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Small Business

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

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Need a credit card to use for your business, and aren’t sure whether to choose a personal or business credit card? There are quite a few differences you need to be aware of to make an educated decision.

Why? For one, personal credit cards offer certain protections under the Credit CARD Act of 2009 that business cards don’t.

Second, while business credit cards can be used for business expenses, your personal credit is still taken into consideration when applying for one. With most cards, you’re still personally liable for any debt accrued on your business card.

Third, you should know you don’t actually need to be a business owner in the traditional sense to get a business credit card. Freelancers and contractors can apply, too. Most of the time, you only need to supply a Doing Business As (DBA) name. You can use your social security number and name and classify yourself as a sole proprietor when applying.

If you want to know all the pros and cons of using a personal or small business credit card for your business, read on to learn what factors to consider.

Using a Business Credit Card – The Cons

Applying for a business credit card to use for your business might make sense intuitively, but it’s critical you read the fine print before proceeding with one.

We mentioned business cards aren’t treated the same as personal cards due to the Credit CARD Act of 2009. What exactly does that mean?

With personal credit cards, you get a 21-day window for payments. With business credit cards, that doesn’t exist. Your due date can change month to month.

With personal credit cards, you get 45 days notice if your interest rate is increasing. With business credit cards, your rates could go up overnight.

This applies to introductory rates, too. Introductory rates for personal cards need to be offered for at least six months. There’s no mandatory period for business cards – the introductory rate can disappear at any time.

Additionally, payments might be applied differently to business credit cards. While payments are directed to the highest APR balance for personal credit cards, payments made toward balances on business credit cards can be applied toward the balance with the lowest APR. This varies by issuer.

There are also no limits when it comes to fees for business credit cards. For example, late fees can’t exceed $25 on personal credit cards. That’s not true for business credit cards.

Lastly, some companies don’t report your business credit history on your personal credit history. The two tend to be separate, unless you make a mistake with your business card. For example, if you’re late on a payment or default on your business credit card, it will show up on your personal history.

This also means business credit cards aren’t the best choice if you’re looking to improve your credit score, as good history isn’t likely to be reported. However, it can at least help you build your business credit score.

Overall, it’s important to review the details before you apply. Some companies voluntarily give their business credit cards the same protections offered to personal credit cards. Many will give you notice before raising your rates, or changing your due date.

Using a Business Credit Card – The Pros

Now that you know what to look out for when applying for a business credit card, we can talk about the perks.

The most obvious benefit is being able to separate personal and business transactions with ease. As a business owner, you know how hectic tax time can be. If you’re sick of shuffling through statements trying to figure out which transactions were personal or business related, you won’t have to anymore.

Business credit cards often come with tools to organize and categorize your business spending, too. If you want to get multiple cards for employees, this will make streamlining your spending simpler.

You’ll also have a much higher credit limit on a business credit card than you will with a personal credit card. Sometimes larger expenses are needed to get your business off the ground, or you’re going through a period of growth where you want to invest in expanding.

Some business credit cards also come with special repayment terms. If you need help managing your cash flow, you may be able to work out a different payment system with your creditor.

Although business credit cards may not come with the consumer protections we’re used to with personal credit cards, they still offer similar benefits when it comes to specific Visa or MasterCard benefits. Warranties, fraud protection, and price protection are a few everyone has access to.

If you love getting rewards points with credit cards, business credit cards often have the best sign up bonuses. They also have higher spending requirements, but if you time your sign up with a large business expense, it shouldn’t be hard to meet it. Just remember to watch out for annual fees, as these tend to be higher on business rewards cards.

Additionally, you can earn bonus points on business expense categories such as office supplies, travel, and wireless phone plans. This means you can capitalize on getting more points for business expenses, while still using your personal cards for things like gas and groceries. You’re able to get the best of both worlds when it comes to gaining rewards points.

[Look for a Business Credit Card Here.]

Using a Personal Credit Card for Your Business

If using a business credit card sounds a bit too volatile for your tastes, stick with a personal credit card. Owning a business doesn’t mean you need to have a business credit card if it’s something you’re not comfortable managing.

It might be more challenging to separate business expenses from personal expenses, but if you open a personal card solely dedicated to business transactions, you won’t have as much difficulty come tax time.

Plus, if your business is on the small side, or you work alone, then you might not spend enough to make business rewards cards worthwhile.

