Tag: Small Business

News

9 Essential Tax Tips for Entrepreneurs

Advertiser Disclosure

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

9 Essential Tax Tips for Entrepreneurs

For many entrepreneurs, there is no topic more fraught than taxes. In fact, a 2015 survey of small business owners found that 40% say dealing with bookkeeping and taxes is the worst part of owning a small business and that they spend 80+ hours a year dealing with taxes and working with their accountants. Taxes can be time-consuming, confusing, and a drain on your finances if you don’t prepare well. So whether you choose to do your taxes on your own or hire a professional, this guide can provide some sound advice and hopefully make tax time a little less taxing.

 

#1 Select the Right Entity for Your Business

 

One of the first decisions you’ll make when setting up your business is whether to function as a sole proprietor, partnership, LLC, or corporation. In her recent blog post, Wendy Connick, an IRS enrolled agent and owner of Connick Financial Solutions, says “the type of business entity you choose will have a huge effect both on how you pay taxes and how much tax you pay. It’s wise to consider the pros and cons of each business structure before making a final decision.”

Sole proprietorship

A sole proprietorship is the simplest way to form a business, as it is not a legal entity. The business owner just needs to register the business name with the state and secure the proper local business licenses. The downside is that the sole proprietor is personally liable for the business’s debts.

Partnership

A partnership is similar to a sole proprietorship, but two or more people share ownership. Both partners contribute their money, labor, or skill to the business and share in its profits and losses.

Limited liability company (LLC)

An LLC provides more protection from liability than a sole proprietor or partnership but with the efficiency and flexibility of a partnership.

Corporation

A corporation is more complicated and usually recommended for larger companies with multiple employees. It is a legal entity owned by shareholders, so the corporation itself, not its shareholders, is legally liable for business debts.

Unlike other business entities, corporations pay income tax on their profits, so they are subject to “double taxation,” first on company profits and again on shareholder dividends.

To avoid double taxation, corporations can file an election with the IRS to be treated as an S Corporation. S Corporation income and losses “pass through” to the shareholder’s personal income tax return instead of being taxed at the corporate level.

Some small businesses and freelancers may save on self-employment taxes by registering as an S Corporation and paying themselves a salary. Sole proprietors, partners, and LLC members pay self-employment tax on their entire business net income, but S Corp shareholders only pay self-employment taxes on their wages. They can receive additional income from the corporation as a distribution, which is taxed at a lower rate.

Connick says “many small business owners start out as sole proprietors and adopt a different structure once the business gets big enough to make it worthwhile (which would typically be when the business is making over $50,000 a year).”

 

#2 Get an Employer Identification Number

 

All businesses, even sole proprietors should get an Employer Identification Number (EIN). Technically, sole proprietors can use their Social Security number (SSN) as the business’s identification number, but that means providing an SSN to any clients or vendors who need to issue a 1099, a move that can leave you more exposed to identity theft.

Applying for an EIN from the IRS is free and can usually be done in a matter of minutes using the IRS’s online form.

#3 Make Sure Your Business Isn’t Just a Hobby

 

You know you’re in business to make money, but would the IRS agree? If your company is operating at a loss, the IRS could reclassify your business as a hobby, resulting in some serious tax consequences.

A business is allowed to offset taxable income with business expenses, but hobby expenses cannot be netted against hobby income. Instead, they are deducted as miscellaneous itemized deductions on Schedule A and limited to the amount of hobby income reported on Schedule C. This means a hobby business can never result in a net loss, and you may be prevented from deducting hobby expenses entirely if you don’t itemize deductions.

If you’ve been making money in your business for a while and just have one bad year, you don’t have to worry about the IRS reclassifying your business as a hobby. If you’ve been losing money for a while and especially if your business involves some element of personal pleasure or recreation (such as horse racing, filmmaking, or restoring old cars), you’ll want to make sure you’re treating your business like a business in case the IRS challenges your losses.

The IRS takes several factors into consideration:

  • Does the amount of time you put into the business suggest an intention of making a profit? Side projects are more likely to face scrutiny because you’re spending the majority of your time at another full-time job.
  • Do you depend on the income you receive from the business?
  • Were any losses beyond your control or occur in the startup phase? Losses due to poor management and overspending are less likely to hold up under examination.
  • Have you changed operation methods to improve profitability? Many business experience setbacks. If you learn from mistakes and try to correct your course, the IRS is more likely to agree that you have the intention of running a profitable business.
  • Do you have the knowledge and experience necessary to be successful in your field?

If you are concerned about an IRS challenge of your losses, there are a few steps you can take to treat your activity as a business:

  • Keep thorough business books and records.
  • Maintain separate business checking and credit accounts.
  • Obtain the proper business licenses, insurance, and certifications.
  • Develop and maintain a written business plan.
  • Document the hours spent working on your business, especially if it is a side project.

 

#4 Track Income and Expenses Carefully

 

Maintaining separate business checking and credit card accounts is not only a good way to demonstrate that your business is not a hobby, but it’s also an excellent way to simplify tracking business income and expenses.

Benjamin Sullivan, an IRS enrolled agent and a certified financial planner with Palisades Hudson Financial Group LLC in its Austin, Texas, office, says “small business owners can get a tax benefit from almost anything that is an ordinary and necessary business expense. Travel, meals, advertising, and insurance costs are just some of the popular deductions.”

Use small business bookkeeping software

Small business accounting software like FreshBooks, Xero, or QuickBooks Online can help you easily and quickly track your business revenues and expenses. They can usually be set up to import transactions from your business checking account automatically and let you snap pictures of receipts with your phone.

Whether you choose to use a software program or just a spreadsheet, establish a system for organizing records and receipts right from the beginning. “Little expenses can add up quite a bit over the course of a year,” Connick says, “but you can’t deduct them if you don’t know what they are.”

Special rules for travel, meals, and entertainment

It is especially crucial to maintain good records for business travel, meals, and entertainment expenses. The IRS allows taxpayers to deduct 100% of their business-related travel and 50% of the cost of business meals and entertainment expenses, whether you are taking a client out for a meal or traveling out of town. Because these categories are prone to abuse, the IRS requires documentation to substantiate that these expenses have a legitimate business purpose.

For meals and entertainment, in addition to a receipt that shows the amount, time, and place, taxpayers should also make a note of the individuals being entertained and the business purpose. Meeting this requirement can be as simple as jotting down a note on your receipt or in your calendar regarding who you dined with and the business matters discussed.

For travel expenses, hotel receipts must include a breakdown of the charges for lodging, meals, telephone, and other incidentals. Your hotel should be able to provide an itemized receipt at checkout.

Save cash instead of taxes

One trap that small business owners often fall into is spending money to save on taxes. At year end, many entrepreneurs look at business profits and think they need to spend their cash to avoid a big tax bill. Don’t spend a dollar to save forty cents in tax. If you truly need a new computer, extra supplies, or a new vehicle, buy it. Don’t spend money just to avoid a tax bill. Remember, taxes are a cost of doing business. If you’re paying taxes, you’re making money.

#5 Set Aside Money for Taxes

 

When you set up a separate business checking account, it’s also a good idea to set up a separate savings account to help you organize funds and set aside money for taxes.

Our tax system is a “pay as you go” system. When you receive a paycheck from an employer, money is regularly withheld on your behalf. When you are self-employed, making estimated tax payments is your responsibility. If you don’t pay in enough during the year to cover your income tax and self-employment tax, you may have to pay an underpayment penalty.

Estimated tax payments are due on the 15th day of April, June, September, and the following January. You have a few options for calculating what you owe each quarter:

Use Form 1040ES

This form includes a worksheet to help you estimate how much you owe for the current year. (Corporations use Form 1120-W to calculate estimated taxes.)

Look at last year’s return

If you’ve been in business for a while and there are no significant changes this year, you can aim to pay 100% of last year’s tax as a safe-harbor estimate (110% if your adjusted gross income for the prior year was more than $150,000).

Make a quarterly estimate

If your income fluctuates, you may prefer to make a quarterly calculation. Calculating estimated payments is complex. It depends on your tax bracket, deductions, credits, etc. In this case, it’s best to work with a tax professional who can consider all of the factors and recent changes in the tax law.

Sullivan says, “Tax planning isn’t a one-time exercise that should be done at the end of the year or at tax time. Instead, tax planning is an ongoing process of structuring your affairs in a tax-efficient manner.”

#6 Don’t Forget to Track Your Mileage

 

When you drive your personal vehicle for business, you have two options for deducting business automobile expenses: the standard mileage rate or actual expenses.

The IRS releases the standard mileage rate annually. The rate is $0.54 per mile for 2016. It goes down to $0.535 cents per mile for 2017. You simply multiply the standard mileage rate by the number of miles you drove for business during the year.

To use the actual expense method, total up all of the costs of operating your vehicle for the year, including insurance, repairs, oil, and gas, and multiply them by the percentage of business use. For example, if you drove 10,000 miles during the year and 5,000 of those miles were for business, your percentage of business use would be 50%. If it cost $7,000 to own and operate your vehicle, your deduction using the actual expense method would be $3,500 ($7,000 x 50%).

You can use whichever method gives you the largest deduction. However, if you want to use the standard mileage rate, you must choose it in the first year the car is used for business. In subsequent years, you can choose either method.

Whichever method you choose, you must track your business miles. You can do that with a paper log kept in your glove compartment or with an app such as MileIQ or TrackMyDrive. “Note that ‘business purpose’ is a pretty broad category,” Connick says. “If you drive to the supermarket and pick up some pens for your home office while buying groceries, the trip counts as business mileage.”

 

#7 Consider the Home Office Deduction

 

Some business owners avoid claiming the home office deduction, believing it to be an audit trigger. That may have been true in the past, but today’s technology has made home offices much more common. Connick suggests entrepreneurs shouldn’t fear the home office deduction if they meet the requirements. “It’s no longer audit bait,” she says, “especially if you use the safe harbor method to calculate your deduction.”

To take advantage of the home office deduction, you must use the area exclusively and regularly, either as your principal place of business or as a setting to meet with clients. The home office deduction is based on the percentage of your home used for the business. You can choose either the traditional method or the simplified method for deducting expenses.

