Whether you're a sole proprietor or the owner of a company with hundreds of employees, the best business credit cards can provide a source of quick capital and ease the process of managing business transactions. While the specific features of every business card are different, here's what you need to know about this $300 billion industry to determine if a business credit card is right for you.
1. Eligibility is based on more factors than the average credit card. Issuers look at both your personal and business credit history to determine if you’re approved and what terms you qualify for. While responsible past use of credit will impact your chances the most, make sure the personal credit bureaus Experian, TransUnion and Equifax have accurate information, as well as the business credit bureaus such as Dun & Bradstreet and the Small Business Financial Exchange.
See related: How business owners chose their credit cards
2. You may or may not be personally liable for debts. The person or entity who is liable for debts depends on what type of liability the card offers. If it has commercial liability, your business is liable for all debts. But, if it has joint and several liability, you and your business are both responsible. Know your rights and responsibilities before signing on the dotted line.
3. Business cards often command higher credit limits. The credit limit for business cards is likely to be higher than it would be for a personal card because "we know that small business owners charge a lot more than consumers do," says Rosa M. Alfonso,a spokeswoman for the business division at American Express.
In fact, the average monthly payments for business owners sits around $2,000, while the average for consumers is less than half that.. Because of this, many business credit cards do not carry spending limits at all, though such cards tend to carry annual fees, according to the American Bankers Association.
4. Cards can be customizable for individual authorized users. With business credit cards, you can make employees authorized users and easily oversee their spending. Such cards can have customizable user privileges attached so you can determine how much credit individual employees have access to and where they can make purchases.
5. Payment terms can be tailored for businesses. Recognizing that cashflow isn't always predictable for businesses, card issuers often offer business-friendly payment terms, such as discounts for paying a balance early or the option of deferring payments if cash flow is slow.
But payment terms might vary depending upon the type of card. For example, balances on business charge cards are typically due in 30 days, while balances on business credit cards aren't due as long as a minimum payment is paid. Some cards also offer an extended payment option, which lets business owners finance large purchases over a period of time with different terms than those used for routine purchases.
6. Business cards ease the accounting process. Commercial credit cards help business owners separate their personal expenses from their business expenses – a must-do if you want to avoid problems with the Internal Revenue Service, says Randy J. Elder, a certified public accountant in Phoenix. Monthly credit card statements help business owners track spending, while some cards provide detailed analysis to help business owners plan future expenditures.
7. Rewards can make business spending pay off. Whether your business spends money on travel, entertaining or office supplies, you can likely find a card with a rewards program that lets you rack up points to go toward these purchases when you use it. Some card issuers have agreements with other companies giving cardholders discounts on certain business-related products and services.