There’s nothing wrong with either approach, but it can be more beneficial to use a business credit card.

The Bottom Line

Opening a business credit card means your eyes need to be on your account as often as possible. Set reminders to check your due dates, and try not to carry a balance on your card. This will automatically protect you from any rate hikes that may occur, and you won’t have to worry about introductory rates expiring randomly.

As long as you treat your business credit card like you would a personal credit card (that is, responsibly), you’ll be able to take advantage of the many perks offered to business owners. You’ll have an easier time sorting your expenses, your business and personal credit will (for the most part) be kept separate, and you can enjoy gaining rewards points from both your business and personal cards.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at [email protected]

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Small Business

The Most Important Industries in America’s Largest Cities

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Most important industries
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When starting a new business, you could build your venture around industries that are thriving in your area. Some cities are known for certain types of companies, and you may want to enter a market where businesses are already succeeding.

But what about opportunity for employees in those industries? The highest-paying jobs in the largest industries can be the most difficult to land. Ideally, a city’s top-paying industry would present plenty of lucrative job options for residents.

MagnifyMoney researchers determined the most prominent industries in the country’s 50 largest metro areas and analyzed how well those industries pay compared with the cost of living. In many instances, industry density doesn’t equate to more money in workers’ pockets.

When we plotted all 50 cities across 20 industries, retail jobs, for example, appear relatively plentiful but tend to be lower paying. High-paying utilities jobs, on the other hand, are among the scarcest positions.

Key findings

  • New Orleans has the top-paying industry relative to local cost of living: agriculture, forestry, fishing and hunting. Monthly payroll per employee in this field is roughly 160 times median monthly housing costs or 13.3 times median annual housing costs here. However, this industry has a small presence in the area, just 0.16% of all establishments.
  • Washington, D.C. takes the top spot as the metro area with the highest concentration of one industry. In the nation’s capital, nearly 22% of all establishments qualify as part of the professional, scientific and technical services industry.
  • Patterns emerge despite geographic differences: Retail makes up nearly 13% of establishments in each of the 50 cities and pay is usually low. The information industry and the management of companies and enterprises industry leaves a small footprint in cities but pays its workers well.
  • Of all industries in the study, only the professional, scientific and technical services industry shows significant variation from metro to metro. While it makes up nearly 22% of all establishments in D.C., as we noted earlier, it claims just 8.7% of establishments in Riverside, California.

Industries that pay the most based on local costs

1. New Orleans – Agriculture, forestry, fishing and hunting

Although agriculture, forestry, fishing and hunting makes up just 0.16% of all establishments in New Orleans, the industry offers employee pay that’s 159.8 times median monthly housing costs.

New Orleans has a long history of farming and agriculture in the region, thanks to rich soil resulting from years of flooding. To shorten supply chains in the city and build the local food economy, the New Orleans Food and Farm Network connects urban and regional farmers with restaurants, stores and farmers markets. Louisiana ranks No. 33 in the United States for farm cash receipts, about $3 billion, a significant drop from its 2012 peak of nearly $4 billion. The state issued more than 2.5 million recreational hunting, fishing and trapping licenses in fiscal year 2017, the most recent data available.

2. Cincinnati – Management of companies and enterprises

The management of companies and enterprises sector is made up of businesses that own equity in other companies and influence management decisions. In Cincinnati, this industry comprises 1.24% of all businesses in the metro area. These companies provide employee pay that’s 139.2 times median monthly housing costs.

The Cincinnati housing market includes counties in Ohio, Kentucky and Indiana, areas that support sectors such as professional and business services, financial activities, and educational and health-related services. Retail dominates this area’s economy — 13.7% of establishments.

3. Houston – Management of companies and enterprises

Not far behind Cincinnati, payroll per employee in Houston’s management of companies and enterprises sector is 139 times median monthly housing costs. But the industry accounts for just 1% of businesses in the area.

Houston is often thought of as a hub for the oil and gas industry, but our research showed professional, scientific and technical services is the most prolific industry in the city. To keep up, the oil and gas sector is reportedly incorporating new technology, like fintech and artificial intelligence solutions, from experts outside the field.

