What Are Corporate Credit Cards And How Do They Work?
Key takeaways
- Company bank cards are playing cards the place the enterprise entity, quite than the enterprise proprietor, is legally liable for any fees made with the cardboard.
- Company playing cards are sometimes obtainable to giant firms with a longtime credit score historical past and hundreds of thousands of {dollars} in income.
- Small-business playing cards, however, might be helpful for these with smaller firms or the self-employed. You may sometimes want a private assure to be accredited for a small-business card, which means the cardholder is chargeable for any fees made with the cardboard.
It’s the best situation for a small-business proprietor: Your organization is experiencing year-over-year progress, what you are promoting is worthwhile and your income will increase each quarter. That is the type of progress most small-business house owners dream of.
Whenever you begin to see your organization shift from a small startup to a longtime company, it’s time to consider transitioning your monetary instruments. This may imply switching from a enterprise bank card to a company bank card — however earlier than you start the prolonged company bank card software course of, it’s value asking your self whether or not a company card is de facto the precise selection for what you are promoting.
Let’s take a more in-depth have a look at how company playing cards work, methods to handle an organization card and methods to resolve whether or not your small enterprise is able to make the transition from a enterprise bank card to a company bank card.
What’s a company bank card?
A company bank card is a sort of card issued to an organization. Because of this the enterprise entity, not the enterprise proprietor, is legally liable for all fees made on the cardboard. Due to this, company bank cards are usually solely issued to giant firms with a observe report of success and a longtime enterprise credit score historical past. If what you are promoting is an LLC, S-Corp or C-Corp with a stable enterprise credit score rating and income within the hundreds of thousands, your organization may be eligible for a company bank card.
Company bank cards could include sure helpful perks, equivalent to money rebates and frequent flyer miles. Nevertheless, the largest profit to a company bank card is that particular person workers might be issued their very own playing cards to deal with their work-specific enterprise bills. Whether or not it’s paying for airplane tickets or renting workplace area, having a company bank card could make dealing with enterprise bills for a big company rather more environment friendly.
How do company bank cards work?
In some ways, company bank cards perform quite a bit like private bank cards or small enterprise bank cards. You should utilize your company bank card to make purchases for what you are promoting, and plenty of company playing cards enable what you are promoting to earn rewards on company purchases. Your corporation might want to make common funds in your company bank card account, and your company card utilization and cost historical past will issue into what you are promoting credit score rating.
Nevertheless, company bank cards additionally include a number of options that small-business bank cards could not supply. These embody the power to challenge worker bank cards with out having to imagine private legal responsibility for the fees. Company bank cards additionally typically embody entry to accounting software program and companies designed to assist what you are promoting handle its company line of credit score, and your organization could obtain reductions on frequent enterprise bills and retailers.
Company bank cards vs. small-business bank cards
Company bank cards and small-business bank cards aren’t one and the identical. Whereas company bank cards are designed for companies with a number of workers and income within the hundreds of thousands, enterprise bank cards are designed to fulfill small-business house owners’ wants, together with freelancers and people with facet hustles. Realizing which possibility is greatest for what you are promoting will enable you apply for the precise card — and having the precise line of credit score is a good way to assist what you are promoting develop.
Which possibility is best for you?
When you have a facet hustle, run a contract enterprise or have a small enterprise with income of lower than one million {dollars} per 12 months, you’ll in all probability desire a enterprise bank card. Enterprise bank cards have quite a lot of benefits, together with the power to earn rewards on enterprise bills and construct what you are promoting credit score rating. When you have workers who want entry to what you are promoting line of credit score, you can also make them licensed customers on what you are promoting bank card.
Enterprise bank cards additionally require a private assure, which suggests you’re personally chargeable for any fees made on the account (together with licensed customers’ fees). If what you are promoting doesn’t herald sufficient cash to repay what you are promoting bank card invoice, anticipate to make funds out of pocket.
In case your small enterprise is legally labeled as an organization, has income within the hundreds of thousands and has a number of workers who want entry to a company credit score account, it may be time to contemplate a company bank card. Company playing cards don’t require a private assure, so it’s a good suggestion to ensure what you are promoting has constructed up a stable credit score historical past earlier than making use of.
How do you qualify for a company bank card?
To search out out whether or not what you are promoting will qualify for a company bank card, contact a company bank card issuer straight. In contrast to shopper bank cards, company bank cards typically embody prolonged software processes — and chances are you’ll be required to offer documentation proving that what you are promoting’ earnings and bills are excessive sufficient to justify taking out a company line of credit score. The appliance could even embody a monetary audit, so be ready.
Are you able to get a company bank card with bad credit report? Technically, sure. Since company bank cards don’t require a private assure, a credit score issuer in all probability gained’t do a tough inquiry in your private credit score. Because of this you would have a low private credit score rating and nonetheless have what you are promoting qualify for a company bank card. However, if what you are promoting has bad credit report or has solely developed a restricted credit score historical past, you may need a more durable time taking out a company line of credit score.
What are one of the best company bank cards?
The most effective company bank cards are those providing flexibility, rewards and expense monitoring what you are promoting requires. It additionally allows you and your workers to pay for the supplies and provides you want whereas getting rewarded for it. Sometimes a majority of these playing cards require full cost of the steadiness each month,which retains you from accruing curiosity however may create some money circulation points for extra fledgling firms. Listed here are a couple of Bankrate’s suggestions for one of the best company playing cards:
Suggestions for managing a company bank card
Company bank cards include extra perks, however additionally they include extra elements to handle. To start utilizing your company bank card correctly, it is best to:
Set up insurance policies for all cardholders
Whenever you open a company bank card, be prepared to speak to your workers about your organization’s new bank card insurance policies, in addition to methods to use their firm playing cards. Be certain that workers perceive that they need to solely make enterprise purchases on the cardboard, in addition to the significance of maintaining with funds and monitoring receipts.
Should you’re an worker utilizing a company bank card on behalf of your employer, one of the best ways to handle your organization card is to comply with the rules set by your employer — and ensure to submit all receipts, expense experiences and different crucial documentation promptly. When you have any questions on how your company bank card ought to be used, discuss to your supervisor or attain out to a group member in accounting or finance.
Monitor and handle bills
Managing funds for big companies takes work, however most company bank cards include high-level expense reporting instruments that may make that work a little bit simpler. Whether or not you wish to observe bills by class, monitor worker spending or reallocate your funds in real-time, one of the best ways to handle your company bank card is to take full benefit of those instruments.
And if what you are promoting is giant sufficient to have a company line of credit score, it’s in all probability giant sufficient to have an accountant (or accounting division) who can assist you perceive the place what you are promoting’ cash goes, whether or not you’re staying inside your funds and what you could do to maintain your company line of credit score in good standing.
The underside line
Many profitable small-business house owners could ponder whether it’s time to transition from a enterprise bank card to a company bank card. If what you are promoting has a group of workers, a stable credit score historical past and — most significantly — annual income within the hundreds of thousands, it may be time to contemplate making use of for a company line of credit score. If what you are promoting is doing effectively however isn’t but hitting that type of income, a small-business bank card continues to be in all probability your best choice.
Issuer-required disclosure assertion:
*The details about the Brex Card, Ramp Visa® Company Card, Company Platinum Card®, Company Gold Card and Company Inexperienced Card has been collected independently by Bankrate.com. The cardboard particulars haven’t been reviewed or accredited by the cardboard issuer.