credit, which have shorter initial application processes but might have higher rates and fees, check out a comparison of our favorite business credit lines.
  • Only Pay Interest On Borrowed Funds: For most lenders, you will only have to pay interest on the money you have withdrawn from your credit line. You will not have to pay interest on the funds you are not using.

Cons

  • Long Initial Application: While you can typically receive requested funds from your credit line within a couple of days, the process to get access to a credit line might not be so easy. Lines of credit can have fairly long application processes, including gathering a lot of financial documents and possibly talking to an underwriter. Some online lenders have shorter application processes (some are even automated and only take a few minutes to complete), but they will have higher rates and smaller credit facilities.
  • Variable Interest Rates: Lines of credit often have variable interest rates, which means that your interest rate will change along with the prime rate or a similar metric. If the prime rate goes up, your interest rate will also increase, and you will have to pay more for borrowing.
  • Potential Revenue Checks Before Borrowing: If you don’t borrow very often, lenders might want to take a look at your finances before letting you draw from your line. This additional check might cause a delay in your funds because you have to gather and send in the documents and await the lender’s decision before you’re allowed to access funds.
  • Blanket Liens & Personal Guarantee Required: To be approved for a credit line, you might have to sign a personal guarantee or agree to a blanket lien placed on your business.

For more information on lines of credit, check out our guide to lines of credit.

Business Credit Card Pros & Cons

Business credit cards are credit cards used for business purposes. You can use these cards to pay for goods and services up to your available credit limit.

Credit cards can offer your business savings in the form of rewards programs, and they can make it easier to keep track of purchases and defer payments to a more convenient time. However, if you don’t pay your card off in a timely manner, interest rates can be quite high.

Pros

  • Rewards Programs: Credit card issuers reward businesses for using their card. Depending on the card you have, you could earn points for travel or other expenses, or earn cash back, simply by using your credit card. In other words, as long as you pay off your debt in a timely manner, using a credit card can save your business a little money.
  • Signup Bonuses: On top of rewards systems, many credit card issuers offer bonuses when you sign up for, including earn points or cash back for putting enough charges on your card within a certain time period, or a 0% APR for a certain amount of time.
  • More Time To Pay: Credit cards are the easiest way to defer payments for everyday purchases to a more convenient date. You can use credit cards to smooth out your cash flow and pay at a time more convenient to your business.
  • Emergency Funds: As long as you don’t make a habit of maxing out your credit card, you’ll always have a little money at your disposal when you happen to need it.

Cons

  • Low Credit Facilities: Credit card issuers don’t typically grant you as large a credit facility as you’d be able to get from a line of credit or business term loan. Additionally, utilizing too much of your credit line can have a negative impact on your credit score, so you will have to consider the consequences of using too much of your available credit line.
  • High Rates: Credit cards tend to have higher interest rates than you might be able to get from a loan or line of credit. Typically, credit card rates range from about 10% to 25%, and rates for credit card advances can be even higher. Additionally, credit card rates are variable, which means that your interest rate will fluctuate along with the prime rate.
  • Fees: Credit cards can carry fees in addition to the interest rate, such as annual fees, late payment fees, balance transfer fees, foreign transaction fees, advance fees, and others. These fees can add up over time, which could impact the amount you actually save by using the credit card.

Final Thoughts

The financing option that’s best for you will depend on the needs and eligibility of the business. Small business loans are most appropriate for business growth projects and other situations in which you need a relatively large sum of money, whereas lines of credit and credit cards work well for situations in which you need a smaller amount of money quickly for business maintenance or growth. You might even find that your business would benefit from a combination of two or even three of these financing options.

Ready to find a loan, credit line, or credit card for your business? Check out these resources:

Bianca Crouse

Bianca is a writer from the Pacific Northwest. As a product of the digital age, she likes absorbing large amounts of information and figures she might as well pass it on. When not staring at a screen, she is probably foraging for food outside, playing board games, or harassing somebody with theories about that movie she just watched.

