Business Credit Cards for New Businesses
Many thanks to Wallet Hub for including Boston University on its expert panel regarding the Business Credit Cards for New Businesses. The interview link is here and I’ve separately pasted in the responses below. They distribute this content to national news outlets throughout the US, as well.
What are the best business credit cards for a new business?
By: John Kiernan, Credit Card Editor
The best business credit card for a new business isn’t just the offer with the lowest approval standards. Some people might assume otherwise. But neither the age of your business nor its credit standing plays much of a role. It’s your own personal credit standing that really matters. So the best business credit card for a new business venture is one that you can get approved for personally which offers great terms for the types of transactions you expect to be making.
With that in mind, WalletHub’s editors compared 1,000+ offers based on their ability to meet the needs of newly formed companies and their suitability for entrepreneurs of all credit levels. Six offers in particular ultimately rose to the top.
Gregory L. Stoller
Senior Lecturer in Strategy and Innovation in the Questrom School of Business at Boston University
How important are credit cards to new business owners?
I’ve always believed that credit cards are important, especially for new business owners, since it provides them with an immediate source of financing. However, it’s important to note that credit card use, especially in Asia, is rapidly going away in favor of apps, or the use of mobile phones, which in many cases act as de facto debit cards, rather than credit cards. This article is also quite timely since soon, signatures might be going away from certain U.S. credit cards, as well.
Is a credit card the best way to fund a new business?
The best part of credit card financing is that it’s immediate. The worst part is it can become extremely expensive, especially if balances are carried over a period of several months. But there’s far less paperwork involved in getting credit card financing, compared with applying for a mortgage (and having to come up with collateral), and/or negotiating valuation, with pre-money and post money amounts, if taking on equity.
What should a new business owner look for in a credit card?
For me, it’s not just a piece of plastic that you have in your wallet, but rather the credibility of the company behind it. A good credit card company will be able to work with its customers both in good times and bad. A prime example of this is someone who has a large credit card balance but is unable to pay it off on the schedule they originally envisioned. Obviously, the credit card company will continue to charge interest, but the best companies are willing to work with their customers, as opposed to pulling the plug and immediately calling the entire balance in. On a more positive level, other services they provide a new business owner, whether in terms of introductions, product/service discounts, or long-term relationships are an immense value add.
Are credit cards better for some new businesses than others?
A business that has regular cash flow will definitely benefit from credit card financing, more so than a business that is beset by possible seasonal swings or uneven revenue. That’s where a credit card company that is, say, charging 1.5% per month is going to get very wealthy through high financing costs at the expense of their customers. But in terms of short-term financing, credit cards are the best.
Are there any credit-card accounting issues that new business owners should be aware of?
It’s going to be very important for companies that use credit cards, either for revenue payments or bill payments, to work with accountants to determine what constitutes true accounts payable and accounts receivable versus uncollected revenues or debts. No more can a credit card in someone’s personal name necessarily be separated from their business entity.
Are credit cards better or worse for new business owners now than before the Great Recession?
I think the big change that we’ve seen from before and after the Great Recession is accountability. People formerly treated credit card debt separately then other debt and didn’t view it with the same degree of reverence as they do now. Plus, with so much more transparency, it’s not a given that you can apply for and be approved from multiple credit card companies concurrently.
