topic Re: Do I need business credit? in Business Credit

Do I need business credit?

micvite — Sun, 03 Oct 2021 06:36:50 GMT

Do I even need a business card if I can just put all my stuff on personal credit cards? I've mainly been using my DC card for all business expenses getting 2% back and just paying it off with the business bank acc (which I also don't quite understand why I need when it has all these fees and stuff for transactions)

Re: Do I need business credit?

WayneSki — Sun, 03 Oct 2021 18:01:30 GMT

@micvite wrote:
Do I even need a business card if I can just put all my stuff on personal credit cards? I've mainly been using my DC card for all business expenses getting 2% back and just paying it off with the business bank acc (which I also don't quite understand why I need when it has all these fees and stuff for transactions)

I will give you 1 reason out of many why you should have a business credit card. If you're putting all your business expenses on a personal credit card, you're probably ruining your credit with high utilization being reported.

Re: Do I need business credit?

micvite — Sun, 03 Oct 2021 18:07:08 GMT

@WayneSki wrote:
@micvite wrote:
Do I even need a business card if I can just put all my stuff on personal credit cards? I've mainly been using my DC card for all business expenses getting 2% back and just paying it off with the business bank acc (which I also don't quite understand why I need when it has all these fees and stuff for transactions)
I will give you 1 reason out of many why you should have a business credit card. If you're putting all your business expenses on a personal credit card, you're probably ruining your credit with high utilization being reported.

Nope, I PIF, my only business expenses other than like rent and utilities that just come out of the bank acc are just parts and stuff that I get paid back for within a week or two usually. (Own an auto repair shop) and I can always use whatever in the bank acc to cover those parts if my statement is coming up.

So is personal util like the main concern when it comes to business cards?

Re: Do I need business credit?

CreditBones — Sun, 03 Oct 2021 18:20:15 GMT

In my opinion, business credit is very similar to personal credit. A healthy business credit file, on its most basic form, allows you to acquire big-ticket items like a property, or a vehicle, or more aligned with a busines; inventory, tools, and equipment, without the need to pay cash for them, or interfere with your personal credit strategies; like "gardening".

If your business were to need the purchase of a big-ticket item, then yes, it would be a good suggestion to start building your business credit. Otherwise, you may be able to continue using your personal credit cards for that matter.

I use my Apple Card + Exxon mobile app for my business fuel expenses (~$700/month). I also PIF before bill close date (to avoid high UTIL), and I have yet to have any inconvenience doing it like that.

Re: Do I need business credit?

micvite — Sun, 03 Oct 2021 18:23:49 GMT

@CreditBones wrote:
In my opinion, business credit is very similar to personal credit. A healthy business credit file, on its most basic form, allows you to acquire big-ticket items like a property, or a vehicle, or more aligned with a busines; inventory, tools, and equipment, without the need to pay cash for them, or interfere with your personal credit strategies; like "gardening".

If your business were to need the purchase of a big-ticket item, then yes, it would be a good suggestion to start building your business credit. Otherwise, you may be able to continue using your personal credit cards for that matter.

I use my Apple Card + Exxon mobile app for my business fuel expenses (~$700/month). I also PIF before bill close date (to avoid high UTIL), and I have yet to have any inconvenience doing it like that.

Gotcha. I'm still new to business credit and can't quite wrap my head around it when it comes to what to do lol... like I read the 101 and the way it says to start with net30 accs and staples is good and all, but I don't need anything from those company's so I'm a bit at a loss for what to do haha...

Re: Do I need business credit?

WayneSki — Sun, 03 Oct 2021 18:24:47 GMT

@micvite wrote:
@WayneSki wrote:
@micvite wrote:
Do I even need a business card if I can just put all my stuff on personal credit cards? I've mainly been using my DC card for all business expenses getting 2% back and just paying it off with the business bank acc (which I also don't quite understand why I need when it has all these fees and stuff for transactions)
I will give you 1 reason out of many why you should have a business credit card. If you're putting all your business expenses on a personal credit card, you're probably ruining your credit with high utilization being reported.
Nope, I PIF, my only business expenses other than like rent and utilities that just come out of the bank acc are just parts and stuff that I get paid back for within a week or two usually. (Own an auto repair shop) and I can always use whatever in the bank acc to cover those parts if my statement is coming up.

So is personal util like the main concern when it comes to business cards?

You PIF on the due date, that's great....but it's what's being reported at your statement close date that's going to affect your utilization. I would say utilization is one of many things why business owners use business credit cards and not personal credit cards.

Re: Do I need business credit?

