As a Black woman entrepreneur, you're probably familiar with just how difficult it can be to get the funding you need to start or grow your business. Credit cards were created to help people establish credit and build up their financial history—and they're available for businesses too! Learn more about how they work and how to get one in this blog post.
What is a business credit card?
A business credit card is a type of credit card that's issued to businesses. Businesses use business credit cards to pay for expenses related to their operations, like office supplies or employee travel expenses.
In addition to helping to build your credit, some card issuers companies offer reward points on certain purchases made. This help you to offset repayment amounts, earn points for company travel, or redeem important resources for your business.
But there are some drawbacks too—you might be charged an annual fee based on your spending habits (and again when bills come due). And if one person at a company has bad financial habits or makes too many late payments (or no payments at all), it can reflect poorly on everyone else who shares that same company account.
How do business credit cards work?
Business credit cards are similar to personal credit cards, but they are designed specifically for businesses. Businesses often use their business credit cards as an alternative to cash, checks or debit cards because these tools have limitations. For example, cash can be stolen or lost; checks require time-intensive processing; debit cards may not always be accepted by merchants or vendors who don't accept all forms of payment.
Businesses also use business credit cards because they offer more protection than cash or checks against theft and fraud—the bank will provide replacement funds if a transaction is unauthorized or fraudulent.
Benefits of Business Credit Cards
Business credit cards can help you get a business loan. Having a solid credit history is an important part of the process of getting approved for loans and other financing options. A good way to build that history is by using your business credit card responsibly and paying off the balance each month, which will show lenders that you're a responsible borrower who can handle debt responsibly.
Business credit cards can help you build your credit history. If you're new to managing finances as part of running a small business, using a high-quality business credit card can be a great way to gain experience with handling money responsibly and learning what it takes to build strong personal finance habits over time. And even if you already have good financial habits in place, using the right kind of card will give your hard work an extra boost toward building up a good track record for future lenders (or even employers).
Business credit cards can earn rewards points or cash back on purchases made through them and redeem those rewards toward things like travel discounts or gift cards at retailers that sell products related directly back into their businesses (think office supplies stores). This means more money saved at no cost out-of-pocket upfront—especially when compared against having spent cash instead!
How to get a Business Credit Card for your Startup
Getting a business credit card for your startup is easy. You'll need to have a business that has been in operation for at least three months, and you must be able to provide documentation showing that the company is real and not just an idea on paper.
Your company does not require an employment identification number (EIN) to apply for a business credit card. The EIN, which is also known as the tax ID number for a business, is akin to a person's Social Security number (SSN) in several aspects. An owner's SSN and borrowing history are frequently considered for establishing creditworthiness, particularly for organizations without established credit histories. On the other hand, if your company has an EIN, you can include it when requesting a business card.
Keep in mind that a personal guarantee is often required for company credit cards. As the business owner, you are therefore personally liable for paying back any amounts charged to the card. And even though you're using a business card, if you pay late or miss a payment, that bad information may show up on your personal credit reports and lower your personal credit score.
If you're approved, it's equally important that you understand how to use the card correctly. For example, avoid using the card for expenses related solely to yourself (e.g., travel or eating out), as these expenses should be absorbed by your personal funds and not with money from the company account.
Platforms that offer business credit cards for startups
There are a several platforms that offer business credit cards for startups. If you're new to the world of credit card processing, it's important to know that there is a difference between the two types of cards: individual and business. Individual cards are tied to one person and their personal information, while business accounts are tied to companies (often with multiple users or employees who will be accessing your account(s)).
There are several players in this space, including Square, Bank of America, Wells Fargo, Capital One, PayPal, Stripe, Intuit, etc. Each has its own benefits and drawbacks which you should research and be aware of before applying for a business credit card. And in addition to being able to process credit cards for your business, these platforms offer a number of other features including recurring billing and subscription management.
Getting a business credit card, while not particularly necessary, can be a great way to build a healthy credit score for your business and unlock future financial opportunities for your startup. It's definitely worth looking into as you try to establish various financing options for your business.
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