What Is a Business Credit Card ?
A business credit card is one that is meant for usage by a company rather than an individual. Business debit cards are critical to your company’s finances. They are accessible to enterprises of any kind and can assist them in developing a credit profile, distinguishing between personal and company expenses, and improving future borrowing conditions.
In contrast to individual credit cards, whose are used by individuals, commercial cards are meant for usage by businesses. A business credit card, in particular, can help small business owners keep their business and private spending separate for recordkeeping and tax purposes. Business credit cards can come with specific benefits, but they lose some of the buyer’s rights that must be fulfilled on personal credit cards.
How a Business Credit Card Works ?
A variety of lending institutions provide business credit cards. The application process is comparable to that of a conventional credit card application. Borrowers in the business sector can apply with or without an employer identification number (EIN), making it easier for small enterprises to obtain a card.
Business credit cards are generally easier to get approved for than non-revolving loans for businesses because the process is frequently computerised and results in an instant credit decision. Interest rates on business credit cards are often slightly higher than those on traditional loans. The reason for this is because credit card indebtedness is typically unsecured, which puts lenders at a larger risk.
Business owners can apply using their EIN, if they have one, or their private Social Security number. Lenders will make their underwriting decisions on the facts contained in the credit implementation. Businesses, like individuals, have reports of credit and build credit histories, thus any action using a taxpayer identification number will be reported in the business’s credit report.
Advantages of Business Credit Cards
When compared to consumer credit cards, business credit cards have several distinct advantages. As an example:
Managing Your Expenses
Business credit cards can help you monitor and itemise your business spending. Business credit cards, in addition to providing the standard advantages linked to credit cards, assist owners of small enterprises, in particular, in keeping work-related expenditure distinct from personal spending. This division might be beneficial for bookkeeping and tax considerations. The cards also make it simple for staff members to make expenditures and for employers to track their employees’ corporate transactions.
company credit cards typically offer certain unique features intended to entice company clients. These perks may differ from those provided to individual clients. Some business credit cards, for example, offer cash back on purchases made at retailers that businesses are most probably to common, such as office equipment stores. In anticipation of substantial business expenditure, corporate credit cards typically provide greater sign-up incentives than individual credit cards. Many will also offer no interest at all as a promotional rate for a limited time.
Travel bonuses are another popular perk, as many organisations incur large travel expenses. A business credit card may permit the cardholder to use an airline’s VIP club at airports or obtain hotel discounts while on business.
Furthermore, business credit cards may provide more flexible payback periods, which are intended to appeal primarily to enterprises with erratic cash flow.
Disadvantages of Business Credit Cards
However, there are some important drawbacks to company credit cards that should be considered:
When a firm does not meet the minimum requirements for credit score or other creditworthiness evaluations, the lender may request an individual guarantee from the business owner or another individual. A private assurance is a contractual term that holds the person who requests the card responsible for the card’s monthly installments and fees.
A lot of company credit card agreements have an individual guarantee guarantee regardless of the business’s creditworthiness, so it’s critical for borrowers to read and completely grasp the agreement’s provisions. If the financial institution enacts the individual guarantee rules for repayment, any card delinquencies could be published on the individual’s credit report, lowering their credit score.
Fewer Consumer Protections
While Congress has enhanced consumer credit card safeguards, most notably in the the Credit Card Being accountable, Responsibility, or accountability, and Transparency Regulations of 2009 (CARD Act), it has largely exempted corporate cards from the new requirements. As a result, consumer safeguards that many consumers take for trust with their personal credit cards, such as prohibiting higher interest rates on existing amounts, might not be applicable to their business cards.
Some card companies have voluntarily expanded some of those safeguards to their company’s credit cards, but applications should not assume this unless it is explicitly stated in the card agreement.
Criteria for Business Credit Cards eligibility
The requirements for credit cards for businesses range from one another. However, there are a few basic standards that everyone should complete in order to be approved for an EZO Business Credit Card.
- The applicant needs to be at least 21 years young and no older than 70 years old.
- The applicant must be an Indian Resident.
- He or she should be self-employed, a sole owner, or an investor in a company that is a partnership.
- He or she must have a strong credit history.
- The credit criteria will determine the credit limits of between zero and five lakhs.
Applications for Business Credit Card required documents
Applicants must additionally submit papers that verify the information they supplied on the application form. These include identification, residence, and income verification. Business credit cards can be provided in the brand name of the organisation or one of its members. Documentation requirements will vary accordingly. For instance, if the card has been issued in the brand name of the firm, you must submit the PAN of the business, as compared to a private business card, which requires personal information.
- KYC Documents: Aadhaar Card / PAN Card
- PAN of Business
- Certificate of GST Registration
- Documents for Business Registration (such as an Incorporation Certificate)
- Bank information / Bank statement
Financial papers that serve as proof of income for company credit cards include
- Self-Employed (Partnership Firms and Businesses): Copy of IT returns for the last two years, as well as profit and loss statements and balance sheets audited by a licenced chartered accountant.
- Self-Employed Professionals: Copies of IT tax returns for the two years prior and statements from banks for the previous six months. A chartered accountant audited the previous two years’ profit and loss and balance sheet.
- Self Employed Non-Professionals: Profit & Loss and balance sheet for the last 2 years audited by a CA and Copies of IT returns for the last 2 years.