Expert Advice on Small-Business Credit Cards

A small-business credit card can be a valuable tool, but it can also be a source of financial pain (or even ruin) if used irresponsibly.

Rosemarie Clancy is editor-in-chief of Credit-Land.com, a website that specializes in helping people find the best credit cards for their specific needs. The Intuit Small Business Blog recently asked Clancy to shed some light on proper small-business credit card use.

ISBB: Does a business have a credit score?

Clancy: Yes. Your business credit Paydex score, issued by Dun & Bradstreet, is based on your payment history to creditors. Once five creditors are reporting, you will receive a Paydex rating from 0 to 100. Most vendors and creditors consider a score of 75 good. Be sure to check that the supplier you are working with reports to D&B or your good payment record will go unnoticed.

How does a business build a positive credit history?

There are two main ways to build business credit: First, make your payments on time. Second, your trade credit, when a vendor extends you a line of credit to finance equipment or supplies, is also usually reported.

Does your personal credit history have an impact on your business credit?

Yes. Your personal debt-repayment habits can help determine the size, type, and percentage rate of any business loan for which you may apply. Startup owners often have to use their own personal credit history to obtain a credit card for their business. Many new owners are surprised to find out they qualify for a business credit card even if their company has not established a credit history.

Why should a small-business owner consider applying for a business credit card?

Opening a credit card account under your business name not only helps your business build credit, but also allows you to separate business and personal expenses. Many business credit cards offer options to track business expenses, which helps with accounting.

You can also get cards for employees and establish credit limits for each person. You do need to be careful about setting limits on cards given to employees.

What types of credit cards are best for a business to consider?

If you have a big purchase, a good idea might be to look for a zero-percent interest card for up to 18 months — to give you time to pay off the balance without accruing interest payments.

A card that provides rewards can translate to cash back of 1 to 5 percent. You should look for a card that offers bonus points for merchandise and services your business uses (like office supplies and shipping). Alternatively, you can accrue miles if you are a frequent flyer or have a business card issued by one of the airlines. And you can also get valuable perks like upgrades, lounge access, and free baggage checks.

How can a small-business owner avoid the negative effects of a business credit card?

Practice the same responsible use you would with your personal credit card: Don’t buy things you don’t need, pay your balance in full each month, and avoid late payment.

Also, don’t use your personal credit card for business. It might affect the chances your business could deduct interest or annual fees as allowed by law. Finally, business credit activity might show up on the owner’s personal credit report and negatively affect it.

Can the owner compare business credit cards online just as they can for personal credit cards?

At Credit-Land.com, we have a credit card navigator that business owners can use to select cards based on what type rewards they prefer. We also have reviews of cards that point out the fees, rates, benefits, reward programs, and other considerations.

About Tim Parker

Tim Parker is the owner of ECS, LLC, a company specializing in financial and small business content. His writing has appeared in many of the top financial blogs including Investopedia, Yahoo! Finance, Benzinga, Business Insider, and Forbes. Find him on Twitter @expositioncreat and Breaking Finance News.com
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3 comments
Apple Art photography
Apple Art photography

I am happy when reading your blog with updated information! thanks alot and hope that you will post more site that are related to this site.

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credit history

The article covers the question of of credit card uses of small businessmen. The maximum number if answer was given which arises in ones mind. The content clears the many of the doubt and would guide as well.

Jeff
Jeff

I see several business credit cards from places like Chase, Bank of America, Capital One, and others. If I am approved and use these business credit cards then do they report to Dun & Bradstreet to help me build this paydex score that you talk about (assuming I have the 5 other creditors reporting as you have mentioned)? You also said that business credit activity may show up on my personal credit report and negatively affect it??? Can that happen even if I never make a late payment?  How can I understand that better?

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