CreditBones — Sun, 03 Oct 2021 18:48:43 GMT

It all has to do with the nature of your business.

If your business requeires an office with multiple desks, computers, a commercial printer... or if it needs a fleet of vehicles, tolls, fuel... or if you have a restaurant business and need to furnish your kitchen and dining room, you can use either a commercial loan at a lower interest rate (because you have built a healthy business credit file), or use your business credit cards with a 0% interest balance transfer, without interfering with your personal credit (because maybe you are gardening for the purchase of your house).

Again, I have not used business credit, ever. So I may be off in what I think how it works. But I don't think I am too far off.

Re: Do I need business credit?

simplynoir — Sun, 03 Oct 2021 19:01:48 GMT

For me and also my DW's businesses we use a combination of both out of necessity

It stems from fact there aren't great general spend business cards out there so we use personal BofA Premium Rewards and US Bank Altitude Reserve for non-category which there is a lot of. Other business cards like Chase Ink Preferred and Ink Cash go for advertising, office supplies, and so on for 3x/5x. Rest earns 2.625% for PR and 3% with AR if they take mobile payments

Neither of us are concerned with paying the bills in full every month and gets rid of need of using AMEX Biz Plat for everything. Does bot have a great return rate (this is accounting for Schwab cashout) even with the amazing purchasing power that we have on that card. We were able to carry a solid six figure balance without having to pay to keep the NPSL going

Re: Do I need business credit?

micvite — Mon, 04 Oct 2021 04:33:36 GMT

@WayneSki wrote:
@micvite wrote:
@WayneSki wrote:
@micvite wrote:
Do I even need a business card if I can just put all my stuff on personal credit cards? I've mainly been using my DC card for all business expenses getting 2% back and just paying it off with the business bank acc (which I also don't quite understand why I need when it has all these fees and stuff for transactions)
I will give you 1 reason out of many why you should have a business credit card. If you're putting all your business expenses on a personal credit card, you're probably ruining your credit with high utilization being reported.
Nope, I PIF, my only business expenses other than like rent and utilities that just come out of the bank acc are just parts and stuff that I get paid back for within a week or two usually. (Own an auto repair shop) and I can always use whatever in the bank acc to cover those parts if my statement is coming up.

So is personal util like the main concern when it comes to business cards?
You PIF on the due date, that's great....but it's what's being reported at your statement close date that's going to affect your utilization. I would say utilization is one of many things why business owners use business credit cards and not personal credit cards.

Im well aware how util works, never had an issue...

I keep a balance of a few hundred just to keep AZEO.

Re: Do I need business credit?

micvite — Sun, 03 Oct 2021 19:53:45 GMT

@simplynoir wrote:
For me and also my DW's businesses we use a combination of both out of necessity

It stems from fact there aren't great general spend business cards out there so we use personal BofA Premium Rewards and US Bank Altitude Reserve for non-category which there is a lot of. Other business cards like Chase Ink Preferred and Ink Cash go for advertising, office supplies, and so on for 3x/5x. Rest earns 2.625% for PR and 3% with AR if they take mobile payments

Neither of us are concerned with paying the bills in full every month and gets rid of need of using AMEX Biz Plat for everything. Does bot have a great return rate (this is accounting for Schwab cashout) even with the amazing purchasing power that we have on that card. We were able to carry a solid six figure balance without having to pay to keep the NPSL going

Gotcha. So I guess for me who basically gets reimbursed instantly for expenses it doesn't really matter. I don't have advertising expenses, just business cards that aren't much, no office supplies... all my expenses are car parts, which as soon as the job is complete the customer pays for.

Re: Do I need business credit?

simplynoir — Sun, 03 Oct 2021 20:14:52 GMT

@micvite wrote:
@simplynoir wrote:
For me and also my DW's businesses we use a combination of both out of necessity

It stems from fact there aren't great general spend business cards out there so we use personal BofA Premium Rewards and US Bank Altitude Reserve for non-category which there is a lot of. Other business cards like Chase Ink Preferred and Ink Cash go for advertising, office supplies, and so on for 3x/5x. Rest earns 2.625% for PR and 3% with AR if they take mobile payments

Neither of us are concerned with paying the bills in full every month and gets rid of need of using AMEX Biz Plat for everything. Does bot have a great return rate (this is accounting for Schwab cashout) even with the amazing purchasing power that we have on that card. We were able to carry a solid six figure balance without having to pay to keep the NPSL going
Gotcha. So I guess for me who basically gets reimbursed instantly for expenses it doesn't really matter. I don't have advertising expenses, just business cards that aren't much, no office supplies... all my expenses are car parts, which as soon as the job is complete the customer pays for.