Under the traditional method, you’ll calculate the percentage of your home that is used for business by dividing the square footage of your office by the square footage of your entire home. For example, if your home is 1,500 square feet and your office occupies 150 square feet, the business percentage is 10%. Then, you can deduct 10% of all of the expenses of owning and maintaining your home, including mortgage interest, real estate taxes, utilities, association dues, insurance, repairs, etc.

Under the simplified method, you’ll take a deduction of $5 per square foot, with a maximum of 300 square feet. So if your home office measures 150 square feet, the home office deduction would be $750 (150 x $5).

 

#8 Save for Retirement

 

For most self-employed people, the simplest option for retirement saving is an individual retirement account (IRA). Anyone can contribute to a traditional IRA, but with an annual contribution limit of just $5,500 ($6,500 if you are age 50 or older), you may want a retirement savings option that allows you to save more.

Connick says her number one tip for entrepreneurs is to open a SEP-IRA. “These retirement accounts are cheap to open and maintain,” she says. They also “have a high contribution limit, and contributions are fully tax deductible.” SEP-IRAs allow entrepreneurs to contribute up to 25% of their net earnings from self-employment, up to a maximum of $53,000 for 2016.

The deadline to contribute to a SEP-IRA is the due date of your return, including extensions. So 2016 contributions can be made until April 18, 2017, or October 15, 2017, if an extension is filed.

 

#9 Get Help from a Professional

 

Connick recommends that entrepreneurs hire a professional to do their taxes. “If you pick someone who knows their stuff,” she says, “you will likely save more than enough off your tax bill to pay for their fees. For that matter, tax preparation fees are deductible!”

When choosing a tax professional, look for someone with experience working with self-employed taxpayers. The IRS maintains an online directory of return preparers who have additional credentials, such as EAs, attorneys, and CPAs. Search the directory to find a professional near you with the credentials or qualifications you prefer.

If there is one thing all entrepreneurs can agree on, it’s that everybody dreads tax season. Having a basic understanding of tax law, maintaining organized records throughout the year, and working with a professional can help you make the most of this least wonderful time of the year.

TAGS: , , ,

Best of, Credit Cards, Reviews

2017 Best Credit Cards for Small Businesses

Advertiser Disclosure

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Note from the Editor: The information related to Chase Ink Business Preferred Card credit card has been collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card.

 

As a small business owner you know you need to manage your cash flow and plan for financing. Credit cards can be an ideal way to meet those needs. But business owners need to be savvy cardholders. Small business credit cards come with unique risks that personally affect entrepreneurs.

 

In this roundup we cover the risks and advantages of small business credit cards. And we’ll show you what card fits your business needs.

 

Best Cards for Financing

If credit cards are an important source of financing and capital for your business, then you need to be a savvy borrower. Look for cards with compelling terms, and take the time to understand the fine print. Remember, the card may be in the business’s name, but you’re personally liable for the debt. Don’t take on more debt than you can handle.

Best 0% Financing

The American Express Blue for Business card offers 15 months of 0% APR for financing. If you fail to pay back your purchases within 15 months, your interest rate will move to 11.74%-19.74%, depending on creditworthiness. You lose access to the introductory rate if you make a late payment.

The 15-month 0% APR window is one of the most generous offers available. On top of generous financing, you earn rewards for spending.

You can also earn 10,000 Membership Rewards points after making your first purchase. Every year, you’ll also receive a bonus of 30% of the previous year’s points earned.

The card offers perks including secondary car rental insurance, purchase protection, extended warranties, baggage insurance, trip accident insurance, and travel hotline help.

The Fine Print
  • Introductory rate: 0% APR financing for 15 months. You must pay on time, or you lose this rate.
  • APR: After 15 months, 11.74%-19.74%, depending on your creditworthiness
  • Penalty APR: 29.74%
  • Annual fee: No annual fee
  • Late fee: Up to $38
  • Returned payment fee: $38
  • Cash advance fee: Greater of $5 or 3%
  • Cash advance APR: 25.74%
  • Rewards: 1 point per dollar spent on all other purchases.
  • Bonus: 2 points for every dollar you spend booking travel at amextravel.com

Apply Now

Low Interest Rates

If you and your business have excellent credit, the Platinum Plus for Business MasterCard from Bank of America offers low ongoing financing. This is a great card for businesses with periodic short-term borrowing needs. Besides interest rates as low as 9.74%, it offers a seven-billing-cycle 0% APR promo rate and $200 statement credit if you spend $500 in the first 60 days.

Plus, the card offers travel accident insurance, secondary rental insurance, and automatic downloads to QuickBooks.

Remember, it’s not wise to use a small business credit card for long-term financing. Many credit unions will offer low rates on installment business loans.

The Fine Print
  • Introductory rate: 0% APR financing for seven billing cycles.
  • APR: 9.74%-20.74% variable APR, depending on your creditworthiness (after seven billing cycles)
  • Annual fee: No annual fee
  • Late fee: $19-$49 (depending on your balance)
  • Returned payment fee: $39
  • Cash advance fee: Greater of $10 or 4%
  • Cash advance APR: 24.74%
  • Sign-up bonus: $200 statement credit if you spend $500 in your first 60 days
  • Rewards: None

Apply Now

Cash Flow Management

Managing cash flow can be one of the most difficult problems facing small business owners. The Plum Card by American Express makes cash flow easier. The Plum Card is a charge card not a credit card. This means that it is designed to give you access to short-term working capital. However, it is not a good source of financing.

If you pay your bill within 10 days of statement closing, you’ll get a 1.5% discount on eligible charges. Otherwise you have a full 60 days without interest before you need to make a payment. Beware, these benefits come at a steep price. After one year, you’ll pay a $250 annual membership fee. Plus, carrying a balance on a charge card comes with huge penalties. The first time you go past due, you’ll be charged 1.5% of the balance. After that, they charge a late fee of 2.99%. The minimum fee is $38.

The Fine Print
  • Late fee: 1.5%, then 2.99%; minimum of $38
  • Returned payment: $38
  • On-time payment bonus: 1.5% discount if you pay balance within 10 days of statement closing
  • Annual fee: $0 for the first year, $250 thereafter
  • No cash advance
  • Rewards: None

Apply Now

Imperfect Credit

If you’re struggling to get approved for a small business credit card, the Spark Classic from Capital One offers an excellent option. The card has a high variable APR (23.49%) and mediocre rewards (1% cash back). But Capital One will approve business owners with just average credit.

This isn’t a great card for borrowing, even in the short term. However, the Spark Classic will give you some working capital, and it will help your business build its credit. Just remember to pay your bill on time each month and to keep your credit use low.

The Spark Classic also offers perks like purchase protection, free extended warranties, and travel and emergency assistance. These protections offer tremendous value to business owners.

The Fine Print
  • APR: 23.49% variable APR
  • Annual fee: No annual fee
  • Late fee: Up to $39
  • Cash advance fee: Greater of $10 or 3%
  • Cash advance APR: 23.49%
  • Rewards: 1% cash back on all purchases

Apply Now

Cards for Service Members

Former and current members of any branch of the military can join Navy Federal Credit Union and apply for these high-quality credit cards. The Visa and MasterCard have the same fees and conditions, but they offer different perks.

 

Navy Federal Credit Union’s Visa for Business credit card gives former service members access to low interest rates and rewards spending. This can be an excellent choice for service members with excellent credit who may have to borrow for short-term needs.

The card gives access to the Visa SavingsEdge program, which gives up to 15% off business purchases at qualifying retailers. However, the card doesn’t offer extended warranties or other protections, so it isn’t always the best choice.

The Fine Print
  • APR: 9.65%-18.0%
  • Annual fee: No annual fee
  • Late fee: Up to $20
  • Returned payment fee: Up to $20
  • Cash advance fee: $0 at Navy Federal Credit Union branch ATM, 50 cents domestic, $1 foreign
  • Cash advance APR: APR + 2%
  • Rewards: 1 point per dollar spent

Apply Now

Navy Federal Credit Union’s MasterCard for Business credit card gives former service members access to low interest rates and rewards. The low interest rates make it a compelling choice for service members with short-term borrowing needs.

The card gives access to the MasterCard Easy Savings program, which gives automatic 10% rebates at a network of gas stations, auto repair shops, and shipping companies. This can lead to significant savings. The card also connects to the MasterCard Business Network, which makes expense reports easy. However, the card doesn’t offer extended warranties or other protections.

The Fine Print
  • APR: 9.65%-18.0%
  • Annual fee: No annual fee
  • Late fee: Up to $20
  • Returned payment fee: Up to $20
  • Cash advance fee: $0 at Navy Federal Credit Union branch ATM, 50 cents domestic, $1 foreign
  • Cash advance APR: APR + 2%
  • Rewards: 1 point per dollar spent

Apply Now

Best Cards for Rewards

Many small business credit cards offer compelling rewards to cardholders. These rewards can allow you to reinvest in your business, or you can take them for personal use. If you choose to use a rewards credit card, try to avoid paying interest. Most of these cards are not good choices for short-term borrowing.

Travel Perks

If you’re a frequent traveler, these small business credit cards give you access to incredible perks. But be sure to read the fine print. These cards have a few gotchas attached.

