Obtaining a small business credit card as an additional line of credit to cover business-related expenses is a serious affair. Unless the business has an established relationship with a financial institution with a proven record of solvency, the business proprietor's credit history is used to configure the terms and rate of a business credit card. This means that in the event of late payment, non-payment, and credit limit excesses will reflect on the business proprietor's personal credit history.
This fact should be a deterrent to those that fear the viability of their business. For others, however, this factor can help improve personal credit while simultaneously building credit for one's business. The key to doing so successfully lies in viewing and treating a business credit card differently than a personal credit card, which though obvious, can be more difficult than it seems.
Credit Card vs Charge Card
Business credit cards can, perhaps, better be referred to as "charge" cards, in the sense that the balance should be paid in full with each billing period. Failing to achieve--or maintain--a neutral balance at the year's end can complicate tax filings and, moreover, sends a negative message to the card issuer and impacts your credit. To ensure that you are building credit for your company--and avoiding damage to your own--the best practice, as with personal credit cards, is to only ever charge what can be paid back at the billing statement's, quarter's or year's end.
Keeping Your Account Secure
With personal credit cards, credit report monitoring is recommended. With business credit cards, it is essential, both to prevent identity theft and prevent authorized cardholder/employee negligence or damages. Businesses, like individuals, are prone to identity theft and credit card fraud. Many credit card issuers offer account monitoring programs in addition to their initial fraud detection and prevention features and services. Also, all individuals are entitled to a free credit report from each credit monitoring bureau (Transunion, Equifax, Experion) per year.
Eye on the Prize
Although many small businesses have to obtain business credit cards on the credit of its proprietor, over time, with an excellent payment history, proven solvency and an established relationship with the financial institution, these same businesses can be extended lines of credit without leveraging--and potentially harming--the proprietor's credit.