Why do you need a business credit cards for LLC?

by | Dec 19, 2022 | Uncategorized

A business credit cards for LLC is a credit card basically used by a business and not for personal use. Business credit cards are available for businesses of all sizes and can help them build a credit profile to improve future borrowing terms. For a small business owner having a business card could be a boon, it helps them to separate their business and personal expenses for bookkeeping and tax purposes.
Business credit cards mostly have perks attached to them, which make them more attractive to the owner.

How a Business Credit Card Works?

Business Credit Cards are widely offered by many card lending institutions. The process for acquiring a business credit card is quite similar to regular credit card possession. Business borrowers can apply with or without an Employer Identification Number (EIN), which makes it easier for small businesses to obtain a card.
generally, business credit cards are more easier to apply for and acquire than non-revolving business loans since the process is usually automated, with immediate credit response.

business credit cards for LLC have slightly high-interest rates as compared to the typical, traditional loans we take, it is because credit card debt is usually unsecured, hence more risk for the lenders. However, some institutions also grant secured credit cards for businesses with little or no credit history.

Business owners can apply with their Employer Identification Number (EIN) if they have one, or else they can use their personal Social Security Number (SSN). Lenders would base their underwriting analysis on the information included in the credit application. Businesses have credit reports and have a credit history in the same way that individuals do, so any activity using the same EIN will be reflected in the business’s credit report/history.

Why get a business credit card?

  • May possess, without a traditional business: You can qualify to get a business credit card even if you don’t have a business, at least in the traditional sense. It’s true, these products are targeted toward small business owners and those who work at larger corporations. However, you may still qualify if you are self-employed, do business under your own name as a sole proprietor or even just have a side hustle that earns you extra money.
  • Attractive and valuable welcome bonuses: Most business credit cards offer more lucrative welcome bonus terms as compared to their personal counterparts. That makes it great both as an alternative to personal cards and also interesting as a second choice if you already have a card with your main loyalty program and are looking for a second one to acquire more points.
  • Discounts and cashback: With business credit cards you get various cashback and discounts in services like:-

Travel

Shipping purchases

Internet

Cable

Phone services

U.S. gas stations, restaurants, supermarkets, etc

*Higher credit limit:

As business credit cards are targeted at small businesses, they provide higher credit limits to their customers. Some also allow you to add employee cards for free, and thereby earn rewards even faster from your employee’s spending.

Business credit card: Pros and Cons

Possessing a business credit card has many advantages, but it also has some serious downsides that are worth taking into consideration. We’ll see both the benefits and the disadvantages one by one.

Managing expenses/funds:

Business credit cards could be a good way to manage and itemize business receipts. In addition to the basic and usual facilities offered by credit cards, it also helps to keep the employee’s personal and business expenses separate. The card also gives the employer an insight into the employees’ business purchases.

Additional perks:

Business credit cards generally have some unique benefits designed to attract business customers. Some of them are:

  • Some business credit card gives cashback rewards in frequent stores.
  • Business credit cards also tend to offer more significant sign-up bonuses as compared to individual credit cards, anticipating high business spending.
  • Many business credit card institutions also offer 0% interest as an introductory rate (for a short period of time).
  • Travel perks are another common benefit ( as many businesses have significant travel expenses).
  • A business credit card might entitle the holder to use an airline’s VIP lounge at airports or receive discounts on hotel stays during business trips.
  • Business credit cards sometimes offer more flexible repayment terms.

Disadvantages:

Personal Guarantees:

Mostly, businesses do not have the minimum requirements for credit scoring or other analysis of their creditworthiness, so the lender may ask for a personal guarantee from a business owner or other individual.

Fewer Consumer Protections:

When Congress expanded protections on consumer credit cards, under Barak Obama’s presidency, most notably in the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (CARD Act), it generally made business cards exempt from the new rules. As a result, consumer protections that many people take for granted with their regular credit cards, such as forbidding interest rate increases on existing balances may not apply to their business cards.

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