If you’re a small business owner, you may have recently been bombarded with credit card offers for your business. These offers can be both tempting and terrifying if you have never had a small business credit card before. Determining whether or not to follow through with these offers is a matter of personal preference, but there are some things you need to know before you take the dive or ignore the option completely. Should you get a small business credit card? Let’s answer some questions to find out…
Why Businesses Get Credit Cards
There are a number of reasons why you may benefit from a small business credit card. You can:
Use it to build business credit
Use it as a source of business funding
Use it to monitor funds for your business
Use it to allow employees to make charges to your account
Use it to make reservations and payments in your business name
SBA, FTC, Consumer.gov
Even though your name may be present on the card, the card itself will act as a source of funding for your LLC, corporation, partnership, or freelance writer in chicago etc. Your reasons for getting a business credit card may be different than someone else’s, but as you can see, there are plenty of advantages to keep in mind.
How to Apply for Business Credit Cards
To apply for a business credit card, you will need an Employer Identification Number from the IRS. This is similar to a Social Security Number, but it represents your business instead of a person. You can apply for an EIN online, and the IRS will send you an email with your number on it. From there, you can use your number to fill out your card applications.
Just like you have a credit score, your business has a credit score that credit card companies will evaluate. If you have never had a card or loan in your business’s name before, the card provider will look at your personal credit during the application process. In that case, you will act as the guarantor for repayment. If you do not pay your card balance or at least your monthly minimums, the card provider can come after your personal accounts for the money.
Assuming you have enough credit to secure a business credit card, you will soon get your card in the mail and you can start using it for whatever expenses you may have.
sources: Duke, fdic
Adding Users to Your Business Credit Card Account
If you want to allow some of your employees to have access to your line of credit, you can request cards issued in their names. The cards will still be tied to the central account, but you can track transactions and spending histories for each card individually online. If an employee is not using the card correctly, you can take the appropriate actions moving forward, with proof in hand.
Note that having someone as an authorized user on your account does not make the person liable for the charges they may incur. Ultimately the business credit card provider will still hold you responsible for these charges, and they will request payment from you accordingly.