 

The American Express Business Platinum Card is a charge card with a premium price tag ($450 per year) and premium benefits for some users. Please note, it is not a credit card; you should not plan to borrow money with this card. These are the most significant perks:

  • Global Lounge Collection access, which includes access to Delta Sky Club lounges and American Express Centurion lounges
  • $200 airline fee credit (for checked bags, inflight refreshment, etc.)
  • One free Global Entry or TSA Pre-check application fee (allows you to expedite security at select airports and U.S. Customs)
  • 10 free passes per year to inflight Gogo Wi-Fi and unlimited Boingo (land-based Wi-Fi) access
  • 50% airline points redemption bonus on first- or business-class tickets (if you spend 100,000 points on a business-class ticket, you’ll get 50,000 points back 6-10 weeks later)
  • Starwood Preferred Guest Gold Elite Status, which also gets you Marriott Rewards Gold status for room upgrades and free breakfast. It also gets you access to the Fine Hotels and Resorts Program (perks like in-room WiFi, complimentary breakfast, and other hotel perks at participating luxury hotels).
  • Elite status for National car rental for free upgrades whenever you rent a car.
  • This could be a great card for frequent Delta fliers; not only do you get access to the Delta Sky Club lounges but you can also convert the points you earn into Delta SkyMiles.
The Fine Print
  • Annual fee: $450
  • Late fee: 2.99% or $38, whichever is greater
  • Returned payment fee: $38
  • No cash advance
  • Sign-up bonus: Earn 50,000 Membership Rewards points after you spend $10,000 within three months of card membership. Earn 25,000 more points after spending an additional $10,000 within your first three months.
  • Rewards: 1 point per dollar spent
  • Bonus rewards: 1.5 points per dollar for first $5,000 spent in a year; 2 points per dollar spent through amextravel.com.

Apply Now

As a business owner, little incidentals can add up in a big way. The Chase Ink Business Preferred Card mitigates these costs by providing high-value insurance protection to you and your employees. Not only will you earn rewards (outlined in the fine print), you’ll enjoy these perks, too.

Trip Cancellation/Trip Interruption Insurance
If your trip is canceled or cut short by sickness, severe weather, or other covered situations, you can be reimbursed up to $5,000 per trip for your pre-paid, non-refundable travel expenses, including passenger fares, tours, and hotels.

Trip Delay Reimbursement
If your common carrier travel is delayed more than 12 hours or requires an overnight stay, you and your family are covered for unreimbursed expenses, such as meals and lodging, up to $500 per ticket.

Travel Accident Insurance
When you pay for your air, bus, train, or cruise transportation with your card, you are eligible to receive accidental death or dismemberment coverage of up to $500,000.

Auto Rental Collision Damage Waiver
Decline the rental company’s collision insurance and charge the entire rental cost to your card. Coverage is primary when renting for business purposes and provides reimbursement up to the actual cash value of the vehicle for theft and collision damage for most cars in the U.S. and abroad.

Baggage Delay Insurance
You are reimbursed for essential purchases like toiletries and clothing for baggage delays over six hours by passenger carrier up to $100 a day for five days.

Lost Luggage Reimbursement
If you or an immediate family member check or carry on luggage that is damaged or lost by the carrier, you’re covered up to $3,000 per passenger.

Extended Warranty Protection
This warranty extends the time period of the U.S. manufacturer’s warranty by an additional year on eligible warranties of three years or less.

Cellphone Protection
Get up to $600 per claim in cellphone protection against covered theft or damage for you and your employees listed on your monthly cellphone bill when you pay it with your Chase Ink Business Preferred Credit Card. There is a maximum of three claims in a 12-month period with a $100 deductible per claim.

The Fine Print
  • APR: 16.49%-21.49%
  • Annual fee: $95 per year
  • Late fee: $15-$39, depending on balance
  • Returned payment fee: $39
  • Cash advance fee: Greater of $15 or 5% of transaction
  • Cash advance APR: 25.49%
  • Sign-up bonus: 80,000 points when you spend $5,000 in the first three months
  • Rewards: 1 point per dollar spent, 3 points per dollar spent on travel, shipping purchases, internet, cable or phone services, or online advertising (social media or search engines)
  • Bonus: Points worth 25% more when you redeem through Chase Ultimate Rewards (Chase’s travel website)

Big Introductory Bonuses

Business owners who know they’ll spend a lot in a short period of time should take note of these cards. These bonuses provide excellent value if you can meet the spending requirements. But be wary: these cards have high interest rates. You won’t come out ahead if you end up financing a big purchase with these cards.

The Business Platinum Card offers excellent travel perks, but it offers an unparalleled sign-up bonus, too. Right now, you can earn 50,000 Membership Rewards points after you spend $10,000 within three months of card membership. You’ll also earn 25,000 more points after spending an additional $10,000 within your first three months.

If you plan to spend $20,000 or more in the next three months, this bonus is worth the highest value when redeemed for travel rewards. Depending on which option you choose, this bonus may offset annual fees. You need to churn through a lot of money to meet the spending minimums, but this is a lucrative bonus.

Click here to see details including perks and the fine print.

The Chase Ink Business Preferred Card offers ideal perks for frequent travelers, but right now you can get a great sign-up bonus, too. By spending $5,000 in three months, you’ll earn 80,000 points. This bonus is worth $1,000 if you spend your points through Chase Ultimate Rewards for travel or $800 if you redeem for cash back. You can also transfer the points to airline partners like United and Virgin Atlantic and hotel partners like Marriott and Hyatt.

In addition to the lucrative bonus, you can earn everyday spending rewards (including 3 points per dollar spent in certain categories) and valuable trip insurance.

Click here to see details including perks and the fine print.

Cash Back Rewards

Every business owner can benefit from more cash in their pocket. These cards give you the best cash back offers for everyday spending. You can find better rewards if you use multiple cards, but these have excellent rewards for those who don’t want to mess around with multiple cards. Plus, these cards have excellent protections, too. But be careful when you finance with these cards; they don’t offer great terms for borrowing.

 

The Spark Cash card from Capital One offers unlimited 2% cash back on all purchases, and it is free for the first year. Plus, if you spend more than $4,500 in the first three months of holding the card, you get a $500 cash bonus. After the first year, you’ll pay $59 to hold the card. After the first year, if you spent more than $3,000 per year, it’s worth it.

The Spark Cash card also offers valuable protective features like purchase protection, free extended warranties, primary auto rental collision coverage, and more. Overall, the Spark Cash card gives straightforward rewards to business owners with excellent credit.

The Fine Print
  • APR: 17.49% variable APR
  • Penalty APR: 29.9% (applied if you make a late payment)
  • Annual fee: Free for the first year, $59 per year afterward
  • Late fee: Up to $39
  • Cash advance fee: Greater of $10 or 3% of transaction
  • Cash advance APR: 23.49%
  • Sign-up bonus: $500 reward when you spend $4,500 in the first three months
  • Rewards: 2% cash back on all spending

Apply Now

The Spark Cash Select card from Capital One offers a rare combination of friendly financing terms and rewards. You’ll earn an unlimited 1.5% cash back rewards on all purchases, and you’ll receive a $200 sign-up bonus if you spend $3,000 or more in your first three months.

On top of that, you’ll have a 0% APR financing rate for nine months, and an APR as low as 13.49% afterward.

This isn’t the most lucrative rewards card, but you won’t pay an annual fee. This makes it a great card for businesses that don’t spend as much on a credit card.

The Fine Print
  • Promo APR: 0% for nine months
  • APR: 13.49%-21.49%, depending on your creditworthiness
  • Penalty APR: 29.9% (applied if you make a late payment)
  • Annual fee: $0
  • Late fee: Up to $39
  • Cash advance fee: Greater of $10 or 3% of transaction
  • Cash advance APR: 23.49%
  • Sign-up bonus: $200 reward when you spend $3,000 in the first three months
  • Rewards: 1.5% cash back on all spending

Apply Now

Best Category Bonuses

If you and your employees spend a lot of money in a limited number of categories, you might want to consider a rewards card with heavy bonuses in those categories. These cards offer at least 3 points for every dollar you spend in a given category. That’s the equivalent of a 3% reward.

Remember, rewards cards aren’t usually a good choice for financing purchases. Look to pay off these cards every month.

Online Advertising

Businesses that regularly advertise on social media networks (Facebook, Twitter, etc.) or via search engines (Google, Bing) can earn impressive rewards on their marketing spending. These are the best cards for heavy online advertisers.

 

You’ll earn 3 points for every dollar you spend on online advertising. In addition, you’ll be eligible for travel perks, sign-up bonuses, and more.Click here to see details including perks and the fine print.

The American Express Business Gold Rewards Card allows you to choose to earn 3 points per dollar spent on any one of the following categories: advertising in select online media, airfare from airlines, gas, shipping, or computers and cloud services from select providers. You’ll earn 2 points per dollar on the categories you don’t choose.

All other spending earns 1 point per dollar you spend.

As a sign-up bonus, you’ll earn 50,000 points if you spend $5,000 or more in your first three months of holding the card. In addition to the rewards, you get trip accident insurance, extended warranties, and purchase protection.

Since the Business Gold Rewards Card is a charge card, you shouldn’t plan to borrow with the card. But the rewards for online advertisers are excellent. Just watch out for the $175 annual fee that kicks in after the first year.

The Fine Print
  • Annual fee: $0 for the first year, then $175
  • Late fee: 2.99% or $38, whichever is greater
  • Returned payment fee: $38
  • No cash advance
  • Sign-up bonus: Earn 50,000 Membership Rewards points after you spend $5,000 within three months of card membership
  • Rewards: 1 point per dollar spent
  • Bonus rewards: 3 points in one category (pick between advertising in select online media, airfare from airlines, gas, shipping, or computers and cloud services from select providers).
  • 2 points rewards on remaining four categories.

Apply Now

Dining and Travel

Dining and travel cost a lot, but these cards offer enticing rewards. The cards we recommend offer more than 3% cash back on restaurant spending, travel, or both. Plus, they have other compelling perks. But most of these cards aren’t great for borrowing, so check the fine print.

 

The American Express Blue for Business card offers the single best dining deal, at least during your first six months. During the first six months of holding the American Express Blue for Business card, you’ll get 10 points for every dollar you spend at a restaurant up to $2,000. Once the six-month offer period is over, you may want to turn to other rewards programs from the cards we outline below.

This is also one rewards card that has a decent financing option. Right now you can get 0% APR financing for the first twelve months.

Learn more here about the perks, rewards, and fine print before you apply.

Looking to thin down your wallet? A Sam’s Club Business MasterCard, doubles as your membership card. But it’s not just for wholesale shopping. Spending on the Sam’s Club Business MasterCard gives you the opportunity to earn 3% cash back rewards on all restaurant spending worldwide. It also gives 5% cash back rewards on gas (except when purchased at other wholesalers) and 1% on all other spending.

