The proprietor of a small firm would be in heaven in this situation: Your organization is showing year-over-year growth, you are making a profit, and a quarter-over-quarter rise in sales is something you routinely see. The majority of owners of small businesses have their sights set on expansion like this.
When you begin to see your business evolving from a fledgling startup to an entrenched corporation, it is important to look at transitioning your financial tools to better suit the needs of the established corporation.
This may require you to transfer from a business credit card to a corporate credit card; however, before you start the lengthy application process for a corporate credit card, it is important to consider whether or not a corporate card is truly the best option for your company.
Let’s take a more in-depth look at the operation of corporate cards, as well as how to handle a company card and how to determine whether or not your small business is prepared to switch from a business credit card to a corporate credit card.
What is a Corporate Credit Card?
One sort of credit card that may be made available to businesses is known as a corporate credit card. This indicates that the corporate entity, rather than the individual who owns the business, is the one that is held legally accountable for any charges that are performed on the card.
Due to this, corporate credit cards are often only given out to very large businesses that have a proven track record of financial success as well as an established credit history for their company.
Your organization may be qualified for a corporate credit card if it is a limited liability company (LLC), a corporation (C-Corp or S-Corp), has a solid business credit score, and has annual revenues in the millions of dollars.
Cash rebates and recurrent flyer miles are two examples of the useful benefits that could come packaged with a corporate credit card. Nevertheless, the most significant advantage of a corporate credit card is that particular workers can be granted their own cards to cover any work-related or business-related expenses that they incur.
Whether it’s used for incurring for plane tickets or leasing coworking space, possessing a corporate credit card may make the process of managing a huge corporation’s business spending significantly more effective.
How Do Corporate Credit Cards Work?
Credit cards issued to corporations perform many of the same functions as personal credit cards and credit cards issued to small businesses. You can make procurements for your company using your corporate credit card, and many corporate credit cards enable your company to receive rewards on procurements made using the card.
Your business will be required to make consistent payments on the account associated with your corporate credit card, and both your usage of the corporate card and your payment history will be evaluated as part of your business’s credit score.
On the other hand, corporate credit cards come equipped with a number of capabilities that are not available to small-business credit cards. Among these is the possibility to offer credit cards to workers without the need for the workers to take personal culpability for any transactions made using the cards.
In addition, many business credit cards come with entry to accounting software and other services that are intended to assist your firm in managing its corporate line of credit. Furthermore, your organization may be eligible for discounts on popular business expenses and shops.
How Can You Qualify for Corporate Credit Cards?
Contacting an issuer of corporate credit cards directly is the best way to determine whether or not your company will be able to receive a corporate credit card.
When applying for a corporate credit card, the application process is typically more time-consuming than the one for a consumer credit card. Additionally, you may be needed to present evidence indicating that your company’s income and expenses are substantial enough to warrant obtaining a corporate line of credit.
Consumer credit cards do not have these requirements. You should get ready for a possible audit of your finances as part of the application.
Is it possible to obtain a business credit card even if you have a poor credit history? In a sense, that is correct. Because corporate credit cards do not necessitate a personal guarantee, the credit issuer most likely will not conduct a thorough investigation into your personal credit history.
This indicates that even if you have a poor personal credit score, it is still possible for your company to be approved for a business credit card.
If, on the other hand, your company has a poor credit history or has just established a small credit history, you may have a more difficult time obtaining a corporate line of credit.
What Are the Different Types of Corporate Credit Cards?
Employee liability and corporate liability are the two primary kinds of credit cards that companies can provide to their workers. The types are applicable to all card brands, including American Express, Visa, Mastercard, and others. They can be obtained through a number of card issuers that provide corporate cards, including TD, Capital One, and Citi.
Employee liability cards
When using a card with individual liability, the cardholder is held accountable for paying any fees or charges that are related to the usage of the card. After that, the employee can submit an expense record to their company in order to get their firm to compensate them for these charges.
Before providing an employee with one of these corporate credit cards, the issuer will first check the employee’s credit history in order to determine whether or not to provide them with a card. While a credit check is performed, it has no bearing on the employee’s credit rating.
