Written by: Kathy Martin, Director of Payment Services, Union Savings Bank
If you’re a small business owner, it’s high time you give yourself and your employees some credit. You’ve put a lot of time and money into your business, so you should reap the benefits. One of the best ways to do so is to start using a small business credit card.
Like any financial decision, deciding to apply for a small business credit card works best when you’re well-informed. So, we’ve put together a list of absolute need-to-knows about business credit cards to help you find the right card for your business.
What are the benefits?
Small business credit cards have a lot to offer. They have higher limits than personal credit cards and lower rates. Like any business credit card, they allow business owners to separate personal finances from business finances and build business credit. In doing so, small business credit cards can extend a business’s credit up to $25,000, depending on the bank, with competitive interest rates. They also offer rewards that vary based on the type of card.
Responsibly used small business credit cards are vital tools for improving your company’s business credit by helping you build a credit history for your business. Using your small business credit card regularly, making your payments on time and using 10 to 20 percent of your credit line on a regular basis is a sure way to improve your business’s credit. You can save on interest rates and other financing fees by making sure you pay off the balance on your card within 28 days of the invoice date. This practice of credit management and building business credit also helps many businesses improve cash flow.
The credit utilization ratio makes up 30 percent of your credit score. It represents the amount you owe versus the total credit available to you and is the second most important component of your business credit score. (The first is making on-time payments.) So, according to FICO, keeping your credit usage between 10 and 20 percent, or lower if possible, is a great way to keep your credit score high with credit report companies. This, in turn, creates more financial options for the future of your company.
Small business credit cards also make accounting easy – well, easier. As a business owner, you get free cards for your employees. For each card, you can set up payment controls, such as spending limits, spending categories and time delays. You can also set up central billing, which means that you will only receive one monthly bill with consolidated card activity, and point pooling, rolling over the points your employees earn onto the main account.
Having multiple cards out there may seem intimidating, but there’s no need to worry. Small business credit cards protect you and your money from fraudulent charges. If fraudulent charges do occur, the cardholder is protected from unauthorized transactions.
What should you do before you apply for a small business credit card?
If you are planning to apply for a small business credit card, you should start by checking your credit score with credit report companies. Your personal credit score will be considered when you apply for a small business credit card, in addition to your business credit score if you have one. This varies from applying for a corporate credit card, in which case your personal credit score is not considered. You can easily obtain your business credit report and credit score from any of the three major credit bureaus – Experian, Equifax and TransUnion. DBA operators can obtain a small business credit card by applying via your tax ID, which you should obtain by filing with the IRS.
You should also have a solid understanding of your liabilities. The best way to gauge your liabilities is by taking a good look at your financial statements.
If you’re just starting your business and don’t have revenue or a business credit score yet, don’t worry – that’s what we’re here for. We want to help you grow your business, so we will work with you to find the best option for you and your business.
Having a relationship with your bank can be very helpful for all financial decisions and processes, but it is especially helpful during the business credit card application process. The Business Banking Team at Union Savings Bank can help you establish best practices with your business credit card. When it comes to local businesses, we’ve got your back, and can offer several attractive Visa business credit card options to best fit your business.
If, however, you’re starting a small business and would like to go ahead and get a jump start on building your business credit, check out these additional tips to build your business credit quickly.
In general, eligibility for business credit cards is based on business financials, credit rating and the history of the credit for the business.
So, how do you know which card is the right fit for you?
As a business owner, you can choose the type of small business credit card that best fits your needs. For example, the non-rewards Visa® Business Credit Card offers a low introductory rate for an extended period of time, which is perfect for funding equipment or other one-time purchases. If you prefer to earn cash back on your purchases, you can choose the Visa® Business Cash Card.
Once your business has been approved for the right small business credit card for you, you will have the option to pay a minimum due or statement balance by the due date printed on the statement. There is a standard grace period for credit cards of 28 days.
Union Savings Bank credit cards* are accepted anywhere Visa is accepted, but you should always call the number on the back of the card to inform the bank if you are traveling overseas.
Once you’re ready to apply for a small business credit card, visit our website to view your options and apply online or make an appointment with your business banker to help you make the best decision for your business.
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*The creditor and issuer of these Cards is Elan Financial Services, pursuant to separate licenses from Visa U.S.A. Inc. Subject to credit approval.