Then you keep doing what you're doing. Hopefully if a bank inquires what is going on you will be able to explain yourself and keep spending as normal

Re: Do I need business credit?

ScorpioRising — Mon, 04 Oct 2021 05:13:28 GMT

@micvite wrote:
Do I even need a business card if I can just put all my stuff on personal credit cards? I've mainly been using my DC card for all business expenses getting 2% back and just paying it off with the business bank acc (which I also don't quite understand why I need when it has all these fees and stuff for transactions)

Having 1 or 2 business cards is a good thing because you just never know. Things happen sometimes and it's always a good thing to be prepared. The worst time to go looking is when you're in need, no matter what that might be.

A business checking account allows you to separate your business expenses etc, from personal ones; which in turn makes filing your taxes easier when tax season rolls around. Regarding "all these fees and stuff for transactions", (bank /transaction fees) credit card annual fees and any interest paid, these are all tax deductible as business expenses.

There are business checking accounts that are actually free, depending on how many transactions you make monthly. There are also some really good business cards with nice rewards that has no annual fees. One of the other benefits of a business credit card is that the starting limits tend to be higher than for personal ones.

Re: Do I need business credit?

aynot4fitness — Mon, 04 Oct 2021 13:12:13 GMT

@micvite wrote:
Do I even need a business card if I can just put all my stuff on personal credit cards? I've mainly been using my DC card for all business expenses getting 2% back and just paying it off with the business bank acc (which I also don't quite understand why I need when it has all these fees and stuff for transactions)

There are legal and tax implications to blending personal and business finances. Yes, it is convenient to use personal credit cards in our business, but any competent accountant or business lawyer will warn against doing so. If you are ever audited by the IRS or state tax authorities, then every personal credit card transaction will be open for scrutiny and review. They could compel you to produce every credit card statement for the period of the audit, and they can question any and all transactions. If they find personal transactions paid by the business, then you'll be forced to defend it. You'll have to identify every business transaction and match them to business payments. You might also have to prove that large personal expenses were paid from personal funds. If you get an aggressive auditor, or you're dealing with large sums of money, they can make it a real PITA and cost you lots of time and $$$ to defend yourself even though everything is legitimate.

Business credit cards simplify things because those cards are the only cards subject to a business tax audit, and they are off limits for personal tax audit. You only put business transactions on business cards, and the business pays the entire bill, creating a clean separation of expenses. And if you should accidentally put a personal expense on the business card, you just pay the business back from personal funds.

There are ways that you can use personal cards for your business and still protect those cards in an audit, but a CPA is the best person to tell you how to do that. However, one thing is certain: If your business pays your personal credit card bills or shares your personal bank account, then a business tax audit becomes a personal tax audit, and vice versa. Also, if your business is ever the defendent in a lawsuit, then you will have to defend yourself personally as well.

Legally, a business is a separate entity from you. It makes sense to take advantage of the personal protections built into the legal system to limit the potential damages of any unforeseen risks. Blending business and personal finances tend to make unforeseen bad financial situations worse.

Re: Do I need business credit?

SouthJamaica — Mon, 04 Oct 2021 13:21:49 GMT

@micvite wrote:
Do I even need a business card if I can just put all my stuff on personal credit cards? I've mainly been using my DC card for all business expenses getting 2% back and just paying it off with the business bank acc (which I also don't quite understand why I need when it has all these fees and stuff for transactions)

Yes you do and as soon as you get one you should stop using the personal card.

Mixing personal and business finances creates serious potential legal, accounting, bookkeeping, and tax nightmares.

And yes you do need the business checking account as well, for the very same reasons.

Re: Do I need business credit?

spiritcraft1 — Mon, 04 Oct 2021 18:53:05 GMT

We used to use business debit cards, checks etc. Now we pay everything we can with cards. We have AMEX for MR points, a couple of Hotel cards that rack up stays and 2% CB cards from FNBO. The upside to us personally in doing this is quite significant. Before our credit was repaired, we didn't have so many options and got Net 30's in anticipation of better credit scores but now the personal benefit to us yearly in using CC's and still paying in full each month is over $10k per year but actually much more if counting SUB's, rewards etc.

Re: Do I need business credit?

GApeachy — Tue, 05 Oct 2021 12:28:32 GMT

We've operated our S-Corp without any biz credit for 25+ years. We did always keep personal separate from business via checking/savings for both, which sounds like that's how you operate too.

