How Are Credit Cards For Small Business Different Than Corporate Credit Cards?
Although credit cards for small business are different than corporate credit cards, a small business owner looking for "business credit cards" will find credit application targeted only to small businesses.
Credit cards for small business will most often carry the name of the business owner. This is true even if the credit account is approved based only on the credit file of the business itself and does not rely on the personal credit of the owner for approval.
The greatest market for business credit cards is in the area of small to medium sized businesses. These businesses are the driving force of our economy so that's not surprising. Major credit issuers such as MasterCard, Visa and American Express offer products tailored just for small business owners and the very specific charging and payment needs of those business models.
The owner of mid-sized business may refer to his credit card as a corporate card but it's likely the business credit account he has is one targeted toward the needs of small businesses rather than corporations.
Large Businesses Are Unique
Very large businesses such as huge corporations, charities and government agencies are unique. The credit needs of state and federal governments are vast and often include hundreds of cards issued on the corporate account to employees who have full discretion in the use of their card.
An agent of the federal government may be issued a credit card under the government's corporate account. The agent is responsible for management of that account and making timely payments. He may travel several weeks each month and charge all of his lodging and meals to the card. There may be charges for air fare, rental cars, entertainments and many other necessities involved with frequent travel.
The agent would then submit a list of his expenses with appropriate receipts to the government agency and be issued a check for the total amount. That check would then be used to pay his corporate credit card monthly.
For a small business, the owner may issue additional credit cards to various employees. The charges on those cards would be included in the total monthly charged to that one business credit card account. Details of expenses, tracking and reports would be conducted by the owner or his accountant from the one bill received each month.
Corporate cards have a differently type of organization. The corporation card is in the corporate name. Under that account separate credit cards can be issued to various employees. The corporation is able to track the total expenses of the corporate cards issued and each employee also can track and get reports for his personally assigned credit card.
Who is Responsible?
The responsibility for paying the amount due on credit cards for small business lies solely with the owner of the business who obtained the credit account. For this reason, many issuers of credit for small businesses provide a way for the business owner to track charges by employee or to limit the credit line an employee can access.
Small business credit card management is not always a simple account with 2-3 employees making charges. A business with many sales people in the field or with a large number of employees may have 20 people authorized to use the business credit card account with a different spending limit allotted to each of the twenty and based on the purchasing power needed for the specific position.
Corporate credit cards control employees' use of the issued credit cards using policies, terms and procedures developed by the human resources and hiring divisions of the corporation. The terms may list how the credit cards issued by the corporate account are allowed to be used and may include a lengthy list of disallowed charges.
Very large corporations often allow employees to use corporate credit for non-approved items on occasion. This may be permitted when extensive travel is required of the employee. Terms usually contain consequences for overuse or misuse of the corporate credit card held by an agent or employee.
For example, frequent charging of personal or unapproved items may result in disciplinary action. Failure to pay the credit card in a timely fashion as agreed can result in termination of an employee in extreme cases. In effect, the bank that issues a corporate card is issuing credit to a huge organization. That large corporation then issues credit to its employees for their use in conducting business for the corporate entity.
The vast majority of business credit cards issued is for use by small businesses. Though credit cards for small business are different than corporate cards, your lender will not confuse the two.
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