If you own a small business, you probably should consider establishing some credit in the name of the business, rather than relying entirely on your personal credit. You might be surprised to know that fewer than 50% of small business owners are using business credit cards that are in the name of the business and not their personal name! Keeping everything in your own name may put your personal assets at risk, so read on and consider these great reasons to apply for a business credit card!
Tips For When You Apply For A Business Credit Card
So what should you look out for when you apply for a business credit card? Here are a couple of tips to consider.
Keep Business Expenses Separate
Keeping business expenses separate not only comes in handy at tax time, but it helps you stick to both a business AND a personal budget. When you are simply comingling all of your money and spending it as needed, it can be difficult to know how much money you are making from your business and how much you may be investing towards the future.
When you carefully keep everything separated, you are protected by a “corporate veil,” which allows you to be separately responsible for profits and losses. Your personal assets will have protection. Having a business credit card helps you to reinforce that protection, and reduce the risk to your personal assets.
Details, Details, Details
When you use a business credit card, it is far easier to keep detailed records of any expenses related to running your business. Whether you keep your own books or use a bookkeeper, the tasks will be monumentally easier when you keep your finances seperate. Business credit cards often offer you special spending reports and graphs that can help you build a balanced budget and stick to it. It also makes it easier for you to quickly see your profits and losses.
One final, and very important reason for getting a business credit card is that you can establish a credit history for your business. When it comes time to apply for a loan or any other kind of financing, you will have a solid credit history and be able to show that your company is credit-worthy. You won’t have to worry about depending on your personal credit history. Plus, you will be eligible for different rates and terms for loans as they pertain to a business, rather than an individual.
Additionally, it is important to keep your business credit separate from your personal credit, especially if you are going to incur any significant business debt. You don’t want this appearing in your personal credit history and bringing down your credit score.
Here’s what you need to know before you apply for a business credit card:
Consider the type of business credit card that you need.
How much of a credit limit do you need? Will you be considering a secured or unsecured card? Are you hoping to get a rewards credit card? There are many things to think about before applying!
Find out your credit score.
This means you need to know your personal credit score, as well as any credit score for your business if you have any credit established yet.
Don’t be blinded by perks.
Sure, special benefits and great perks can draw you to a particular card. But, don’t rely only on the perks. Know the actual terms of the credit card—annual fees, APRs, any other charges, and fees, etc., before applying. Make sure you know whether or not any special offers are going to expire after an introductory period, too.
Don’t apply for a ton of business credit cards. In most cases, one is probably sufficient. If you have employees, then make sure you look for a business credit card that offers low cost or free additional users, because these are the kinds of charges that can add up quickly.
Always be careful when applying for credit, whether for business or personal use. You need to protect your personal—and business—assets and maximize profits. When you are educated about the various terms and conditions, and understand what you are getting into, you will be able to make the right decision for your company.