Bianca Crouse
Bianca Crouse
Bianca Crouse

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The Ultimate Guide To Improving Your Business Credit Score

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A good business credit score is important for a multitude of reasons. For one, it’ll help you get a business loan if you need one – and you never know when you might need some help. Additionally, a higher business credit score will result in lower rates on loan interest and insurance, meaning you’ll be paying less money every month. It will also allow you to separate your business and personal credit scores, since many new businesses that don’t have business credit rely on their personal credit to get loans and such. Finally, raising your business credit score will improve your business’s reputation and potentially win you more business; after all, your business credit score is public information that anyone can look up.

Okay, now that you know why you should improve your business credit score, let’s get on with the how. It’s actually easier than you might think!

Table of Contents

Establish Your Business Credit

The first step to improving your business credit score is to simply establish all of your business credit scores – that’s right, you will have multiple business credit scores, and you have to take certain actions in order to establish them. Personal credit scores are calculated by the same criteria and scoring system set forth by FICO, but the three business credit scoring agencies are more disparate in their calculations, and their scores all signify different things. Only once you establish credit with each agency can you work on improving these scores.

The Three Big Credit Agencies

The three major business credit scoring agencies are Dun & Bradstreet, Equifax, and Experian. As you may know, Equifax and Experian also perform personal credit scoring, but your personal credit score with these agencies is different than your business credit score.

Dun & Bradstreet

Dun & Bradstreet assigns something called a PAYDEX score. This score, which ranges from 1 – 100 (100 being perfect), primarily has to do with repayment of creditors and is of particular importance to lenders looking to make decisions about whether to grant your business a loan. To qualify for a D&B credit score, you need to register for a D-U-N-S number and have active trade lines with at least three vendors or suppliers (more on those topics in a bit).

While it’s free to register for a D-U-N-S number, you will have to pay between $61 and $188 to purchase a Dun & Bradstreet business credit report to see your score.

Equifax

Equifax has two different business credit scores: one that predicts how likely you are to skip payments to creditors, and another that predicts how likely your business is to fail. From Equifax’s website:

  • Business Credit Risk Score predicts the likelihood of a business incurring a 90 days severe delinquency or charge-off over the next 12 months. The score ranges from 101 – 992 with a lower score indicating higher risk.

order an Equifax business credit report for your company (or another company) for $99.99 per report. You can also order multiple reports at a discount, or pay a monthly fee to monitor your business credit report on an ongoing basis.

Experian

Experian assigns just one credit score, ranging from 1 – 100, that designates your risk to both vendors and lenders. You want your score to be as close to 100 as possible.

To establish an Experian business credit score, Experian requires at least one trade line and/or one demographic element, such as years on file, business size, and/or Standard Industrial Classification (SIC) code.

You can order a business credit report from Experian’s website for $39.95 or $49.95; Experian also has monthly and yearly subscription packages.

Unlike with Dun & Bradstreet, you don’t need to register for a proprietary number to get an Equifax or Experian credit score. However, in order for them to have enough information to go on, you will need to differentiate your business (as its own entity) from your personal identity with an LLC designation, employer ID number, and accounts in your business’s name. Which brings us to …

Register For Numbers & Titles

So let’s say the credit agencies don’t have enough information on your business to provide an accurate score or complete credit report. No worries. By registering your business for a few important designations, you’ll put your business on the map as far as credit agencies are concerned.

D-U-N-S Number

On the Dun & Bradstreet website, you can set up your D-U-N-S number for free. This is a nine-digit number that identifies your business’s physical location. You’ll need to have one of these in order to obtain a PAYDEX business credit score through D&B.

Many business organizations use D-U-N-S as a form of business identification and to check your business’s credit report.

Employer Identification Number

If you don’t have one already, registering for a federal employer identification number (EIN) through the IRS can help establish your business credit. In addition to identifying your business to creditors, having an EIN also allows you to stop using your personal social security number for official documents, thus separating your personal credit from your business credit.

Use the IRS’s online EIN Assistant Tool to get started with your EIN registration.

Limited Liability Company

Forming your business as a Limited Liability Company instead of a Sole Proprietorship has some important benefits, including establishing your business credit. As with registering for an EIN, restructuring your business as an LLC will help separate your personal and business credit because it differentiates your business as its own separate entity.