Road warriors and frequent business entertainers will love this card. Plus, the $45 statement credit (if you spend $100 the day you open it) pays for your annual Sam’s Club membership.

The Fine Print
  • APR: 15.15%-23.15%
  • Penalty APR: 29.99% (applied if you make a late payment)
  • Annual fee: $0 (requires $45 Sam’s Club membership)
  • Late fee: Up to $39.99
  • Cash advance fee: Greater of $5 or 3% of transaction
  • Cash advance APR: 20.15%-26.15%
  • Sign-up bonus: $45 statement credit when you spend $100 on your first day (applying in-store makes this easy).
  • Rewards: 1% cash back on all spending. Maximum of $5,000 back in a given year.
  • Bonus rewards: 3% on dining and travel expenses. 5% on gas (up to $6,000 in gas purchases). Gas cannot be purchased from other wholesale clubs.

Apply Now

If you prefer Costco to Sam’s Club, the Costco Anywhere Visa Business Card offers similar terms. Their 4-3-2-1 program includes 4% on gas purchases (up to $7,000 per year), 3% cash rewards for all dining and travel expenses, 2% on Costco purchases, and 1% on all other spending.

While the rewards are sweet, the terms can be expensive. This is not a good card for borrowing, so be sure to pay it off each month.

The Fine Print
  • APR: 0% for seven months, then 15.74%
  • Penalty APR: 29.99% (applied if you make a late payment)
  • Annual fee: $0 (requires $55 Costco membership)
  • Late fee: Up to $37
  • Returned payment fee: Up to $37
  • Cash advance fee: Greater of $10 or 5% of transaction
  • Cash advance APR: 22.49%
  • Rewards: 1% cash back on all spending.
  • Bonus rewards: 4% on gas (up to $7,000 in gas purchases). Gas cannot be purchased from other wholesale clubs. 3% on dining and travel expenses. 2% rewards on all purchases from Costco and Costco.com.

Apply Now

If you’re a frequent business traveller, Chase Ink offers the best rewards. You earn 3 points for every dollar you spend on travel, but you get a travel bonus. Every point is worth 1.25 points when you book through Chase Ultimate Rewards.

Travel perks also include trip insurance, auto rental collision damage waivers (this is primary coverage), and more.

Click here to see details including perks and the fine print.

Gas

 

As a small business owner, you know that driving can be an economical choice, but you can also earn rewards for all those miles on the road. Sam’s Club Business MasterCard gives 5% cash back rewards on gas (except when purchased at other wholesalers), and 1% on all other spending.

Even if you don’t frequent Sam’s Club, this is the best category for rewards for gas purchases.

Click here to see details including perks and the fine print.

Learn More

Risks of Using Small Business Credit Cards

Many business owners see credit cards as an easy solution to their capital needs. But small business credit cards have unique risks. Savvy entrepreneurs will consider the risks before opening a new line of credit. These are the most important considerations.

 

1. Personal Liability

As a small business owner, you’re personally liable for credit card debt. Business bankruptcy won’t protect you. Whether your business succeeds or fails, you have to pay back the debt.

The only way to get rid of small business credit card debt is to declare personal bankruptcy. Bankruptcy destroys your credit history for a few years, and it stays on your report for 7-10 years.

Don’t treat a credit card like venture capital. It’s not. You need to repay it.

2. Credit Bureau Reporting

Small business cards don’t report to the credit bureaus the same way personal cards do. Depending on which card you choose, if you pay your credit card on time, you may not see any information on your personal report. For most business owners, that is a good thing. It will keep your personal credit utilization low.

However, an unpaid bill will show up on your personal credit report. A bill that goes unpaid for 60 days will generally appear on your personal credit report. Some banks offer more generous reporting and some less. You can speak with a banker to determine your bank’s reporting standards. Still, your personal credit score can take a hit at the same time that your business credit runs afoul.

When you take out a business credit card, put precautions in place to protect yourself. You can limit employee spending, and remove authorized users. You can also set up automatic payments each month.

3. Not Protected by the Credit CARD Act

In 2009, Congress passed the Credit CARD Act. The act curtailed predatory lending behaviors, including raising interest rates on existing balances. It also required credit cards to be more transparent about rates and fees.

This act does not apply to business credit cards. With a small business card, banks can raise the interest rate on your existing balance at any time. A higher interest rate means a bigger minimum payment and a longer time to pay off your debt. If you’re using your small business credit card to finance something, you could be at risk.

Still, many banks will not raise your rate if you have an excellent history of on-time payments. It is simply a risk to understand.

Another risk related to the Credit CARD Act is the possibility of double-cycle billing. Business credit cards do not require an interest accrual grace period. This means you may begin accruing interest on purchases right away. We only recommend cards that have a grace period of at least 23 days built in. If you choose a different card, be sure to check for this in the rates and fees schedule.

4. Employee Risk

Small business credit cards make it easy to watch employee spending. Still, they pose serious risks. You’re personally liable for any employee spending on a credit card. If you wouldn’t trust an employee with your wallet, don’t trust them with a company card. Employees can rack up debt and leave the company. That leaves you with a bill and no recourse to get the money back.

The Best Ways Use Small Business Credit Cards

Once you understand the risks of small business credit cards, you can also understand their best uses. Over 65% of small businesses use credit cards on a regular basis. Some use them for rewards, and some for financing. In fact, close to 10% of all small business financing comes from credit cards.

Here are some of the best ways to use a small business credit card.

 

1. Earning Rewards and Protection

If you pay your small business credit card in full each month, you can earn substantial rewards. Many business credit cards offer perks, including cash back, travel rewards, extended warranties, trip insurance, and more. As a business owner, you can reinvest the rewards into your business or take them for personal use.

2. Managing Cash Flow

Cash flow problems destroy small businesses, but credit cards provide short-term working capital. If you have a sales cycle that lasts 30 days or less, a credit card can fund inventory purchases. By the time your bill comes due, you’ll have money to pay it off. If you follow this practice, you’ll pay no interest, and you’ll manage your cash flow.

Credit cards can simplify employee monitoring, too. Most business credit cards allow you to place individual restrictions on employee use. That means you can limit how much and where employees can use company cards. But your employees may manage to misuse the cards. If they do, you will be stuck with the bill.

3. Building Business Credit

Businesses have credit reports just like people. Business credit cards can help you build your score. To build your business credit, hold the card under your employer identification number (EIN).

When your EIN establishes a record of paying its bills on time, it makes your business creditworthy. That means you’ll have an easier time finding long-term loans at great rates.

63% of all small businesses carry debt. Having a lower interest rate on that debt could make the difference between success and failure. This means every small business should take their credit history seriously from the outset. Small business credit cards may allow you to build that history without paying interest or fees.

4. Short-Term Borrowing

Small business credit cards have high interest rates, but they can work for short-term borrowing. If you know that you’ll only carry debt for a few months, you may want to finance something with a credit card.

Credit cards do not have origination fees or prepayment penalties. Sometimes this means that they offer the best terms for short-term borrowing. Just be careful when you borrow, and pay it back quickly. High interest debt compounds over time.

If possible, borrow on a card with a 0% introductory offer. Remember, failing to pay off 0% interest purchases may result in back interest. Be sure you understand the risks before you borrow.

The Worst Ways to Use Small Business Credit Cards

Small business credit cards aren’t always the best tool to get the job done. These are a few times when you should avoid using credit cards.

 

1. Personal Expenses

Bad accounting sinks many entrepreneurs. Always keep your personal spending off of your business credit cards. This will simplify bookkeeping, and it will keep your business credit utilization low. If you need to borrow for personal expenses, look for a low-interest credit card instead.

2. Long-Term Financing

Due to the high interest rates, most businesses should not finance long-term commitments using credit cards. Instead, consider an installment loan from a local credit union or a bank.

Applying for an installment loan can be a pain, but the lower interest rate will be worth it in the long run. Keep money in your pocket and avoid small business credit cards for long-term financing.

3. Cash Advances

Cash advances are the most expensive way to use a credit card. Banks begin charging interest right away, and the advance has a higher interest rate. Cash advances also have high fees of up to 10% of the amount you withdraw.

If you need cash, withdraw it from your business checking account instead, or take out a traditional loan.

4. Financing a Failing Business

Do not use credit cards to help a failing business limp along. Too many people will not give up on their idea even when the execution doesn’t work out. Credit card debt will bury a failing company and erode your personal wealth.

Remember, negative credit behavior will show up on your personal credit report. Plus, courts hold you liable for all credit card debt your business incurs. Use an objective lens to decide whether you need to shut down your business.

TAGS: ,

Consumer Watchdog, Credit Cards

Warning: Even the Best Small Business Credit Cards Do This

Advertiser Disclosure

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Best Small Business Credit Cards

If you have a small business, you might be tempted to open a small business credit card. When used properly, small business credit cards can provide you with free working capital, rewards and the ability to manage the expenses of you and your employees more easily. However, there are real risks that you need to consider.

  • You are personally liable: when you apply for a small business credit card, you are signing a credit application that makes you personally liable for any spending that happens on that card. If your company fails to reimburse you or goes bankrupt, you will still be held responsible for making payments and should expect collection activity from your credit card issuer.
  • Your personal credit report and credit score can be impacted: with most cards, the balance will not appear on your credit report so long as you are current. However, if you miss payments, many major credit card issuers will report the balance and delinquency to your credit report. And if the credit card issuer ever sells your debt to a collection agency, you can expect a collection item to hit your personal report as well.
  • Your interest rate can be increased on your existing balance: In 2009, the CARD Act was passed. The legislation made it very difficult for credit card issuers to increase rates on existing balances. However, the law only applied to consumer cards: the interest rate on your small business account can increase at any time. If you want to use your small business credit card to borrow, you will not have certainty regarding the interest rate.
  • If you give cards to your employees, you are likely personally liable. Many small business credit cards give you the option of adding credit cards for your employees. Usually that means you are adding an “authorized user” who will have the same charging privileges as you. It is like adding your husband or wife as an authorized user to your personal credit card. If your employee goes crazy at the local bar or books a flight to Tahiti, you are personally liable for the charges.
  • CARD Act protections do not extend to small business credit cards. In addition to the limitations on price increases mentioned above, none of the other CARD Act protections apply to small business credit cards. I will explain all of those protections in more detail later.

