When you apply for a business credit card, majority of the issuers will run your credit report through both consumer and business credit bureaus. However, you probably won’t have any business credit history unless you have a well-established company that is incorporated or a limited liability company, has a federal Employer Identification Number, and satisfies other standards.
To be approved for a business credit card, you’ll typically need to have the perfect credit score or at least, near it. However, if your company is well-established or generates a sizable amount of annual revenue, you might be able to get in touch with some card issuers who would approve you for a card with a lower credit score requirement.
Credit Scores and How to Improve It
The most accurate way to assess a company’s financial reliability is through its business credit score. Credit professionals can learn from your company’s credit record how regularly you’ve paid off prior obligations and how likely you are to do so for future loans. The easier it is to qualify for additional lines of credit or loans to expand your firm, the better your company’s credit rating will be.
Pay on Time
Maintaining direct payments and making timely payments to suppliers and lenders will raise the company’s credit score and show credibility to potential investors. Regularly paying on time brings your company one step closer to the perfect credit score that you want.
Avoid Closing Accounts
The credit score of a company will still be impacted by canceling an account because any missed payments or adverse credit contributions will still be recorded. But don’t worry. If you had a rough start paying your bills on time, seeking help from a cheap credit repair services will work wonders.
Look Over Credit Score Regularly
Business owners should periodically check their company’s credit score since it enables them to monitor transactions, analyze growth, highlight missing payments, and identify areas for development.
Bad credit is caused by the higher interest rates you will pay as your credit score falls. If you have bad credit, you will also pay higher interest rates on your mortgage in addition to higher credit card interest rates. To put it another way, having bad credit could cost you literally thousands of dollars over the course of your lifetime, which is why you need to ask credit repair professionals for help.
Guidelines for the Proper Use of Employee Credit Card
1. Clear Instruction of the Rules
Your company’s policy on employee credit cards should be very specific on how the cards should be used, the spending caps you’ve established, and the reporting requirements.
2. Access to Card Should Have a Limit
Credit repair professionals suggest that you assign specific credit limits to employee credit cards. Employees that you anticipate will frequently require credit cards with authorized users should be given these cards. Employees that occasionally incur expenses do not necessarily require a card, but you may need to repay them.
3. Setting Up an Account Restriction
Many solutions are available from employee credit card issuers to help you reduce risk. Take advantage of the option to set personal card limits, such as spending caps or restrictions on specific spending categories. Instead of flights, your office manager might need to be able to buy office supplies.
4. Turn on Alert
You can create text notifications based on card spending with card issuers. Create an alert for transactions that exceed a predetermined limit or for unusual behavior.
5. Always Ask for the Receipt if Card Is Used
The requirement to process reimbursement is reduced by opening an employee credit card. But the compensation procedure also makes workers responsible for their own spending. Demanding receipts and correlating them to your monthly billing statement will help you keep up this practice.
6. Reviewing Your Account Is Good Practice
By periodically examining account transactions before receiving your monthly bill, you can reduce the potential for employee fraud or abuse. You can track individual spending online with many employee credit card providers, so you may link expenses to specific employees.
The Pros of Using Business Credit Cards
● Be Qualified Easily
Compared to a line of credit or a bank loan, it is significantly easier to be approved for a business credit card, even without the perfect credit score in your record. Most credit card providers will be pleased to offer you a business credit card if you have good personal credit standing or a successful small business.
● Effortless Access to Financing
Running a small business frequently requires having access to capital. When there isn’t enough money on hand to make a necessary transaction, small business owners frequently experience cash flow issues.
● More Rewards to Get
When using their business credit cards, many credit card issuers provide bonuses and perks. By simply making purchases with your company credit card, you could accrue perks such as cashback, miles, or other benefits.
● Acquire Great Credit Scores
Your company’s credit standing can be built and enhanced with the aid of your credit card. After all, what kind of business doesn’t want to get the perfect credit score? When you ask for a bank loan later, this could be advantageous. Having a score close to the perfect credit score allows you to lend money for your business easily.
The Cons of Using Business Credit Cards
● Personal Credit Issues Can Happen
Credit bureaus record your company’s activities on your personal credit, and when you are held responsible for late or excessively extended credit, this could cause problems for your personal credit standing.
● Prepare Higher Fund
Using business credit cards to make purchases is expensive. In most cases, you also pay exorbitant yearly fees to maintain the card, which results in you incurring high interest rates and late fees, making you farther from the perfect credit score.
● Protection for Purchases Is Low
Business credit cards frequently lack that same level of security as that of a personal credit card. As a result, it will be more challenging to exchange purchases, fix billing issues, and even reverse fraudulent charges.
● Security Issues
A stolen card number could be used to make fraudulent transactions on business credit cards. Be cautious when entering your credit card number online and always keep your card secure.
You must also enforce stringent rules regarding who can use the card to make purchases and what qualifies as an authorized purchase. If a business credit card is not adequately managed, employees may abuse it.
A company credit card can be helpful, but you must be aware of the potential repercussions and exercise caution while applying for and using one. You can minimize the drawbacks and increase the positives for your company by removing or regulating business credit card concerns.
Also, getting the help of credit repair professionals should be an option to improve your business’ credit scores.