Our technology-driven world is the breathing ground for home-based businesses arising. Many at-home workers dream of selling their goods and knowledge with the world. Thus, this creates a home-based business. But how many know that they are able to receive a business credit card for their business that is strictly online? For instance, you own an Etsy shop, you’re a web designer, sell on Amazon or eBay, or you have an online tutoring business in your home. These are home-based businesses that with the right paperwork are able to receive a business credit card to take care of expenses.
How does it work?
There is a lot of paperwork that goes into running a home-based business. Depending on what you are selling, there needs to be sales tax preparation and zoning conformance if a garage is being used for the online business. The term online-only business means that all your transactions and business activities are online, but the products you make or are selling can be made within your “business” location that is in your home.
After the proper paperwork has been filed to list your new business, working out your budget and understanding where your finances lie are the next steps. One must fund their business and it can get tight at times if you are trying to use your own personal credit cards to fund your business.
This is a bad financial mistake because your business expenses are being taken out of your personal credit and can rack up without providing proper cash back for what you need. If you can get a business credit card, there are ways to facilitate it into your business financial reports.
What do you need the card for?
What is the main purpose that this business card will be serving not for you but for your business? Are you looking to cover day-to-day expenses, or offsetting purposes if profit is being lost? Wink Capital acknowledges that credit cards are the best way to finance any online business. Not many know how to go about it, or are aware that they as the business owner need to have a good personal credit score and income that is suitable for applying.
Let’s discuss another important factor to consider after establishing your home-based online business. If down the line, you would like to apply for a business loan or credit increase, make sure that you are constantly watching and improving your business credit score. This is different from your personal credit score. Spending purposes are the main goals for having a business credit card for your business.
Similar to a personal credit card, paying off your balance and uploading your receipts is vital. Pay on time and keep a low balance. The only difference here is the name: Business vs. Personal.
When running an online business that is home-based, it can prove to be challenging with the upkeep of sales and products. At-home workers spend a lot of money on material and to have that eating away at your home budget will not help your business but will hinder it. Therefore, don’t forget about rewards.
Understand that digital promotional creations and web domains will be your biggest costs. It is beneficial to apply for a business credit card for your online home-based business, but the budget is not limited to:
- Hardware and software programs for your computer
- Professional logo and website designs – even self photoshop
- Office supplies such as paper receipts, paper, ink, pens, etc.
- Consulting fees if you hire a mentor to guide you
- Utility services
- Homemade product materials
- Listing fees for third party websites
- Credit card processing fees
- Business card creation fees
- QuickBooks or any other accounting fees
Wink Capital states that if online home-based business owners travel to conferences or industry-leading webinars, they should only have travel business credit cards. Especially if there are frequent travel expenses. If this is not the case, then cashback rewards are great. This does not include fueling up. Use your personal credit card for that.
Consider a flat-rate cashback reward for 2% cashback on everything. Supplies and materials can add up. A great card for this is Capital One Spark Cash. This card allows you to carry a balance that can work for several online businesses. Know the differences between a cashback and a charge card like the business card from American Express. Charge cards do not allow you to carry a balance and can cause financial stress down the road.
Consider your month to month with your online-based business to determine if a credit card is the right way to go. Make sure that your profits allow you to apply for a business credit card.
If the opposite is in consideration, then having multiple cards can go a long way because all cards are different with their rewards systems. Meaning one card can have 2% on everything and another could have 5% only on supplies. Read the fine print before applying.
In Conclusion
Just don’t go start frantically applying for cards, because your personal credit information still has to be connected to your business. Understand that if anything goes wrong, creditors can come after your personal credit and ding it. It’s possible to pack on the rewards with different cards. So, don’t be afraid, but be mindful and conscious of your business credit cards.