Small business credit cards can still be a great tool (I use one). Just make sure you understand the risks and the alternatives. In general, a small business card can be an excellent deal if you earn points and pay your balance in full and on time, accruing no interest. In addition, the cards can be a useful way to fund very short-term borrowing needs. However, if you need to borrow a larger amount over a longer period of time, an installment loan with a fixed interest rate from a marketplace lender or local bank would likely be a better option.

If you are shopping for a loan, you can read more about the best small business loans

I will now explain each of the potential risks in more detail below:

Personal Liability

If you have a small business and need to borrow money, you will likely need to take provide a personal guarantee, which means you would be held personally liable for repayment of the debt. This risk is not unique to small business credit cards. If you take an SBA loan, borrow from a marketplace lender or go to your local bank, you will likely need to provide a personal guarantee.  You really need to think twice before borrowing. If your business needs working capital to fund orders, make sure you pay close attention to the credit-worthiness of your customers before taking on too much debt to fund their orders. And you also need to be very honest with yourself if your business is in financial difficulty. It might be surprisingly easy to borrow money, even when your business is struggling. But if your business ultimately fails, you don’t want to create unnecessary debt that will follow you even after your business is closed.

Personal Credit Report

Most small business credit cards will not report to consumer credit reporting agencies so long as your account is current. This is important, because you do not want the balance on your small business credit card to appear as personal debt. However, if you stop paying your small business credit card (and default), you can expect the negative information to end up on your personal credit report.

Many major credit card issuers will start reporting to your personal credit report as soon as you are seriously delinquent. In general, once you are 60 days past due you can expect the negative information to hit your report. The reporting will have a big negative impact on your score. Delinquencies of 60 days or more can easily take 100 points or more from a credit score.

Even if your small business credit card does not report to the credit bureau, a default can still appear on your report. Typically, credit card companies will write off the debt at 180 days past due and sell the debt to collection agencies. At that point, the collection agency registers a collection item on your credit report. And, along the way, you could also have a legal judgment.

In a best case scenario, the debt does not appear on your report. But if you miss your payments, you can expect big derogatory marks to hit your score, in addition to the collections activity.

Your Interest Rate Can Increase

If you miss a payment, even by just one day, you should expect a big increase in the interest rate on your existing balance. Even worse, your rate could be increased even while you are current. For example, if you max out your credit card you could appear riskier to the bank. Because you appear risky, the bank could increase your interest rate.

This could have a big impact. Imagine you have a $15,000 balance at a 15% interest rate. If the rate increases to 25%, you could see an increased monthly interest charge of $125. Your debt could cost you an extra $1,500 a year with no warning and no possibility to avoid the interest rate increase.

If you need to borrow money, you should consider a term loan from a marketplace lender or your community bank. With a term loan, you can get a fixed interest rate. For example, Funding Circle offers loans with an APR as low as 5.49% and LendingClub offers an APR as low as 7.77%. When you take a term loan, you are at least locking in the cost of your borrowing.

Before the CARD Act, the credit card industry was guilty of outrageous interest rate increases, especially using the vague language of “universal default.” That is why the CARD Act made such interest rate increases impossible. Unfortunately, small businesses never received that same protection and need to proceed with caution.

Note: you can use a personal credit card for business expenses. Because you are personally liable for the debt regardless, this could be a good option. The benefit is that the interest rate cannot be increased on your debt so long as you are current. (Remember that most interest rates are variable – so the rate could increase as the Prime rate increases, but you would not see an increase for punitive reasons). The risk is that you would be putting that balance on your personal credit report, which could impact your credit score and your ability to qualify for products like mortgages, because the underwriters would treat that debt as personal debt. If you want to find a consumer credit card, you can read our Best Credit Card Guide.

Employee Cards Can Make You Liable

Often you might want to give credit cards to employees so that they can make business purchases. Most credit card issuers will allow you to give supplementary credit cards to employees. There are two big benefits to this service. First, you can earn points or miles on purchases made by your employees. Second, you have complete visibility of the money being spent by your employees.

But there is a big risk. By giving a card to your employee, you are giving them access to your credit limit. It is just like a supplementary card that you give to your husband or wife. If your employee decides to have a big night out at a bar or a flight to Tahiti, you will be personally liable for the charges. Just be very careful before you agree to an arrangement like this.

Other CARD Act Protections

There were a number of consumer protections provided by the CARD Act that do not apply to small business cards. These include:

  • Penalty Fee Restrictions: penalty fees have to be “reasonable and proportional” to the relevant violation of account terms. In general, penalty fees for consumers should be restricted to $25 for a first late payment and $35 for each subsequent late payment.
  • Overlimit Fee Opt-In: issuers can only charge an overlimit fee if the customer opts in to overdraft protection.
  • Payment timing: Payments must be due on the same day of every month, reducing the risk of confusion.
  • Payment Allocation: When the payment amount exceeds the minimum due, issuers generally need to apply the amount above the minimum due to the balances with the highest interest rates first.
  • Monthly Statements: The statement needs to show how long it would take, and how much it would cost, to pay off the debt if only the minimum due is made. In addition, the statement needs to show the payment required in order to pay off the balance in three years.
  • Ability to pay: Card issuers cannot open a credit card or increase a credit line unless the ability of the consumer to repay is taken into account.

All of the protections listed above are required for consumer credit cards, but are not required for small business cards.

In many cases, credit card issuers have decided voluntarily to provide some of these protections to consumers. However, it is important to understand that these protections, when provided, are at the discretion of the bank and can be removed.

Small Business Credit Cards Can Still Provide A Valuable Service

When used properly, a small business credit card can still provide excellent value. Here are some of the benefits:

  • Small business credit cards can be a great way to manage discretionary expenses, particularly when combined with services like Expensify and integrated with QuickBooks. T&E, travel and other expenses can quickly get out of hand, and creating electronic records of every transaction can help the budgeting and management process.
  • A small business credit card is a free line of credit if you pay the balance in full and on time every month. In effect, you are being given a free working capital line of credit. For example, if you use Google AdWords to acquire customers, you can get 20 – 25 days (depending upon the length of the grace period) before you have to pay the bill. This can be very helpful for cash management purposes.
  • For short-term borrowing needs (for example, 30 days), a small business credit card could be the least bad option. Imagine you need to borrow $15,000 for 2 months until you get paid for a job. At an 18% interest rate, it would cost you about $450 of interest to borrow the money for two months. That is a lot cheaper than most merchant advance businesses, which have interest rates well above 40%.
  • You have the potential to earn rewards. It is easy to earn at least 2% on your spending, which can be serious money depending upon the spending needs of your business.
  • The debt associated with your small business will not appear on your personal credit report so long as you remain current, which can help keep your credit score up.
  • One of the greatest accounting risks faced by small businesses is that they co-mingle their personal and business accounts. By using a separate card, you can ensure you don’t mix up your personal and business expenses.

Just remember – if you have a longer term borrowing need, it is better to go through the process of applying for a term loan. Although the process will take a bit longer, you should be able to get a much lower, fixed interest rate.

TAGS: , ,

Reviews, Small Business

Review: American Business Lending Small Business Loan

Advertiser Disclosure

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

personal-loan_lg-e1469273811143

American Business Lending is a Preferred SBA non-bank lender offering SBA small business loans. SBA Loans are guaranteed by the Small Business Administration. Since the government may guarantee up to 85% of this small business loan, the lender is able to qualify business owners with more lenient standards and offer a lower interest rate than traditional loans.

You can borrow $300,000 to $5,000,000 for commercial financing. This loan can be used for expansion, refinancing, business acquisitions, start-ups, franchises, furniture, fixtures, equipment, inventory and working capital.

Loan interest on the American Business Lending SBA Loan is the prime rate + up to 2.75%. The Wall Street Journal prime rate at the time of publication is 3.50, so you can expect an interest cap of 6.25%. However, interest on this loan is floating, which is another way of saying variable. Interest rates will adjust quarterly based on the prime rate.

The loan term is 7 to 25 years. Collateral may be required. There’s a minimum 10% down payment. You may be able to avoid a down payment if you’re getting a loan for a refinance.

The American Business Lending Loan Process

There are four steps to the loan process. First, you’ll get assigned a loan officer. They’ll help you choose which loan product is the best for you and then you put in an application. During the application process you’ll turn in a few documents to qualify you for the loan including:

  • Financial statements
  • Federal tax returns for your business from the last 3 years
  • A business plan or projections for the next two years if your business is a start-up
  • A purchase agreement if you’re buying real estate or business assets
  • The franchise agreement if you run a franchise business
  • A copy of the note being refinanced if you’re refinancing a loan

From there, your application goes into underwriting where your loan request will be reviewed. An underwriter will possibly follow up with questions to qualify you. You get a credit decision within 72 hours of turning in your complete loan application.

Once approved, you’re given a commitment letter, which includes: your interest rate, loan amount, collateral required and other loan terms. You’ll have to pay a good faith deposit, which will later be used to cover the closing costs, credit reports and other fees associated with taking out a loan. After signing the commitment letter and turning in your good faith deposit, you can expect your loan to close within 30 to 45 days.

Since we just mentioned closing fees, now’s a good time to go into how much this is going to cost you.

Fees and Gotchas

American Business Lending charges a $1,500 fee for packaging the loan on top of the SBA guarantee fee charged by the Small Business Administration and other closing costs.

The Small Business Administration fee is charged to the lender and the lender can choose to eat the cost or charge it back to you. In this case, American Business Lending will charge you. The SBA guarantee fee for this loan will range from 3% to 3.75% of the guaranteed portion depending on how much you borrow.

Aside from packaging and the guarantee fee, there’s a prepayment penalty to consider. If you take out a loan that has a term less than 15 years, there’s no penalty for paying early.