Only until I got on the "credit kick" did I even bother building biz credit. I really only did that because we will leave our biz to our ds's...should they want it and have the luxury of biz credit built in.

Another eta: Not using debits cards on the biz bank accts. is very reassuring too. Not using personal debit cards, again very reassuring. And..who likes writing checks, yuck!

I consider it a luxury to have biz cards/credit and now enjoy how it's way convenient....

-Paying all the insurances at one time, being done with it for the year, and it not affecting our personal credit in order to do so.

-Esp. nice is paying big ticket items on biz cards that have 0% interest for x amt of months.

-Allowing our employees to purchase supplies/fuel on cards.

-Having purchase protections come into play as well.

But again, it's a luxury in how I pay bills now. I like it! I can look up items online through cc portals a little more easily. I like it!

Also, our employees like not having their credit affected since their cards are through the biz, not personal, and we can all carry the same cards at the same time.

Business Credit card for LLC partnership

micvite — Sun, 24 Oct 2021 06:07:10 GMT

So if I wanted to get business credit cards and the business is set up as an LLC, with 2 owners, is there any special way I have to do this? Can both owners be on the credit card or is it going to be one gets the card the other is an AU? Or are business cards completely different?

Also is there a specific way to tell which business cards don't require a personal guarantee or does it just not ask for personal info?

Re: Business Credit card for LLC partnership

NYC_Fella — Sun, 24 Oct 2021 14:02:52 GMT

@micvite wrote:
So if I wanted to get business credit cards and the business is set up as an LLC, with 2 owners, is there any special way I have to do this? Can both owners be on the credit card or is it going to be one gets the card the other is an AU? Or are business cards completely different?

Also is there a specific way to tell which business cards don't require a personal guarantee or does it just not ask for personal info?

One gets the card and the other is an AU.

There are no business cards that don't require either a personal guarantee (or a deposit account that can serve as collateral). One notable exception is the Amex corporate card (different from a business card) which used to require a minimum of $4M in profitable annual revenue. My company was turned down even with $12M in annual revenues, although Amex did give us a $750K line of business credit. Still had to give a PG.

Re: Do I need business credit?

NYC_Fella — Tue, 26 Oct 2021 13:19:59 GMT

A really good reason to have your business cards separate from your personal cards is to forestall a claim that you are commingling your personal and business finances. In the event of a problem, this can cause the coprorate veil to be pierced and you could be held personally liable for the debts of the business.

Re: Do I need business credit?

4sallypat — Sat, 30 Oct 2021 16:46:15 GMT

@aynot4fitness wrote:
@micvite wrote:
Do I even need a business card if I can just put all my stuff on personal credit cards? I've mainly been using my DC card for all business expenses getting 2% back and just paying it off with the business bank acc (which I also don't quite understand why I need when it has all these fees and stuff for transactions)
There are legal and tax implications to blending personal and business finances. Yes, it is convenient to use personal credit cards in our business, but any competent accountant or business lawyer will warn against doing so. If you are ever audited by the IRS or state tax authorities, then every personal credit card transaction will be open for scrutiny and review. They could compel you to produce every credit card statement for the period of the audit, and they can question any and all transactions. If they find personal transactions paid by the business, then you'll be forced to defend it. You'll have to identify every business transaction and match them to business payments. You might also have to prove that large personal expenses were paid from personal funds. If you get an aggressive auditor, or you're dealing with large sums of money, they can make it a real PITA and cost you lots of time and $$$ to defend yourself even though everything is legitimate.

Business credit cards simplify things because those cards are the only cards subject to a business tax audit, and they are off limits for personal tax audit. You only put business transactions on business cards, and the business pays the entire bill, creating a clean separation of expenses. And if you should accidentally put a personal expense on the business card, you just pay the business back from personal funds.

There are ways that you can use personal cards for your business and still protect those cards in an audit, but a CPA is the best person to tell you how to do that. However, one thing is certain: If your business pays your personal credit card bills or shares your personal bank account, then a business tax audit becomes a personal tax audit, and vice versa. Also, if your business is ever the defendent in a lawsuit, then you will have to defend yourself personally as well.

Legally, a business is a separate entity from you. It makes sense to take advantage of the personal protections built into the legal system to limit the potential damages of any unforeseen risks. Blending business and personal finances tend to make unforeseen bad financial situations worse.

That's exactly what my accountant told me!

After 20+ years having a side business as a sole proprietor, I am going to change how my online business runs - separate personal from business.

Don't know how it will affect my filing of Schedule C along with my personal 1040 though....