Rules on how to start an LLC vary somewhat from state to state, but here’s a useful resource with a few general steps for how to form an LLC.

Incorporating your business is another option.

Open Accounts In Your Business’s Name

Opening accounts in your business’s name will also put your business on credit agencies’ radars. All of these accounts need to be dedicated specifically to business purposes, meaning you can’t use the same account for personal business. Some important accounts to open include:

  • Business bank account
  • Business phone line (listed)
  • Business credit card

Besides helping separate your personal and business finances and establish your business credit, a business credit card will also help build your business’s credit score. Just keep in mind that you’ll need to practice good credit habits — such as keeping your debt-to-credit ratio low and making all payments on time.

Vendors & Your Credit Score

Setting up business trade lines with vendors — i.e., “accounts payable” relationships — helps demonstrate your business’s ability to make payments on time. Even if you don’t strictly need this sort of arrangement for your business, you can still set one up to help boost your credit score – you could, for example, set up a trade line with your office supplies or drinking water distributor. Note that D&B requires businesses to have at least three trade lines with vendors and four payments on file before they will even assign a PAYDEX score.

It’s also important to note that that you need to work with vendors that report your payments to the major credit bureaus for your trade lines to positively impact your credit score.

Repay Your Debts

To get a perfect business credit score, you don’t just need to repay your debts on time; you need to repay them early. This includes payments to suppliers, service providers, and any other entity to which you owe money. If you pay all your vendors on time, you will likely get a PAYDEX score of about 80, but if you pay them early you could get a perfect 100 score.

Remove Negative Marks

I’ve dedicated most of this article to the topic of building business credit by establishing it in the first place, as many small business owners rely on their personal credit for their business. However, it may be the case that you do already have a business credit history, and it’s not a good one. Depending on the nature and severity of the credit infraction, you might be able to remove that blemish from your record.

Check out this resource on how to remove negative marks from your credit report.

Business Loans & Credit Score

Having a small business loan in good standing will help build or improve your business credit. However, if you have no business credit or you have bad credit, it will be difficult to obtain a business loan. In such cases, you may have to take out a loan in your personal name and/or find a lender that does not check your credit in order to get that capital you need.

Business Line Of Credit

While any business loan is good for building up your credit, a business line of credit is an especially easy way to help bolster your business’s credit score. If you have a line of credit, you have access to a sum of money, but you only have to pay interest on the amount you borrow. Lines of credit may also be easier to qualify for than actual term loans, especially if you choose an online line of credit such as Bluevine, Kabbage, and others.

Business Loans For Bad Credit

If you’re reading this post because you need to get a loan for your business ASAP but have poor business and personal credit, you might consider getting a loan with no or low credit score requirements. Just make sure you read the fine print, because you may have to sign a personal guarantee and a UCC blanket lien on your business assets. Here are a few good lenders to consider for businesses with poor credit:

However, be aware that lenders might not report to the credit agencies. If you’re taking out a loan to improve your credit score, ask potential lenders if they report to credit agencies before accepting a loan.

Looking for a lender that doesn’t check your credit at all? Head over to our article on 5 Business Loans With No Credit Check.

Managing Your Credit Profiles

Once you know what your business credit scores are, you can start to work on improving them. But that’s not the only thing you need to do; it is also advisable to monitor your scores on at least a semi-regular basis by checking your reports from time to time – at least once a year. Additionally, you will want to correct any mistakes on your business credit profile that could be negatively affecting your score. All of the credit bureaus provide a process to correct inaccuracies on your report, like an inaccurate SIC code or wrongfully filed UCC lien.

More Tips

Finally, here are a few more things you can do that might boost your business credit score.

  • Fix your personal credit (some lenders check personal as well as business credit)
  • Deal with any judgments, liens, or other black marks on your report
  • Avoid behaviors that hint at risk, such as closing any business-related accounts
  • Keep revolving debt low
  • Stay on the right side of the law in terms of business taxes, business licenses, insurance policies, etc.