Industry density in major metro areas

1. Washington, D.C. – Professional, scientific and technical services

The U.S. capital’s economy is dominated by the professional, scientific and technical services sector — 21.8% of all businesses, the highest rate on our list. Average payroll per employee in that industry is quite high at $102,331 but an elevated cost of living makes that figure less impressive. Monthly payroll per employee is 58.6 times median monthly housing costs.

Jobs in the professional, scientific, and technical services sector include accounting, legal representation, engineering, computer services, advertising and consulting.

2. St. Louis – Health care and social assistance

St. Louis is slightly behind Washington, D.C., with 21.6% of all companies falling in the health care and social assistance industry. Payroll per employee in the industry is 45.6 times median monthly housing costs.

Hospitals support more than 116,000 jobs in St. Louis, according to research from the Missouri Hospital Association. Hospitals in Missouri contribute more than $26 billion in gross state product.

3. San Jose – Professional, scientific and technical services

In San Jose, 18.4% of businesses fall into the professional, scientific, and technical services sector. Jobs in the industry pay 66.9 times more than the median monthly housing costs in the area.

San Jose is the country’s most expensive housing market, where the median cost of a single-family home is $1.1 million. Rent is expensive, too — the city says renters must earn $108,920 per year to afford the average effective monthly rent of $2,723 for a two-bedroom apartment. Our study found that the highest-paying jobs belonged to those in the information industry with employee payroll 113.6 times higher than median housing costs.

Methodology

In order to find the highest paying industry and most common industry in every metro area, researchers analyzed data from the U.S. Census Bureau. To find the highest paying industry in every metro area, researchers looked at the ratio of payroll per employee to local median monthly housing costs. To find the most common industries, researchers divided the number of industry establishments by the total number of establishments.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Wylie
Melissa Wylie |

Melissa Wylie is a writer at MagnifyMoney. You can email Melissa at [email protected]

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Small Business

How to Determine If Your Business Is a ‘Small Business’

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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To be considered for loans and other assistance from the U.S. Small Business Administration, your company would need to meet the SBA’s definition of a small business.Certain government contracts and loan programs from the SBA are reserved for small businesses. To ensure the right companies receive these opportunities, including the relatively low interest rates that come with its loan programs, the SBA enforces eligibility requirements.

The SBA’s size standard is based on employee count and average annual receipts. The current averaging period is three years, although the SBA recently proposed a rule change that would allow businesses to average revenues from the past five years. The SBA’s size standard indicates the largest size that a business could be to remain eligible for SBA loans and federal contracting programs.

“What they have is conditions on how much a business can make as far as revenue in order to qualify for an SBA-guaranteed loan,” said Kyle Bayliss, regional director of the Maryland Small Business Development Center. Across the country, SBDCs assist business owners through a partnership with the SBA.

Continue reading to find out whether your business is a small business according to SBA guidelines, and what that means for your company.

The SBA’s definition of a small business

To be classified as a small business, your company would need to meet or fall below the SBA’s maximum annual revenue or employee count. The SBA sets specific standards for individual industries, so the exact requirements would depend on the type of business you run.

The SBA outlines standards for each industry listed in the North American Industry Classification System, or NAICS. The SBA provides a lengthy table describing employee and revenue limits for each industry, organized by NAICS code. You can find the table here.

Revenue limits range from $750,000 to $38.5 million, depending on industry, and employee requirements span 100 to 1,5000 employees. As long your business falls below its designated revenue or employee threshold, it could be considered a small business in the eyes of the SBA.

All workers, including those employed on a full-time, part-time and temporary basis, contribute to your overall employee count. If you acquired another business, employees from that business would also contribute to your total. The SBA takes an employee count on a 12-month basis, or counts employees for each pay period if you have not yet been in business for a full year.

The SBA’s definition of a small business incorporates companies that are far larger than the average small business seeking help from the Maryland SBDC, Bayliss said. An SBA small business may be larger than most would think. Businesses that support oil and gas operations, for instance, can have annual revenue up to $38.5 million.

Furthermore, the SBA requires that small businesses also meet the following requirements to be eligible for funding:

  • For-profit, officially registered and operating legally
  • Physically located in the U.S. and operates in the U.S. or its territories
  • Invested equity from the business owner
  • Sound business purpose
  • Ability to repay any debt

What it means to be a “small business”

Businesses that meet the SBA’s small business criteria can apply for SBA loan programs and federal contracting assistance. “The lending part of it is a really big help,” Bayliss said.