If you have a loan term of 15 years or more you can prepay up to 25% of the principal during the first 3 years without penalty. Payments you make above 25% will cost you 5% of the principal the first year, 3% the second year and 1% the third year.

Pros and Cons

We’ve gone over the basics. Let’s head into the pros and cons of this loan:

Pro: Competitive interest. Loans guaranteed by the Small Business Administration have an interest cap. The prime rate has been at a low, so even though interest is variable it’s still a good deal for now.

Con: Fees. This lender is transparent with most fees there’s just many fees to consider. Particularly the closing costs and early prepayment fee. American Business Lending doesn’t say how much closing costs are exactly but you will be charged to cover appraisals and environmental reports, loan closing attorney’s fees, credit reports and lien searches. You may also get penalized if you’re able to repay this loan early.

Pro: Loan size. American Business Lending gives you the flexibility to take out a large loan amount and you can borrow for a longer time span than you can for other non-SBA business loans. We’ll cover a non-SBA business loan below so you can see the difference in loan amounts and terms.

Con: Loan size. The loan size is a plus for business owners who want to borrow over $300,000, but a negative if you’re looking for a smaller loan amount. Other SBA Loan products like the SBA Express Loan allow you to borrow $50,000 through an expedited process. American Business Lending doesn’t appear to have this option.

Pro: Experience with SBA loans. One of the downsides of SBA Loans is the application process. You have to qualify with the lender and also have your paperwork approved by the Small Business Association. According to the American Business Lending site, it’s a preferred SBA lender and the loan officers are experienced in processing these loans. Ideally, this experience will make the process less burdensome.

Con: Long wait time for funds. Applying and closing this loan will take awhile. Getting a credit approval will take 3 days. Then closing will take up to 45 days after you sign off on the contract. If anything should hold up the process like an appraisal you could be waiting for a few months until you get your hands on the loan.

American Business Lending

Apply Now

Alternatives to American Business Lending

In our comparison section, we’re going to put the American Business Lending SBA Loan against two competitors including one that also offers the SBA Loan and another lender that doesn’t offer SBA Loans.

SmartBiz has an SBA Loan process that’s handled completely online. You can borrow $30,000 to $350,000 for 10 years. Interest ranges from variable 6.25% to 7.25%. Interest is higher at SmartBiz because the Small Business Administration sets a higher interest cap for smaller loans that have shorter loan terms.

You can pre-qualify for a SmartBiz loan within 5 minutes and get funding within 7 days of completing your application. SmartBiz doesn’t have a prepayment fee. The packaging fee is 4% in addition to closing costs. For loans above $150,000, there’s a 2.25% SBA guarantee fee.

smartbiz

Apply Now

Funding Circle can get you funds quickly and with a competitive interest rate, if you have a good to excellent credit score. You can borrow $25,000 to $500,000. This is comparable to the amount you can borrow from American Business Lending. However, the loan terms are shorter.

You have between 1 and 5 years to repay your loan. If you’re taking out a six-figure loan a short repayment window could be a challenge. Interest is from 5.49% to 21.29% APR. There’s an origination fee of 1.49% to 4.99%.

Funding Circle

Apply Now

Who Will Benefit the Most From an American Business Lending Loan?

SBA Loans open the door to financing for small business owners who can’t qualify for traditional financing. So, an American Business Lending SBA Loan could be a good choice if you need to borrow a large sum with a low-rate.

Instead of a percentage package fee like SmartBiz, American Business Lending has a flat $1,500 fee, which can save you money and gives it an edge. One the other hand, SmartBiz has a quick and streamlined application process that is more convenient for smaller loans.

One question you should ask a loan officer at American Business Lending and SmartBiz before borrowing is how much the closing costs will be beyond the packaging and guarantee fees for the loan you choose.

TAGS: , ,

Reviews, Small Business

Review: National Funding Small Business Loan

Advertiser Disclosure

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

personal loan_lg

National Funding is a lender that provides businesses funding for things like day-to-day operations, inventory, expansion, and equipment. The goal of National Funding is to offer an alternative to traditional small business loans that take a long time to get approved for and require never-ending paperwork.

National Funding Small Business Loan Details

National Funding loans are unsecured. An unsecured loan is one that doesn’t require assets as collateral or security in case you default. The loan cap is $500,000. You must have a credit score of at least 500 to qualify. Your business also needs to make over $100,000 in revenue.

Interest on the National Funding small business loan varies. We called into National Funding to find out the range of interest rates. The representative wasn’t able to offer specific rates because interest is unique to each business. If you’re interested in this loan, you’ll need to provide information on your business to find out how much it’ll cost you.

The loan application process is short and has minimal paperwork. You can get funding faster at National Funding than you can with a typical brick-and-mortar bank. National Funding can approve you and fund a loan within 24 hours.

Unique Payment Plan for National Funding Loans

This small business loan offers a unique repayment option for borrowers. Since National Funding understands making large loan payments can be difficult for small businesses, borrowers can choose a smaller, daily payment plan instead. Payments are fixed and automatically draw from your account each weekday.

Other National Funding Products

National Funding has two other products for businesses including equipment financing and merchant cash advances. You can lease or finance equipment up to $150,000. National Funding offers same day approvals for equipment financing with no money down. You may also be able to defer payment for 60 to 90 days.

A merchant cash advance is where you borrow cash upfront then pay a percent of your credit card sales each day plus a fee until you repay it in full. National Funding offers merchant cash advances up to $250,000. No collateral required and you can get funding within 24 hours.

Fees and Gotchas

Transparency with terms and fees is an area where National Funding falls short. The only fee we were able to get from a representative is a 2% processing fee for the small business loan. But, again, fees will vary because each loan product is tailored to your business. National Funding has a no-obligation application that you can fill out for more details. 

Pros and Cons

The benefit of this small business loan is you can get a large amount of unsecured money while avoiding the hassles of borrowing from a traditional bank. Since each loan is customized, it’s possible that you and the lender can create a loan that suits your business perfectly. At the same time, the ambiguity of tailor-made loans leads us to some cons.

Since each loan is unique, the terms are unclear. Hardly any information is readily available on the average interest rate, loan term length or fees for this small business loan. Of course, these are all important details you need to know to make an informed decision while shopping around for funding.

The cost of the equipment financing and the merchant cash advance products are also not clear. A merchant cash advance is often expensive. Plus, it takes a bite out of your credit card revenue each day, giving you less control of your own cash flow. A small business loan with a competitive interest rate is almost always a better option than a merchant cash advance.

Screen Shot 2016-03-02 at 12.58.46 PM

Apply Now

Alternatives to the National Funding Small Business Loan

Funding Circle and Lending Club are two alternative lenders that have small business loans with more transparent terms.

Funding Circle offers loan terms of 12 to 60 months. Interest ranges from 5.49% to 22.79% APR. You can borrow from $25,000 to $500,000. The origination fee is 0.99% to 4.99%. You can get approved quickly and get funds in under 10 days. There are no prepayment penalty fees. Funding Circle takes into account factors like your credit score, cash flow, and customer reviews to approve your application.

Funding Circle

Apply Now

Lending Club has loan terms from 12 to 60 months. Interest ranges from 5.90% to 25.90%. You can borrow up to $300,000. The origination fee is 0.99% to 6.99%. The application is online and you can complete it within 5 minutes. Collateral is only required for loans above $100,000. There are fixed monthly payments and no prepayment penalties.

LendingClub

Apply Now

Who Will Benefit Most from a National Funding Small Business Loan?

The vague terms of National Funding products could be red flags. So, exhaust all other options including loans from alternative lenders and loans backed by the Small Business Administration before considering National Funding. If you do choose this loan, go through the contract terms with a fine-tooth comb and ask pointed questions to your loan officer about fees to avoid any surprises.

TAGS: ,

Reviews, Small Business

Review: Celtic Bank Small Business Loan

Advertiser Disclosure

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Celtic Bank Small Business Loan

Celtic Bank offers SBA business loans which are loans guaranteed by the Small Business Administration (SBA). Only SBA approved lenders can provide these loan products. The purpose of this program is to make small business financing attainable and affordable for owners.

The SBA guarantees a percent of the loan to reduce financial risk for the lender. Because there’s less risk, these loans have qualifying criteria that are more relaxed than a typical small business loan. You can get approved for a loan that has low-interest even if you have an average or fair credit score. Plus, SBA Loans allow you to borrow more money for a longer period of time than other small business loans.

Celtic Bank SBA 7(a) Small Business Loans

There are several types of SBA Loans, but the most common one is the SBA 7(a) Loan. You can use this loan for capital, refinances, business acquisition, construction, equipment or inventory. Interest rates for at Celtic Bank range from 5.50% to 6% APR. The maximum loan amount you can borrow is $5 million. Loan terms are up to 25 years. SBA Loans require collateral for security in case you can’t make loan payments.

Of course, since the SBA Loan involves the government you and your business need to meet a few requirements to qualify. You may be eligible for this loan if you meet these standards:

  • Operate a for-profit business.
  • Have reasonable equity in the business.
  • Have a demonstrated need for funding.
  • Have no other delinquent government debt.

For a full list of what qualifies or disqualifies a business from an SBA Loan check out the Small Business Administration program eligibility page.

Celtic Bank Express SBA Loans

Application and funding for the SBA 7(a) loan can take several weeks. If you need quick cash, Celtic Bank offers the SBA Express as well. It’s a loan for working capital that has an accelerated application process. You can borrow from $20,000 to $150,000. The loan term is up to 10 years. There are no prepayment penalties. If you choose the SBA Express Loan you can get pre-approved within 24 hours.

Applying for the Celtic Bank Small Business Loan

To apply for a Celtic Bank loan, first you go through a short pre-application online that asks basic questions about your business. Once you complete the questionnaire, Celtic Bank will list loan options that you may qualify for. There’s an online application, but you may also have to send in a few documents outside of the online form to complete the process.

