What Are Business Credit Cards?

(Looking instead for information on Credit Card Advances? Check out our explanation page here.)

Business credit cards are yet another tool that small businesses have at their disposal to help manage their financing needs. But what are they?

What are business credit cards?
A business credit card provides access to a line of credit with a set credit limit in order to make purchases and withdrawals. Like a consumer credit card, it carries an interest charge if the balance is not repaid in full each billing cycle. Unlike a business line of credit, business credit cards do not require collateral.

What is the difference between a true business loan and a business credit card?
True business loans, like those offered by OnDeck, lend the full amount upfront so you can be flexible with your capital. True loans have fixed interest rates while the interest rates of business credit cards can fluctuate with little notice.

What does repayment look like?
Unlike traditional loans, business credit cards don’t have fixed repayment periods. The terms are dependent on the type of card you have, and can be flexible due to the often unpredictable nature of business cash flow.

Will it build my business credit?
Maybe, maybe not. Some business credit cards report repayment while others don’t.

What is eligibility based on?
Credit card issuers will consider both business credit history and the owner’s personal credit history. They’ll also be looking at your business’s licenses, permits, and insurance policies.

Are business owners personally liable for the debts incurred via the cards?
Maybe. Liability depends on whether or not the card carries commercial liability (wherein the business itself is liable for all debts), or joint and several liability (where both the individual applying for the card and the business itself are liable for the debts). So, if you’re applying for a business credit card, be sure to confirm what kind of liability you’re signing up for – or you might end up in an arrangement that isn’t beneficial to you or your business.

Are business credit cards subject to the same regulations as consumer credit cards?
Small business credit cards are not regulated in the same way that consumer credit cards are. The interest rates on business credit cards can be raised and altered by issuers much more freely than can be done with consumer credit cards.

Make sure when you’re considering the different options for financing that you take all these factors into account. Pick the financing that’s right for you.

OnDeck is a Google Ventures-backed company with an A+ rating with the Better Business Bureau. The company offers small business loans nationwide to over 725 different industries. For more information about OnDeck small business loans, click here.