Secured business credit cards can help startups build credit, but there are different types of guarantees. Business owners may be personally liable for repayment, but can also obtain prepaid or protected cards. Guaranteed cards may have higher fees and interest rates.
Obtaining a secured business credit card can be the first step to building credit for many business startups. There are several ways in which the guaranteed term can be understood, however. This could mean that someone or some entity stepped in to secure the borrowed amount on the card, or it could mean that the card is prepaid and subject to prepaid account limits. Alternately, some people mean that the card itself is guaranteed to be approved.
Often the secured business credit card is one where the business and business owner are responsible for the repayment. In other words, the business owner, when applying for a card, uses your personal credit information to secure the refund. If the business becomes insolvent, the responsibility for repaying the card bill will be transferred entirely to the business owner, and the borrowed money will be seen as personal debt. This is a challenge for many business owners because one of the reasons people create a separate legal entity called a company is so that they are not liable for certain debts if the company goes bankrupt.
Providing this type of guarantee is also not usually very useful for business, and eventually a company needs to obtain its own credit that does not require a guarantee from the owner. On the other hand, it is not difficult to obtain such a secured business credit card. A business owner will just add information about his social security number and income in the app and this will be verified with the business tax ID number. If the owner’s credit score is good, these cards are usually approved.
Another type of secured business credit card is the prepaid card. This will allow people to put money on the card so they can use it like a credit card for various business transactions. Alternatively, some companies have a protected card. The money up to the limit of the card is placed in an account and is not touched by the company, and the company can borrow up to the limit, making regular payments, but ensuring that, in case something happens to the company, this guaranteed and deposited amount can be used to pay debts. There are many companies that offer these two types of cards and they are easy to search on the Internet.
Finally, there are types of cards with a guaranteed guarantee. They can also be found on the Internet and may look attractive to a company with little or poor credit history. It’s important for people to read the fine print on these cards and note that the amount of credit they can get usually reaches a certain amount. Due to the fact that lenders can take greater risks when securing the issuance of a card, companies can expect these cards to come with higher fees and interest rates. You might be better off starting with another form of secured business credit card, as the rates may be lower.
Asset Smart.
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