Find Other Small Business Loan Offers Here

Fees and Gotchas

The SBA charges a guarantee fee for the SBA 7(a) Loan. The fee is initially charged to the lender. The lender can choose to pass on the fee to you. There’s no fee if you borrow less than $150,000. If you borrow more than $150,000, the fee ranges from 0.25% to 3.5%.

On top of the guarantee fee, Celtic Bank may charge a closing or processing fee. However, Celtic Bank doesn’t list these fees on its website. And we had trouble getting in touch with a loan officer. Before committing to this loan, you need to ask for more information on the fees.

Pros and Cons

A pro of going with Celtic Bank for your small business loan is the loan size. If you need to borrow a large sum at low-interest, this SBA Loan offers rates and terms you may have trouble finding with another lender. Celtic Bank is also one of 10 approved banks that give out the most SBA Loans in the U.S., which suggests loan officers are very familiar with SBA Loan procedure.

On to the negatives: Celtic Bank is less transparent with terms and fees than other lenders. You won’t get access to much information unless you submit an email address on the site and complete the questionnaire. Calling into the bank and reaching someone is hit or miss. The application process is not entirely online which you may find less convenient than other options.

Celtic Bank

Apply Now

Alternatives to Celtic Bank Small Business Loans

SmartBiz offers SBA Loans as well with a fully online application and transparent terms. The loan cap at SmartBiz is lower than the one at Celtic Bank. You can borrow up to $350,000. The loan term is 10 years. Interest ranges from variable 6.25% to 7.25% APR. There’s no prepayment penalty fee. You can get funding within 7 days. SmartBiz charges a 4% referral and packaging fee. If your loan is over $150,000, there’s also a 2.25% SBA guarantee fee.

smartbiz

Apply Now

Funding Circle is an example of an online small business lender that doesn’t offer SBA Loans. So, let’s see what an alternative lender has to offer. You can borrow $25,000 to $500,000 from Funding Circle. The loan terms are 1 to 5 years (considerably shorter than the Celtic Bank loan). Interest is from 5.49% to 22.79% APR. There’s an origination fee of 0.99% to 4.99%.

Funding Circle

Apply Now

Who Will Benefit the Most From a Celtic Bank Small Business Loan?

You’ll benefit from a Celtic Bank small business loan if you need to borrow a large amount for your business. Or you need to get your hands on money quickly. If you do choose to explore Celtic Bank as an option for your small business, make sure you reach someone to discuss all the fees associated with the loan.

TAGS:

Reviews, Small Business

Review: LiftForward Business Loan

Advertiser Disclosure

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

storecard - lg

LiftForward is an alternative lender that offers small and mid-sized businesses quick access to funding. It specializes in working capital, purchase order and asset-backed loans. LiftForward will also refinance merchant cash advances also known as MCA. (A merchant cash advance is when you receive cash upfront for your business and agree to repay the cash back and fees with a percentage of your credit card sales.)

According to LiftForward, you can submit an application in less than 10 minutes. Then within 24 hours someone from underwriting will contact you to go over loan options. The goal is to have your application approved and the loan fully funded within 48 hours. Depending on your credentials, LiftForward may even be able to give you $50,000 in funding the same day.

Now, if you’re shopping for a business loan, you’ve probably noticed there are many online lenders offering alternatives to the average brick-and-mortar loan. In this post, we’ll go over the details of LiftForward and compare it to other options to help you decide if it’s the right one for you.

[5 Best Small Business Credit Cards]

LiftForward Loan Details

LiftForward offers loans from $10,000 to $1 million dollars and loan terms from six to 36 months. According to a LiftForward representative, interest rates range from 16% to 36%. Although, the website states a different range of 0.67% to 3.00% interest per month which works out to be about 8% to 42% annually.

As far as qualifying criteria, LiftForward is fairly flexible. Your personal credit score must be at least 600. However, LiftForward is willing to work around your credit score if you can show business strength.

Aside from your personal credit score, LiftForward will consider the number of years you’ve been in business, your business credit score and revenue. Having at least two years in business is preferable, but LiftForward is willing to approve a newer business if you have a track record of success. After your first loan, you can keep requesting financing through the account you create without applying again. 

Fees and Gotchas

According to LiftForward, there’s an origination fee that ranges from 1% to 5% and the total cost of your loan will include that fee plus your interest. Here’s an example scenario: If you borrow $10,000 for 36 months with a 2% origination fee the total loan is $10,200.  With interest rates from 0.67% to 3.00% per month, the total cost of the loan will range from $11,517.91 to $16,929.58.

[4 Things You Need to Know About a Small Business Before Opening One]

Pros and Cons

Pros

So, what are the pros of LiftForward? The top benefit is the speed and ease at which you can get your hands on money. Plus, LiftForward will let you borrow a large sum. The application is completely online which is convenient. In addition, LiftForward has flexible qualification criteria. An underwriter will call you and together you can come up with a loan option that’s tailored to your business needs. As your business grows you can also borrow more money.

Lastly, merchant cash advance fees can get very expensive. If you qualify for a reasonable rate with LiftForward, a refinance to a business loan can save you money.

Cons

As for the drawbacks of LiftForward, let’s face it, there are a lot of lenders online with easy application processes and many of them also have more competitive interest for a business loan. So, ultimately, the convenience factor doesn’t make LiftForward stand out of the crowd.

Obtaining loan details like the rates, qualification criteria and fees for the LiftForward loan takes some extra effort. The information on the website differs from the information you’ll receive if you call in for rates and fees, so you should verify your rate in writing before accepting an offer. 

LiftForward

Apply Now

Alternatives to LiftForward Business Loans

Funding Circle and SmartBiz are two competitors where you may be able to score a lower interest rate and lower fees if you have a strong business and good credit history.

Funding Circle offers loan terms of 12 to 60 months. Interest rates range from 5.49% to 22.79% APR. You can borrow from $25,000 to $500,000. The origination fee is 0.99% to 4.99%. You can get approved within 10 minutes and get funding within 2 weeks. Funding Circle provides loans to help you meet business goals like expanding, hiring new people or purchasing equipment.
SmartBiz is another loan option for business owners and it happens to offer the SBA loan. An SBA loan is unique because the Small Business Administration backs it; this allows for special benefits like lower interest rates and longer loan terms. You can borrow from $30,000 to $350,000 for 10 years. Interest rates range from 6% to 7%.

Funding Circle

Apply Now

SmartBiz charges a 4% referral fee. If you borrow over $151,000 there’s also a 2.25% SBA guarantee fee. To qualify for a SmartBiz loan, you can’t have any adverse credit history. You have to be in business for at least 2 years and have enough cash flow to cover your payments. Pre-qualification takes a few minutes and you can get money in 7 days. 

smartbiz

Apply Now

Who Will Benefit Most from a LiftForward Loan?

LiftForward may be on your shopping list, but it shouldn’t be at the top. Sure, the money is quick and the qualification criteria accommodating, but these are also signs of high interest. Take the time to shop around for the very best deal before you settle on this business loan.

TAGS: ,

Reviews, Small Business

BlueVine Review: Cash Advances for Business Invoices

Advertiser Disclosure

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

personal loan_lg

If you’re a small business owner, freelancer or solopreneur, you probably experience the stress of sitting on unpaid invoices from time to time. In a perfect world, you would get paid for delivering your products and services right away. But, in reality, you have to patiently wait for the money to roll in. During this time, your business may suffer from low cash flow and your own bills can begin to pile up. Well, BlueVine has a solution. The company offers fast cash advances to cover your invoices.

The BlueVine Cash Advance in Detail

Credit lines are available from $5,000 to $250,000. Once approved for a credit line, you can choose which invoices you want to get advances on (up to your credit limit). BlueVine can give you an immediate advance in as little as 24 hours after you sign up and make the first request. Subsequent requests for advances can be funded within an hour.

BlueVine gives you 85% of the invoice upfront. You get the rest of the invoice amount (minus fees) after your customer pays. The standard rate is 1% per week with a minimum of 3 weeks.

Let’s take a look at an example scenario. Say your customer owes you $3,000, the invoice is due in 3 weeks and they pay on time:

  • BlueVine will give you $2,550 of the invoice upfront (85% of $3,000)
  • The weekly fee is $30 and $90 for 3 weeks (1% of $3,000)
  • When your customer pays the invoice you’ll get a remaining $360 balance back

How BlueVine Works

Once you open a free account, you can sync accounting software, like Xero, FreshBooks and QuickBooks, to your BlueVine dashboard and each of your open invoices will populate. If you don’t use an accounting software, you can also enter invoices directly in BlueVine.

From there, you can click on which invoices you want to be paid through a cash advance. BlueVine does set the following guidelines for invoices that can be funded:

  • The invoice has to be more than $500
  • The due date on the invoice must be at least 1 week away
  • The payment term must be shorter than 12 weeks
  • The customer has to be a business (and not a consumer)
  • The customer must be in the U.S. or Canada
  • The product or service must be completed, delivered and accepted by your customer

BlueVine assigns you a P.O. Box and a bank account in your name. Customers either mail payments or deposit money into your account. The money received goes towards repaying your advance and then you’re given the remaining 15% balance minus fees, like we discussed above.

[4 Things to Know About a Small Business Before You Open One]

Qualifying for BlueVine Invoice Financing

BlueVine will consider your business cash flow, the strength of your debtors and your credit history to qualify you for funding. BlueVine doesn’t require perfect credit, but your credit score can’t be lower than 530. Both sole proprietors and freelancers are eligible for funding. Your business doesn’t have to be of a certain age to qualify and there’s no sales volume requirement.

Fees and Gotchas

BlueVine has very transparent fees and offers you flexibility with its funding model. Opening an account is free with no strings attached. You don’t have to sign a long-term contract or pay termination fees if you decide to no longer use the service. There’s also no origination fees or prepayment penalties.

You can get funds transferred to you by ACH or bank wire. ACH transfers are free, but bank wires cost $15. BlueVine also offers the opportunity to cut your rate. As you build history using the service, you may qualify for a 20 to 30% discount on the standard rate.