Your small business could be eligible for the following SBA-backed loans:

7(a) loan program: The SBA’s most popular program provides general-purpose loans for small business owners. You could borrow up to $5 million with repayment terms between seven and 25 years. Specialty loans within the 7(a) programs are available for certain needs like smaller loan amounts, export working capital or express time to funding.

CDC/504 loan program: Small businesses looking to acquire fixed assets, like buildings, land or machinery, can borrow funds to finance their purchase. There’s no set limit on loan size, though Certified Development Companies must administer all 504 loans. The SBA typically provides 40% of the total cost while a CDC contributes 50%. The business owner would need to provide the remaining 10%. The assets being purchased would serve as collateral on the loan.

Microloan program: For smaller funding needs, the SBA microloan program provides up to $50,000 to small businesses that have trouble qualifying for traditional business loans. Repayment terms for microloans typically max out at six years. SBA microloans are generally reserved for women, low-income, veteran and minority business owners.

SBA-designated small businesses can also apply for federal contracts through the following program:

8(a) Business Development program: The SBA limits competition for certain government contracts to small businesses that participate in the 8(a) program. The goal is to help disadvantaged businesses win valuable contracts. To be eligible for the program, an owner who is economically or socially disadvantaged must control at least 51% of the business. The owner must also have a personal net worth of $250,000 or less, $4 million or less in assets or $250,000 or less in average adjusted gross income for three years.

Additionally, business owners must show good character and potential to successfully perform. If approved for the 8(a) program, you could compete with similar businesses for sole-source contracts. You could also receive assistance such as business training, counseling or marketing help from a mentor who is also participating in the program.

The SBA 8(a) program provides a leg up for small businesses that may not otherwise win big contracts, Bayliss said. Women and minority entrepreneurs particularly benefit from this program, he said.

“Actually doing government contracting, it’s really hard, especially for small businesses,” Bayliss said.

Other benefits of meeting the SBA’s size standard

SBA-approved small businesses could have access to additional assistance, most notably resources set aside for women and veteran entrepreneurs.

For instance, the SBA’s Women-Owned Small Businesses Federal Contracting program reserves federal contracts for qualified women-owned businesses. It’s like the 8(a) program, but specifically designed to give women entrepreneurs increased access to federal contracts.

Organizations such as the National Women’s Business Council and the Association of Women’s Business Centers also provides resources and opportunities for women-owned small businesses through partnerships with the SBA. To access resources for women-owned small businesses, you would need to receive certification from the SBA. You can apply for certification here.

Eligible veteran-owned small businesses could also access training programs and specialized loans through the SBA Office of Veterans Business Development. Programs like Boots to Business and the Veteran Federal Procurement Entrepreneurship Training Program teach veterans the skills to successfully run a small business.

The SBA also guarantees loans for veterans through the SBA Veterans Advantage program. Additionally, the Military Reservist Economic Injury Disaster Loan Program provides funding to businesses with employees who have been called to active duty.

Becoming certified for these programs could be a lengthy process. The SBA would ask you to submit information about your business, such as organizing documents, past financial statements and a business plan, as well as personal information like income statements and proof of citizenship.

As an SBA small business, you may be able to qualify for government-sponsored business grant programs as well. Both the Small Business Innovation Research Program and Small Business Technology Transfer Program are tied to the SBA, and grant recipients would likely need to meet SBA size standards.

The bottom line

The SBA provides countless resources to business owners across the country, but there’s a catch — you have to qualify as a small business according to the SBA’s standards.

Fortunately, these requirements are broad and take your specific industry into consideration. You would need to fall below the threshold of number of employees or annual revenue that the SBA sets for your industry. The limit on employees ranges from 100 to 1,500 workers, while revenue maximums range from $750,000 to $38.5 million.

If your business is within the SBA’s parameters, you could apply for a number of contracting and business loan programs. You could also receive additional resources set aside for underserved business owners, such as women and veteran entrepreneurs.

Your local small business development center could help you determine which programs your business may be eligible for and provide assistance with any applications. Be sure to calculate the correct size of your business before applying for SBA resources.

This article contains links to LendingTree, our parent company.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Wylie
Melissa Wylie |

Melissa Wylie is a writer at MagnifyMoney. You can email Melissa at [email protected]

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