The purpose of business loans need not always be to purchase raw materials, to pay rent/salaries, to expand the business, and to manage other debts. There can be expenses beyond these items listed, such as travelling to meet a potential client, purchase gadgets to improve the market reach of the business, and others. You cannot approach a lender for finances to cover these expenses. Business credit cards can come handy at times like this and give you a window to repay the debt.
1. What are business credit cards?
A business credit card is specifically designed for business expenses and is not meant for personal use. A business owner can obtain and distribute business credit cards to the employees and let them pay for business expenses so the bills will be paid by the business owner once a month. Such credit cards help keep track of business expenses and also get some benefits on these expenses.
Many banks and financial institutions offer business credit cards that come with multiple advantages. Here, benefits of business expenses mean cashback on business spends, bonus points on spending a certain target amount, and others. The credit card makes it easy for you and your employees to pay when travelling within the country or abroad for business purposes.
2. Why should you opt for a business credit card?
- Interest-free repayment period: Most credit cards offer an interest-free repayment period of 30 days from the date of transaction. Some cards offer an interest-free period of up to 48 days as well. This can be considered as the most significant advantage for businesses as the card can buy some time before the repayment.
- Monthly instalment option: If you are unable to make a single payment towards the bill, you can get the transaction converted into equated monthly instalments (EMIs) for the duration you wish.
- Rewards for Expenses: When you make an expense with the card, you may receive a cashback, reward points, and even air miles based on the card you choose. Also, you can expect offers on dining, travel, boarding, and other office utilities across the world.
- Cash advance facility: In addition to making purchases and transactions, you can also opt for a cash advance when you are in immediate dire need of cash. Just swipe your card at the ATM to withdraw cash of up to 30% of the card limit.
- Simpler management: Credit card networks offer features, such as category-wise spend tracking and report generation with filters and sort options. These features make it easy for you, the business owner, to gain insights on the expenses made by employees through business credit card. It is also easier to identify frauds and restrict card usage as the owner holds the central authority.
- Lifestyle benefits: High-end business credit cards come with lifestyle benefits, such as complimentary airport lounge access. Besides, comprehensive insurance coverage backs up at the times of uncertainties associated with business travel.
- Customer service: In case of any queries regarding the credit card or its features, you can get in touch with the lender’s customer service and get it resolved. Also, the customer service team can help you if you lose your card or in the case of theft.
- Miscellaneous: The business owner will benefit from business credit cards since the usage of these cards will build the credit history of the business. Also, the business owner gets additional purchasing power to expand the business with finer details.
3. Fees and charges
You may have to incur one or more of the following based on the card and the lender you choose. Accordingly, the features and benefits of the card vary.
- Joining fee.
- Annual fee.
- Finance charges of up to 3.35% p.m.
- Cash advance fee of up to 2.5% of the withdrawn amount or up to Rs.500 per transaction.
- A payment dishonour fee of up to 2% of the payment amount.
- Late payment fee of up to Rs.750.
- Foreign currency conversion mark up of up to 3.5%.
4. Eligibility criteria
- The applicant must be an Indian citizen.
- The applicant must be running a business, irrespective of the size of the business.
- Some lenders may specify a certain turnover or sales volume of the company that is to be met.
*The eligibility criteria may vary depending on the lender
5. Documents required
- Identity proof, such as PAN card, Aadhaar card, voter ID, and driver’s license.
- Address proof, such as passport, Aadhaar card, voter ID, and utility bills.
- Business registration certificate.
- Latest IT returns filed.
- Profit & loss statement with audited reports.
- Proof for business continuity.
6. Frequently asked questions (FAQs)
Q. Everyone who applies for a business credit card get one?
A. You must satisfy all the eligibility criteria set by the lender and have a good credit score. Also, you must have been running a business even if it involves a single person. Approving a business credit card is up to the lender’s discretion. Not everyone who applies will get one.
Q. Is it necessary to maintain a good personal credit score to get a business credit card?
A. A lender can check both your credit rating as well as the business credit rating.
Q. How long would it take to receive the business credit card?
A. Once you receive approval, it may take 7-10 working days to receive the credit card. The entire process may take 15-20 working days after submitting the application form. However, the timeline may vary depending on the lender.
Q. How is the card limit decided?
A. The lender will take a call on the card limit based on the number of cards you wish to obtain, the current status of the business, the expected future cash flow, the credit rating of your business, and many other factors.