Final Thoughts

Building up a strong credit history for your business can help your business in a lot of ways. You’ll be able to increase your borrowing limits, qualify for lower interest rates, limit your personal liability in business dealings, keep your personal credit lapses from hurting your business’s reputation, and more. While most startups rely on personal credit to get things off the ground, once your business is up and running you can establish business credit in just a few easy steps. After your business credit profiles are firmly established, you can build up your scores by simply paying your bills on time (or, ideally, early) and exercising other good credit practices.

Shannon Vissers

Shannon is a freelance writer and editor based in San Diego, CA. Shannon has a three-year-old daughter named Izzy. Shannon likes to unwind by watching trashy reality television and reading literary fiction during the commercial breaks.

Shannon Vissers
Shannon Vissers

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Everything You Need To Know About Secured Business Credit Cards

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If you’ve been comparing business credit cards online, there’s a decent chance you’ve come across some secured cards. If you aren’t sure what “secured” means or how to compare secured cards to other business credit cards, we’re here to help.

Read on for everything you need to know about secured business credit cards.

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You Won’t Want A Secured Card Unless You Need One

There may be a few rare cases where this is untrue, but for the most part, a secured credit card is a good option only when unsecured credit cards are unavailable to you.

Secured business credit cards do offer rewards similar to many of their unsecured counterparts. At the same time, your selection of cards will be limited. Not only that, but your interest rates will probably be higher than they would be with a similar unsecured card.

What Makes A Card Secured?

Have you ever lent yourself money? The concept sounds kind of absurd, and in a way it is.

Secured credit cards require you to put down a security deposit when you sign up for them. The bank will then use that security deposit to establish your credit limit. So if you put $200 down, you’ll have a $200 credit limit. If you’re lucky, the bank will apply a small multiplier to your deposit.

Why would you do that? If it helps, you can think of it as a strategic money transfer between your different accounts that maximizes the efficiency of your money.

How Secured Cards Can Help

Secured credit cards are a way for business owners who have recently filed bankruptcies to access revolving lines of credit. Many of these individuals may find it difficult to be approved for an unsecured business credit card.

The security deposit removes the risk from the bank, and the cardholder is able to access rewards and perks similar to those they would get with unsecured business credit cards.

More importantly, a secured business credit card becomes an easy way to repair your credit. Just be aware that banks aren’t always consistent about how they report business credit card activity. Some will report to a consumer credit bureau. Some will report to business credit bureaus. Some will report to both. Some will report to neither. Be sure to find out before you sign up.

How You Should Use A Secured Credit Card

Secured business credit cards usually have very low credit limits, so it’s difficult to get yourself into too much trouble by using them. That said, you should use your secured card judiciously, avoiding spending more in a month than you can pay off that month.

As for what you should spend it on, that depends on the type of card you get. Some cards return a small amount of cashback for every purchase you make. Others use a multi-tiered system that might reward telecommunication expenses at 3 points per dollar and general expenses at 1 point per dollar. You’ll get a better return on your investment if you use the card for purchases that maximize your reward points or cash back.

What Are The Drawbacks?

For starters, secured business credit cards come with all the same risks of unsecured business credit cards. Business credit cards aren’t governed by the same regulations that consumer credit cards are. That means you’ll need to be on guard for surprise rate changes, floating due dates, and fast and loose terms of service.

Secured credit cards come with a few additional risks, however. The big one is higher interest rates. If you pay off your card’s balance every month, you don’t have to give interest rates too much thought (just watch out for that aforementioned floating due date). That said, if you can avoid getting charged usurous fees if you miss a payment, you should. With a little research, you should be able to get a secured credit card with a reasonable APR.

The other things to look out for are miscellaneous fees. It’s not unusual for even unsecured business credit cards to carry annual fees, but secured business cards can come with even more charges, including application fees, maintenance fees, and processing fees. Avoid as many of these as you can.

How Long Should You Have A Secured Business Credit Card?

The answer is, of course, no longer than you need to. You should expect to have to use a secured business credit card for about a year. After that, a bank will usually offer you an unsecured credit card.

In the event that the issuing bank doesn’t offer you a new card, don’t be afraid to ask to be promoted to an unsecured card.

At that point, you should have your security deposit returned to you. Unfortunately, you don’t usually earn interest on your deposit.

