Are you operating an LLC and having trouble separating your business vs. personal spending? Do you ever lose out on rewards or money? Business credit cards may be the solution. They are what help you spend money, make money, and borrow money when you need it. Here’s what you need to know, the pros and the cons.
The Benefits of a Business Credit Card for Your LLC
In these 15 types of businesses, it is crucial to keep personal and business finances separate. This is high on the list of reasons to obtain a business credit card.
Protecting Personal Assets
It keeps your personal belongings safe from business risks. It maintains your LLC’s limited liability status. This separation is referred to as the corporate veil. The sole proprietorship provides a veil between you as an individual and your business, but if you intermingle personal and business spending, that veil can be pierced. If your business is ever sued or owed money, your personal property is on the line. Having its own card keeps things tidy.
Building Business Credit
Here is the explanation of why a business credit score is important for your LLC. These scores are distinct from personal credit scores. They assist you to secure loans and other funding. The three primary business credit bureaus are Experian, Equifax, and Dun & Bradstreet. Good business credit score opens up better terms on loans, lines of credit, and even vendor agreements.
Making Accounting and Expense Tracking Simple
Using a business credit card simplifies accounting. They assist you in organizing expenses and streamline tax season. Many of these cards integrate with accounting software. It makes tracking spending simple. Allows users to categorize transactions and create reports. This saves time and minimizes mistakes.
Best Business Credit Card Features for LLC Owners
As you consider what to get in a business credit card, keep an eye out for important attributes. These properties can have a major upside for your LLC.
Rewards Programs (cashback, points, miles)
Rewards programs offer you cash back, points or miles for your spending. Pick the one that serves your business goals the best. For instance, a few cards give bonus rewards on travel. Others offer more on office supplies or advertising. A card that offers 2% cash back on every purchase is beneficial as well. This can add up quickly.
0% Introductory APR Offers
A 0% APR deal allows for cash flow management. It also helps to model the financing of big purchases. Just be aware of the terms and conditions. And know how long the offer will last. What ends after the introductory period? If you miss a payment, the offer could expire prematurely.
Reporting to the Business Credit Bureaus
Select a card that reports to the business credit bureaus. This contributes to your business credit history. The key bureaus are Experian, Equifax, and Dun & Dun & Bradstreet. Reporting means these on-time payments will show on your credit report. This can improve your credit score.
Business Credit Cards for LLCs: How to Qualify
Here are multiple factors lenders review when you apply for a business card. They must consider whether they will be a safe investment and will repay the money you borrowed.
Personal Credit Score
What is your personal credit score? Lenders frequently consult it to evaluate your creditworthiness. Your chances of being approved increase with a good personal credit score. It also allows you to negotiate terms and interests more favorably.
Industry of the associated business and its revenue
Accurately representing your business. These factors include your annual revenue and what industry you’re in. Lenders want to see stability in your business. They want to know whether you have the ability to repay what you borrow. These are lofty goals at best, so be realistic in your revenue projections.
EIN and Business Documentation
You’ll also need to have certain documents to apply. These usually consist of your LLC formation papers and EIN. Your Employer Identification Number is your EIN. It’s a Social Security number for your business, basically. The advantages of having these documents in place are smoother application.
Business Credit Cards for LLCs Compared
Here’s a look at several popular business credit cards. This comparison shows their advantages and disadvantages.
Card 1: Capital One Spark Cash Plus
This card earns unlimited 2% cash back on every purchase. It has no annual fee. It also reports to all three major business credit bureaus. This makes it a responsible option for establishing credit.
Card #2: American Express Blue Business Cash Card
It gives 2% cash back on up to $50,000 spent per year. There’s no annual fee. It also provides extended warranty coverage. This will be beneficial for companies which buy equipment.
Card 3: Chase Ink Business Preferred
This card earns valuable Chase Ultimate Rewards points. It has a high signup bonus. Redeem points for travel, cash back and/or gift cards. It also comes with purchase and travel protection benefits. That can be appealing to flyers who travel often.
Trend of Use: How to Use the Business Credit Card Effectively
Here’s how to maximize the use of your card. This will help you to avoid several common mistakes too.
Pay Your Bills on Time
Make sure all your bills are paid on time, every time. That helps build credit and avoid late fees. Set up automatic payments. In this manner, you will ensure no deadline is missed. It’s also a simple way to handle your cash flow.
Maintain Low Credit Utilization
Maintain low credit utilization levels. This is the amount of credit you’re using compared with your credit limit. Try to keep it below 30%. As a result, this will help boost your credit score, and demonstrate to lenders that you are a responsible borrower.
Track Your Expenditures and Check Statements Regularly
Track your expenses closely. Also check your statements frequently. Check for discrepancies or mistakes. This will enable you to keep track of your finances. Catch any issues quickly.
Conclusion
LLCs can rely on business credit cards to turn things around. They also assist with financial separation, credit building and accounting. Pick the correct card, and wield it responsibly. It will set your LLC up for growth. So, do some research and get a card today!
