As you grow a business, having a credit card can help you manage your cash flow, grow your business credit, access special credit card rewards, and more.
When choosing a credit card for your business, you might ask yourself which type of card is best for you: a small business credit card or a business credit card? While the two have similarities, they offer different benefits and features and are designed for different types of businesses.
Keep reading to find out what small business and business credit cards are, how they differ, and how to decide which one is right for you.
What is a small business credit card?
A business credit card is a card that helps businesses of all sizes manage their spending. Business credit cards can be used by entrepreneurs without employees or large companies with many employees and high incomes.
Business credit cards have a straightforward qualification process that typically requires business owners to provide a personal guarantee, which means they accept responsibility for the business debt on the credit card. Many business credit cards allow businesses to add employees as authorized users, as well as set spending limits and track their employees’ purchases.
What is a business credit card?
A business credit card is a card owned by a qualifying corporation or limited liability company (LLC). These cards are designed for large businesses that have millions of dollars in annual revenue, high annual expenses, and multiple employees. Business credit cards allow businesses to issue multiple employee cards and allow the business to easily track spending and set spending limits for their employees.
Business credit cards are tied to business finances. To qualify for these cards, you will need to prove that your business is creditworthy and will likely need to share financial statements to prove income, expenses, and ability to pay.
Small Business Credit Card and Business Credit Card: What’s the Difference?
There are several key differences between small business credit cards and business credit cards:
With a small business credit card, the business owner is often directly responsible for the credit card debt. This means that if the business goes bankrupt or cannot pay its debts, the business owner is responsible.
But in the case of a business credit card, the business is responsible for its debts. The business owner is not personally liable.
Small business credit cards are widely available. Anyone with a business of any size can apply, and as long as you have enough personal credit to qualify, then you can open a credit card.
Business credit cards, on the other hand, have more stringent eligibility requirements. In most cases, card issuers require businesses to have at least $ 4 million in revenue to be eligible. Some issuers may also require a certain amount of annual expenses or a certain number of employees.
Some small business credit cards charge an annual fee, but many are completely free. Even those that charge a fee are usually capped at less than $ 100. On the flip side, business credit cards tend to charge higher fees because of the extra features they offer.
When you apply for a small business credit card, as a business owner, the credit card issuer is likely to run your credit to determine if you qualify for the card. Plus, in many cases, the card issuer will report your business credit card activity to the credit bureaus, meaning your business expenses can impact your personal credit.
When you apply for a business credit card, the card issuer will rely on your business creditworthiness to determine if you qualify for the card. And rather than reporting your expenses to your personal credit, they’ll report them to your business credit.
Many small business credit cards come with reporting features that make it easy for business owners to track their spending and those of their employees. But these features are even more robust with business credit cards.
Many small business credit cards come with cash back rewards and travel rewards similar to what you would find on personal credit cards. These rewards allow business owners to earn extra cash and benefits over spending they already have. Business credit cards tend to offer less rewards.
Should you get a small business credit card or a business credit card for your business?
Wondering if a small business credit card or a business credit card is right for you? A corporate card can be extremely beneficial if you own a large business with millions of dollars in income and many employees. It reduces your personal risk, makes it easier to manage employee expenses, and more.
That being said, not all business credit cards are suitable for all businesses. Credit card issuers typically require businesses to have millions of dollars in revenue before they are eligible for a business card. Additionally, the advantages of business credit cards are outweighed by some disadvantages, such as higher fees and lower rewards potential. If your business has lower incomes than is typically required, only a few employees, or enjoying the rewards of your current small business credit card, a business card may not be right for you.
Small Business Credit Cards and Business Credit Cards FAQs
Does a business credit card affect your personal credit score?
No, a business credit card will not affect your credit score the same way as a small business credit card. This is because the business, not the individual, is responsible for the debt.
How do I qualify for a business credit card?
To be eligible for a business credit card, your business must be both legally and financially established. They are often only open to businesses with millions of dollars in revenue and a satisfactory business credit history.
What’s the best small business credit card?
There are many credit cards that small businesses can choose from to help them manage their cash flow. Check out our roundup of the best business credit cards on the market right now to help you choose the right one for you.