Final Thoughts

A secured business credit card should primarily be viewed as a road back to decent credit health. Remember, however, that it isn’t necessarily the best or only path you can take. Some banks also offer high-interest, low-limit unsecured credit cards to customers with poor credit. Avoid offers that pile on the fees, and you should be back to normal unsecured credit card usage in no time.

Looking for a good unsecured card instead? Check out our 2018 business credit card guide.

Chris Motola

Chris Motola is an independent writer, journalist, programmer, and game designer who has mastered the art of using his laptop in no fewer than 541 positions, most of them unergonomic. When he’s not pushing keys or swiping screens, he’s probably out exploring urban or natural environs, experimenting in the kitchen, or delighting/annoying his friends with his ideas and theories.

Chris Motola

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Who Is Responsible For Business Credit Card Debt?

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Business credit cards are a useful way for anyone in your organization to make purchases, all while earning reward points. But while swiping the card may be easy, it raises questions about who is ultimately responsible for the purchases made with the card. The swiper? The business owner? The business itself?

If you’re confused about who is responsible for business credit card debt, read on.

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The Personal Guarantee

In most cases, it’s pretty easy to figure out who is ultimately responsible for business credit card debt. Typically, a credit card company will require the business owner to sign a personal guarantee.

What this means is that, even though the business credit card is technically taken out in the name of your business, the creditor can try to collect on you, personally. This bypasses some of the protections granted to your personal assets by your business’s corporate status.

If you’re worried about creditors knocking on your door after they’ve squeezed all the blood from your business, you may want to think twice before signing a personal guarantee–and scrutinize the ones you do sign.

Personal guarantees come in limited and unlimited forms. An unlimited guarantee is a great deal for your creditor. Under that agreement, you can be held responsible not only for your debt, but for any legal fees associated with collecting that debt. As you might guess, signing an unlimited guarantee is far from ideal.

Limited guarantees come in a couple different forms, but in most cases they assign liability between multiple parties. You’re most likely to see this arrangement if you have business partners, but it’s possible, at least in theory, to negotiate an unlimited guarantee down to a limited one.

Does That Mean The Owner Is Always Personally Responsible?

While a personal guarantee sounds pretty straightforward, in practice it’s far from an air-tight contract.

A side effect of pushing the responsibility onto the business owner is that it can make the debt subject to personal bankruptcy protections. In those cases, your business credit card debt is treated like personal debt.

Even if you don’t declare bankruptcy, a personal guarantee doesn’t necessarily entitle the creditor to declare open season on all your property. To collect anything, they’ll need a legal judgment against you. Depending on your balance, your creditor may decide your debt isn’t worth the trouble.

Is There A Way To Avoid A Personal Guarantee?

You might be noticing a theme so far: there are few certainties in the world of business credit cards. And what do you know? It applies here as well.

The default terms for almost all business credit cards include a personal guarantee, so it won’t be a matter of hunting down a rare, plastic unicorn. On the other hand, banks are more inclined toward negotiation with established customers. You stand the best chance of having a personal guarantee waived if you’re applying for a business credit card from a bank with whom you’ve previously had a relationship.

Bigger businesses and corporations may also be able to use the heft of their enormous accounts to negotiate better business credit card terms with their bank.

Who Is Responsible If You Avoid A Personal Guarantee?

If you circumvent the personal guarantee, your liability for unpaid debt will depend on the way your business is organized. That means limited liability corporations (LLCs), C-corps, and S-corps will, in most cases, have the protection from personal liability that you normally enjoy.

Final Thoughts

Business credit cards come with personal risks. Be sure to understand what your liability is and which assets will be exposed should you default. And, if you can, negotiate a deal that will leave you as protected as possible.

Looking to compare business cards? Check out our 2018 business credit card breakdown.

Chris Motola

Chris Motola is an independent writer, journalist, programmer, and game designer who has mastered the art of using his laptop in no fewer than 541 positions, most of them unergonomic. When he’s not pushing keys or swiping screens, he’s probably out exploring urban or natural environs, experimenting in the kitchen, or delighting/annoying his friends with his ideas and theories.

Chris Motola

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