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TL;DR

Business credit cards share a good amount of similarities with consumer credit cards, but make sure to scrutinize personal guarantees and rewards programs before signing up.

Love them or hate them, it looks like credit cards are here to stay. Sure, in the wrong hands they may incentivize you to spend more than you should. But when used correctly, you get flexibility, fraud protection, and liquidity. All great things for a burgeoning business.

What makes business credit cards different than consumer ones?

On the surface, a business credit card is very similar to a consumer one. They’re both lines of credit, often with a transaction and credit limit, that rely on underwriting to make sure that you aren’t too risky of a client. They both have interest rates that you probably want to avoid paying if you can, and they both have built in security measures.

Some major differences emerge. Certain credit card underwriters may require:

  • Personal guarantees (meaning that an individual will be liable for the company's debt in the event of default).
  • Credit checks (on the individual taking out the loan application, instead of on the business)
  • Security deposits (that can run in the tens of thousands of dollars)

In addition, there are programs tailor their rewards to business needs, whereas others just duplicate the settings they have for consumer cards. And while as a consumer you want to keep your balances relatively low to keep an optimal credit ratio, the incentives are a bit different for a company.

Where should I start my business credit card search?

As a business, you want to focus on scalability, ease of use, ease of paying down your debt, and comfortable relationship with your provider. At the end of the day, this is probably going to matter more than your interest rate - especially because you’ll likely be paying off your balance before it accrues interest. So start your search by narrowing down the fields you care about.

What are my available options?

There are tons of corporate card programs. Most companies that offer consumer cards will also offer a business card option. That makes for a lot of corporate card programs.

Silicon Valley Bank

Aria at Silicon Valley Bank suggests that one of the ways that they are able to set themselves apart from the pack is with the relationship teams they have on hand. If you’re a client of SVB, your contacts at the company help optimize credit card underwriting methods and rewards. Because of their more intimate knowledge with the tech & startup industry, they have a more holistic approach to business banking, which extends to their other products like their business credit cards. Transaction level controls for each payment also ensure accurately managed funds.

Brex

You can’t really talk about business credit cards without also bringing up Brex. In recent years they’ve aggressively pursued new businesses by offering a unique underwriting model that allows for higher credit & transaction limits, best-in-class rewards, and instant approvals.  Best of all, no personal guarantees required, no need to provide your own social security number and no need to get your personal credit score pulled.

The Juggernauts

Compare that to the old-school heavyweights like AMEX or Chase, which according to Slava at Intelli Bookkeeping, are easy to use, but don’t quite focus on the rewards that startups need most like free meals and travel perks.

How do I apply for a business credit card?

Just a few years ago, it could take weeks to go through the whole process of going into a physical bank branch, getting all of your company’s financial statements, getting approved, and finally getting the plastic card in your hand and ready to use. If you’re looking to avoid getting your own credit score pulled for the purpose of a business credit card, and prefer that the company itself be underwritten, look at SVB and Brex. Neither of them require personal backing. In fact, Max at Brex says that qualified startups can start spending on their Brex card within minutes of beginning the application. Once you provide your company info and link your corporate bank account, the wait time is super short.

If you’re in a really early stage of your business life cycle, and don’t yet feel that your company’s financials are up to snuff, there’s nothing wrong with going the more traditional route and getting yourself (as the founder or owner) underwritten to help speed up the process. Slava has a great credit score, and has been able to quickly issue credit cards for all four of his companies just based off of his own financial stability and great credit history.

What are the common business credit card pitfalls?

We’ve mentioned scalability and ease of use before, and it’s important to highlight it again. As your company grows, you’re probably going to need to have more than one person have access to the business card. Our more tech savvy options like SVB & Brex give company administrators the option to add additional cards quickly and easily, and can set per-card credit limits and other restrictions.

Many of the legacy providers may have clunkier payment portals and reporting tools. If these areas are important to you, make sure to check out AMEX - Slava can’t stop gushing over their quality reports & accurate ledger sync. Remember - keep your accounting team happy and your finances will be much less stressful later on.

What about business debit cards?

As a consumer, I use my debit card all the time, so I was surprised to hear just about everyone I spoke to about business credit cards suggest staying away. Aria mentions that the debit card is a useful tool for pulling petty cash, but still recommends paying via credit card for the security and rewards mentioned earlier.

If you have a payment to make that exceeds your credit limit, you should also be able to get a temporary credit raise (something Silicon Valley Bank is happy to do), instead of using your debit card. Not an option with your provider? Most B2B payments of that size can be paid via check, ACH, or wire, which tend to be more secure (make sure to check out Routable for all your B2B payment needs). Fraud is top of mind here - credit cards have much more security built in than the average debit card, and can do everything that the debit card can do as well.

Max echoes this statement. Given Brex’s rewards, it’s worth migrating as much spend as possible to your card so you can stack up those points. Slava says that in all his years as a company founder and owner, he’s never seen the point of using his business bank issued debit card. He much prefers using Routable for ACH payments, and credit cards for everything else.

Hungry for more? We’ll be looking into when and why you should hire a corporate controller in our next piece.