Monthly Archives: February 2017

Know More About Credit Card FAQs

Smart business owners can use credit cards to their advantage, whether it’s to amass valuable rewards or to access funds to take advantage of a potentially lucrative opportunity.

In this short webinar, you’ll learn how to make the most of your credit cards, as well as avoid pitfalls. Then peruse the questions below from business owners like yourself to learn more.

What is required to get a business credit card?

Business credit card issuers usually are most interested in the owner’s personal credit scores, income and credit qualifications. Nav’s MatchFactor can help you understand which cards you are most likely to qualify for. It uses a proprietary algorithm to help you understand your likelihood of qualifying for specific cards. It’s free with a Nav account.

How do business credit cards impact my personal credit scores?

Most issuers don’t report business credit card activity to the owner’s personal credit cards unless they default. (This chart shows how major credit card issuers report to personal credit.) However, since issuers check the owner’s personal credit reports when evaluating these applications, there will be an inquiry on one of the owner’s personal credit reports. Inquiries shave just a few points off credit scores, and after a year they generally don’t count.

Can a new startup qualify?

Generally, you can get a business credit card as soon as your business is established, as long as you meet the issuer’s credit and income requirements. Again, most issuers will look at the owner’s personal credit qualifications when evaluating an application.

Does my business have to have a certain amount of revenue to qualify?

Typically, no, as long as your personal income is sufficient to qualify. And if you aren’t drawing a paycheck in your business, you may use income that’s available to you to pay the debt, such as a spouse or partner’s income.

How can I get higher limits?

Issuers are often eager to extend higher credit limits to customers who qualify and may consider your request in as little as six months after you get the card. When you request a larger credit line the issuer may review your past activity on the account to create an internal score. For example, they may look at factors such as: How much do you charge? Do you pay on time? Do you always carry a balance or do you sometimes pay the card off? They may request updated information about your income as well. Keep in mind that issuers may review your credit and that may create a hard inquiry.

Should I spread expenses over several cards or use one to the max?

There can be a number of advantages to spreading your purchases over several credit cards.
The first is that you’ll keep accounts active, so your issuers are less likely to close the account. (Tuck a credit card in the back of the drawer and your issuer may decide to close the account for lack of activity.) Even a small regular purchase on a card may be enough to keep your account open.

Next, you may be able to maximize rewards. For example, let’s say you have one card that earns 3x points for purchases in a certain category, such as office supplies, so you use that card for all purchases you make at office supply stores. You have another card that earns a higher level of cash-back rewards at gas stations so you use that card when fueling up. And perhaps you have a cobranded airline card that gets you free checked bags when you fly, so you use that card for travel. By using multiple cards, you are able to make the most of your rewards.

Finally, your credit scores are less likely to get penalized for high debt usage. High balances in comparison to credit limits can hurt your scores. If you “max out” a card, your scores are likely to suffer. Business credit scores tend to be more forgiving for this factor than personal scores.

However, if you do use multiple cards, make sure you set up a system to track due dates so you don’t accidentally pay late.

Is it a good idea to use credit cards to establish business credit and should you pay the balance when the statement comes?

Yes, business credit cards can often help establish business credit. Most issuers report these cards to at least one commercial credit reporting agencies, so they can provide a valuable credit reference, provided they are paid on time.

Paying the balance early can help you avoid running up debt and can help reduce the balance reported to the credit reporting agencies, since most issuers report balances around the statement closing date.

Business Credit Card Guide

Business credit cards offer a quick and secure way for business owners to get the funds they need to run their business smoothly, take advantage of growth opportunities, provide breathing room when business is slow, safeguard personal finances from actions of the business, and more.

We created this guide to set you on a path to make the most out of business credit cards. Here’s a taste of what’s inside:

  • The incredible advantages of business credit cards
  • How business credit cards affect both your business AND personal credit
  • How to find our your approval odds before you apply
  • The type of business card you should avoid
  • Hacks to earn rewards and flights from your business credit card

Why wouldn’t I just use my personal credit card?

Well, glad you asked. Here are three serious advantages to using a business credit card for business purchases:

  1. Having a business credit card allows you to keep your personal and business expenses separate. You’ll be able to track business expenses more easily, making tax time, as well as maintaining a company budget, much less of a headache.
  2. By getting a card in the name of your business you’ll start to establish a business credit scoreseparate from your personal one. That means that if you have to make a late payment, your business credit will take the hit instead of your personal credit (there are exceptions—read about which business credit cards report to personal credit bureaus here).
  3. As you start to establish a business credit profile, you’ll build your business’s credibility. When it comes time to apply for other business financing, solid business credit scores can help you qualify for more financing at better rates.

How Many Types Of It

The SBA, Small Business Administration, provides loans to small businesses through financial institutionssuch as banks, microlenders, and online lenders. These SBA loans are government guaranteed, meaning lenders will offer them to small businesses at low interest rates because the government has promised to pay back 85% of the loan in the event of default.

The three most talked about SBA loan types are:7(a) Loans: the most popular loan provided by the SBA, available to new and established businesses with a FICO SBSS Score of 140 or above.

504/CDC(Certified Development Company) Loans: long term financing available for businesses to purchase real estate or high-cost assets they need to run their business.

Microloans: small loans up to $50,000 available through non-profit community lenders to new and established businesses.

But wait… there’s more! In fact, there are over 12 different types of funding provided by the SBA.

The following list of additional SBA loans are either for specific types of businesses or for more specific purposes. Some of these loans fall under the umbrella of one of the above loans. It’s worth taking a look to see if you qualify for one or more of these loans.

Special Eligibility Loans

Community Advantage Loans

Part of the 7(a) loan program, this loan type is for newer businesses in low-to-moderate income areas. Employees of the business must be considered low income or reside in an area that is a low-to-moderate income (LMI) area. Whereas most 7(a) loans require a FICO SBSS score of 160 or above, you’ll only need a 140 or above to qualify for a community advantage loan. Community Advantage lenders offer these loans up to $250,000.

Rural Business Loans

Another loan categorized under the 7(a) program, these loans are for businesses in rural areas that need funding for working capital, equipment, real estate, and certain types of debt refinancing.

These loans are actually provided by the U.S. Department of Agriculture. The business’s majority stakeholder must be a U.S. citizen or permanent resident, and the borrower must reside in an area with fewer than 50,000 inhabitants. If you think your business qualifies, the best place to start is by contacting your state Rural Development Field Office.

CAPLines

A CAPLine is like a (potentially enormous) line of credit. Businesses can secure up to $5 million for short-term working capital needs. These are meant to help businesses take on more public and private contracts and purchase orders. A CAPLine can take on four forms:

 

Revolving line of credit — similar to inventory financing or invoice financing. Your assets or account receivables will be looked at to determine how much you can get on your line of credit.

 

Seasonal line of credit — for businesses that need to build up inventory for an upcoming season of high sales.

 

A contract loan — for businesses that need to fill contracts or purchase orders.

 

A builders line of credit — for contractors looking to construct or rehabilitate a commercial or residential property.

CAPLines fall under the 7(a) umbrella.

U.S. Community Adjustment and Investment Program

This program was created specifically for businesses in areas of the country that are adversely affected by the North American Free Trade Agreement (NAFTA). This program is not a loan, rather it gives businesses in affected areas a break on SBA 7(a) and 504 loan fees. Businesses that save will also face a job creation requirement— one job created for $70,000 saved on 7(a) fees and one job created for $65,000 saved on 504 fees.