[9 Best Small Business Loan]

Pros and Cons

There are several benefits to using BlueVine. The application is completely online and you can get access to funds quickly. BlueVine is a viable option if you prefer not to take out a loan to resolve cash flow problems or to grow your business. Unlike other small business loans, a BlueVine advance gives you the freedom to ask for exactly what you need.

What are the drawbacks to the service? Although it’s convenient, it’s not the right solution for chronically late paying clients. You’ll end up paying more and more out-of-pocket the longer they take to pay up. In addition, this service is for B2B operations. If you sell products or services to consumers and not businesses, at this present time you won’t qualify for funding.

Finally, consistently relying on cash advances for your invoices can create a never-ending cycle of debt. Although it’s convenient for one-off situations when you’re in a bind, you shouldn’t depend on cash advances to fund your entire business.

Blue Vine

Apply Now

Alternatives to the BlueVine Cash Advance

Fundbox offers another invoice financing solution, but the process is different and the terms are a little more complex. Instead of charging a standard rate like BlueVine, it tacks on a clearing fee which includes the cost of a cash advance and ACH transfer. The repayment schedule is 12 equal weekly payments. Fundbox has no subscription, origination or prepayment penalty fees. To get an idea of how much Fundbox will cost you in comparison to BlueVine check out the site pricing calculator.

Fundbox

Apply Now

For an alternative business loan option, Funding Circle offers loans from $25,000 to $500,000. Terms are available from 1 to 5 years. Rates start at 5.49%. The origination fee is 0.99% to 4.99%. There are no prepayment fees and you can get funding in less than 10 days. 

Funding Circle

Apply Now

Who Will Benefit the Most From BlueVine?

The concept of BlueVine is clever because you can get a cash advance for 85% of the exact amount that’s owed to you. You’ll benefit the most from this service if you trust your customers will pay in a relatively timely manner. Still, proceed with caution. This is not ideal for trouble clients that take forever to pay because you’ll end up sacrificing most of your income to advance fees.

TAGS: ,

News, Small Business

4 Things You Need to Know About a Small Business Before Opening One

Advertiser Disclosure

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

store card

The allure of being your own boss — it’s something we can all dream about, right? Although you probably already know that opening a small business takes a lot of hard work, determination and late hours, there are bound to be a few things you might not have considered.

MagnifyMoney’s co-founder Nick Clements spent years working for banks that made loans and issued credit cards to small business owners before launching his own small business. Here are some of the most important things he discovered along the way.

1. Your Small Business Isn’t Borrowing — You Are

Most people who launch small businesses do so by taking out loans to pay for things, or by opening new credit cards specifically for that business. It’s important to realize that as the owner, you’ll most likely be taking personal liability for whatever you borrow for your business, as well. “In other words, if your business goes bankrupt, you will still be personally responsible for the debt,” says Clements. With that in mind, he warns new small business owners against separating the idea of spending on a small business credit card or taking out a loan from a marketplace lender from their own personal expenses. “If you think this debt will not affect your personal financial situation, it will,” he said. “So long as you are making payments on time, the debt from your small business credit card likely will not appear on your personal credit report. However, most credit card companies will start reporting the debt on your personal credit report as soon as you start missing payments.”

[Personal Credit Card vs. Small Business Credit Card for Your Business]

2. Small Business Loans Have Less Protection

The CARD Act of 2009 created many consumer protections for credit card use, but the same isn’t true for small businesses. “Many of the protections found in The CARD Act only apply to consumer credit cards,” said Clements. “So if you take out a small business credit card, you will not have those same protections.”

The biggest risk of a small business credit card is that the interest rate on your existing balance can be increased. That was banned for consumer cards, but can still happen on small business cards. You also need to be careful if you are shopping for a loan. Small business lenders do not have to report an annualized interest rate in the way that consumer lenders do, and some products offered by small business lenders can have complicated pricing structures. “Unless you annualize the interest rate, you cannot compare,” says Clements. “For example, you could be offered a 4% fee on a cash advance product. However, if the full repayment is due within 30 days, that means your annualized interest rate could be 48% or higher.”

[9 Best Small Business Loans]

3. Your Personal Credit Score Will Affect Your Business

Your ability to get approved for small business credit cards and loans will largely be determined by your personal credit score, so be sure to stay on top of that in the weeks and months leading up your small business launch, as well as after. “If you are so focused on building your business that you forget to make some payments on your own accounts, you will be doing harm to your business as well,” said Clements. “Both small business credit card companies and marketplace lenders still heavily use FICO and other individual credit scores when making a lending decision.” 

4. Borrowing Shouldn’t Delay Difficult Decisions

When you’re a small business owner, you will occasionally have to make some hard decisions, and the ability to borrow money to stay afloat can sometimes interfere with making the smart choice. “If your small business is having difficulties, you will often find people willing to lend you a lot of money at high interest rates,” says Clements. “Although it might feel easier to borrow the money and keep going, you are only building a bigger problem for yourself.” Instead, Clements suggests taking a serious look at whether it’s time to reduce costs, or even exit the business completely. “Again, remember that you will likely be personally liable for any money you borrow,” he cautions.

At the end of the day, opening a small business comes with a lot of risks, but there are just as many rewards. Keeping the above things in mind, you can move forward knowing you’re making smart financial decisions — both for your business and for yourself.

[Compare Small Business Loans Here.]

TAGS:

Reviews, Small Business

Review: Wells Fargo Business Platinum Card

Advertiser Disclosure

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Review: Wells Fargo Business Platinum Card

Wells Fargo offers its Business Platinum Card to small business owners who have annual sales of less than $2 million. Credit lines are available up to $50,000 and you can get employee cards at no cost. There are also two rewards program options you can sign up to join.

Credit card interest is set according to the current Prime Rate; interest for new purchases ranges from the Prime Rate + 6.99% to the Prime Rate + 15.99%. As of this writing, the Prime Rate is currently sitting at 3.25% so you can expect between 10.24% to 19.24% in interest.

Interest is variable which is true for most business cards, so be sure to pay close attention to the interest rate on your statement if you carry a balance. A representative at Wells Fargo confirmed you will receive a notification on your statement if your interest should change. However, credit card issuers aren’t required to give you prior notice if interest increases.

Reward Program Details

The optional rewards program is free the first year but costs an additional $50 per year afterward. You can either choose to earn 1 point per $1 on every purchase or 1% cash back. There’s no limit to how much you can earn.

If you choose the point option, you’ll receive an extra 1,000 bonus points each billing cycle you spend more than $1,000. You can redeem points online for gift cards, cash rewards, airline tickets, brand name products or charitable donations. Points expire after 3 years.

If you choose the cash back option, the 1% can be credited to your account each quarter or cash can be deposited into a Wells Fargo checking or savings account. You’ll also earn an extra $10 every time you spend $1,000 in a month.

Credit Card Benefits and Features

The Wells Fargo Business Platinum comes with chip technology for security and for use worldwide. On top of the rewards program, cardholders can access discounts on merchandise and other products through Visa SavingsEdge and the Visa Business Partners Advantage Program.

Like most business cards, Wells Fargo comes with tools to manage your finances online. Most notably, there’s a Business Spending Report app to monitor expenses and Business Bill Pay. You can also link your business card to a checking account to avoid overdraft.

There’s Zero Liability Protection which covers you if unauthorized purchases are made on your account and Fraud Monitoring to prevent unauthorized card use altogether. Visa Purchase Security will replace or reimburse you for damage or theft of items you purchase. You may also qualify for extended product warranties up to an additional year.

For travel, the Wells Fargo Business Platinum card offers $250,000 in Travel Accident Insurance and Travel Emergency Assistance. There’s also Auto Rental Insurance available that will cover collision and theft.

Fine Print and Fees

There’s no annual fee for this card other than the $50 annual fee for the rewards program. The only other major fine print detail is the reward expiration date. Either you use points or you lose them within 3 years.

As far as fees, the over limit fee is $39. The return payment fee is $29 for each card that’s impacted. The late fee depends on your previous statement balance. If your previous statement balance is less than $100 the fee is $25. If your previous balance is $100 or greater the fee is $39. However, if you’re late two or more times in the past 12 billing cycles the late fee is $50. Wells Fargo does offer a grace period of 21-days for payments.  The international transaction fee is 3%.

Pros and Cons

The pros of this card are worldwide acceptance and the coverage that protect things you purchase. You can obtain many employee cards for free and you’re given some leeway with a 21-day grace period. Plus, you can connect your card to your Wells Fargo savings and checking accounts to create a one-stop shop to manage your finances.

The disadvantage is the rewards program. First, you have to pay to join it and it doesn’t give you an opportunity to make more than just 1 point per dollar or 1% cash back. In addition, the card fee schedule is costly especially if you miss payments. It’s in your best interest to use auto-pay or pay off your card in full each month to avoid fees and interest altogether.

Alternatives to the Wells Fargo Business Platinum Card

Bank of America Cash Rewards for Business MasterCard

The Bank of America Cash Rewards for Business MasterCard offers 1% cash back for all purchases, 2% cash back at restaurants and 3% cash back at gas stations and office supply stores. For the 2% and 3% reward tiers, there’s a cap of $250,000. There’s no annual fee and there’s a 0% APR special on purchases for 9 months. Standard interest is 11.24% to 21.24%.

Bank of America

Apply Now

SimplyCash Business Card from American Express

The SimplyCash Business Card from American Express offers 5% cash back on office supply store purchases and on wireless telephone services. Then 3% cash back on a category of your choosing including airfare, hotel rooms, car rentals, restaurants, gas stations, advertising or shipping services, up to $25,000 per year. All other purchases you receive 1% cash back. There’s no annual fee. Standard APR is 12.24%, 17.24% or 19.24% depending on your creditworthiness. There’s a 0% APR intro special on purchases for the first 9 months.

simplycash_business_chip

Apply Now

Who Will Benefit the Most From the Wells Fargo Business Platinum Card

This card will benefit anyone who also banks with Wells Fargo. You can connect your card to your other accounts to avoid bank overdraft and manage your money in one place. However, the spending incentives are limited and it costs money to opt-in. If you spend a lot of money each month running your business, you can earn more for your spending with a different card and for free.

TAGS: ,