Corporate liability cards
When a firm uses a credit card that has corporate liability, the issuer of the card can expect payment from the company for any charges that are authorized.
On the other hand, if the employee racks up expenses as a result of making unlawful procurements or misusing their credit card, they may be required to pay such fees directly to the credit card provider or to refund the firm for those costs.
It is not common practice for a person’s credit history to be checked as a component of the procedure for the issuance of a credit card to an individual. This is due to the fact that the individual bears only a limited amount of responsibility for the settlement of the debt.
Corporate Credit Cards: Pros and Cons
The ease with which employee spending may be monitored is the primary benefit that comes along with having company credit cards.
In this way, the corporation can simply control spending restrictions, monitor budget requirements, and monitor fraud risk without relying on workers to make personal charges and provide expense records or receipts for reimbursement.
The majority of corporate credit cards provide users with comprehensive data on where and how business money is being spent, all inside a single system.
Corporate credit cards typically come with their own specialized customer service person who is available to assist with the swift resolution of any problems that may arise due to the sometimes more complex nature of the cards. These representatives are typically available around the clock and have an in-depth understanding of the specific requirements posed by each company.
- Keeping track of and performing analysis on all of your work-related expenditures will be made much easier.
- Gains and advantages are of direct assistance to your company.
- You are assigned a customer support agent who is either permanently available or available on call.
- They offer better spending limits and greater visibility than other business cards, which makes it impossible for workers to make unauthorized personal expenditures using a company credit card.
- Additional fees for cardholders might easily add up to a significant amount.
- For businesses on a smaller scale, this choice is not available.
- The application procedure may present some challenges.
- It is not possible for workers to earn their own points by making procurements with their personal credit cards and then get reimbursed.
Corporate Credit Cards vs. Small Business Credit Cards
Although the terms corporate credit card and a business credit card are frequently used synonymously, the two credit card categories actually have different characteristics.
Business credit cards are intended to fulfill the demands of small-business owners, including freelancers and people who run side hustles. Corporate credit cards, on the other hand, are intended for use by large organizations that have several workers and revenue in the billions of dollars.
You will be able to apply for the proper card if you are aware of the option that will be most beneficial for your company. Having a line of credit that is appropriate for your company is an excellent approach to assist in the expansion of your company.
Do Corporate Cards Affect Credit Scores?
Business cards can be used for making a wide variety of work-related transactions, including those involving supplies or merchandise. Corporate cards, on the other hand, are often reserved for business-related travel and lodging expenses. This makes it possible for even the smallest of enterprises to establish a solid credit record.
By making larger payments with a business card instead of their personal credit cards, business owners can protect their personal credit ratings while also gradually establishing and improving their company’s credit history.
When it comes to using a small business card, staff are regarded as authorized users. As a consequence of this, the activity on their cards can be disclosed to credit reporting agencies.
This is a disadvantage for some of the workforce. For example, if they charged the expensive expenses from a work trip they took on their credit card, they may find that their credit utilization is substantial enough to have an impact on their personal credit. This can be a problem for them if, for example, they are trying to get a mortgage loan.
In contrast, the use of corporate cards does not have any impact on the personal credit of workers, which is a significant benefit from the perspective of an employee.
There are probably a good number of prosperous proprietors of successful small businesses who are pondering the question of whether or not it is time to switch from using a business credit card to using a corporate credit card.
When it comes to qualifying for a corporate line of credit, the three most crucial factors are yearly sales in the millions of dollars, a team of workers, and stable credit history. If your company meets all three of these criteria, it may be time to apply.
Even if your company is performing well, but hasn’t quite reached that level of sales just yet, getting a decent business credit card is usually still the greatest choice you can make.
Corporate cards are normally only made available to really large businesses that bring in millions of dollars each year in revenue. Despite the fact that these cards come with a plethora of advantageous features, such as simple expense tracking, devoted customer service agents, and no personal liability for individual workers, these cards are not widely used.
If you are the owner of a small business, having a business credit card can assist you in slowly creating a credit history for your firm while also allowing you to make substantial procurements that you can pay off over a longer period of time.