Forming a new limited liability company, or LLC, can be an exciting adventure. But it can be hard getting the money you need to grow. So many startups also struggle to gain access to loans or lines of credit. A smart move? Look into business credit cards. They are a powerful tool. They can help you manage your company’s expenses and build a solid credit history of your own. Consider them as the keys to unlocking the financial opportunities.
Reason your New LLC Should Seek a Business Credit Card
It’s best to avoid mixing your personal and business finances. That can cause problems later on. A limited liability company provides liability protection. It protects your personal assets from the business debts and lawsuits. But that protection can evaporate if you commingle funds. A business credit card keeps things separate and clean. This way you maintain the benefits of the LLC structure.
Establishing Business Credit
A business credit card is a game changer. This is critical for building a credit profile for your LLC. This credit history is distinct from your personal credit. Why is this important? Because it makes it more likely that you can obtain loans, leases, and other financing in the future. Building business credit is a lengthy and strenuous process, but the long-term benefits are worth the wait. Pay your bills on time. Maintain low credit utilization. These are keys to success.
Easy Expense Tracking and Management
Business credit cards can simplify bookkeeping a great deal. They provide you with a detailed record of all your expenses related to your business. This makes accounting and tax preparation easy. Consider the following example: Sarah opened her very first business, and for every purchase that her company made, she utilized her business credit card. They ended the year with a simple report download. This made expenses a walk in the park to reconcile. A card makes it easier to save time and avoid errors.
Accessing Capital for Growth
Need money for inventory? Want to invest in marketing? A business credit card is a line of credit. It is ready when you need it. A portion of this capital can be used to sponsor the growth of your company. Business cards serve as a bridge between income and expenses. They allow you to take advantage of opportunities.
Business Credit Card Features You Should Consider
One thing to keep in mind when selecting a business credit card is what features you can expect. Not all cards are created equal. Some come with benefits that more effectively align with your business requirements. Watch for things like rewards, APRs and reporting practices.
Rewards Programs and Cashback
Most of the business credit cards come with rewards. This could include cashback, points or miles. Cashback earns you a percentage of your spending back. Points are redeemable for travel, merchandise or gift cards. Miles can be fabulous if you do a lot of traveling. Examining your spending habits will help you pick the right rewards program. Do you spend a lot on gas? Find a card that offers gas rewards.
Introductory APR Offers
Some cards have 0% introductory APRs. That means you’ll pay no interest on purchases or balance transfers for a specific period of time. If you’re going to make a large purchase, this can represent a good deal. Or move a balance from another card. Just read the fine print. Understand the APR once the introductory period ends.
Business Credit Bureau Reporting
Confirm the credit card company reports to the top business credit bureaus. The big ones are Experian, Equifax and Dun & Bradstreet. Although reporting can help your business build a solid business credit profile. This is critical to future financing.
How a New LLC Can Qualify for a Business Credit Card
It also can be difficult to get approved for a business credit card as a new LLC. Lenders will consider many factors. They want to know how much of a risk you are.
Personal Credit Score
Your personal credit score is important. Particularly when you have a new business. Lenders typically use it to assess your creditworthiness. A strong personal credit score bolsters your approval chances. So, what if your score isn’t good? Pay down debt. Fix any mistakes on your credit report. Don’t open too many new accounts all at once.
Summary: Business Plan and Financial Projections
Be prepared to discuss a well formulated business plan. This shows that your LLC is no joke. Include financial projections that demonstrate the relevance(s) of your product(s). Lenders also want to see a pathway to profitability.
Information and Documentation about the Business
Keep business information ready to share. You will need your EIN (Employer Identification Number). You’ll also need your business address. What about which type of industry you are in? You’ll need to know that too. Make sure all of your documentation is organized so as to help expedite the application process.
Looking for the best way to maximize your business credit card?
The right way to use your business credit card. It matters for building credit and managing finances. For best results, follow these tips.
Earning their Money Back: Responsible Spending and Timely Payments
Maintain low credit utilization. Credit utilization is the portion of real credit you’re using relative to your credit limit. Researchers say keeping it under 30% is a smart move. Pay your bills on time every time. Late payments damage your credit score. They also lead to late fees.
Keeping A Check On Your Business Credit Report
Cycle through your business credit report. Try to do that at least once per year. Here are a few things you can do: Look for errors or signs of fraud. Different monitors allow you to see your credit score over time. Experian, Equifax, and Dun & Bradstreet offer business credit reports.
Leveraging Rewards and Perks
Maximize the rewards and benefits your card offers you. Are you getting cashback? Reinvest it back into your business. Does your card include travel insurance? Or take it on your next work trip. Get the most out of your card.
Conclusion
Business credit cards are potent tools. They help new LLCs establish credit and provide the fuel for growth. They offer access to capital. They can also make it easier to track expenses. Selecting the best card is the key. You have to use it responsibly, too. This will lead to the creation of a good credit profile. It’s a profile that could sustain your business for years. Research your options. Research and apply for a business card that works for you. Do it today.
