It’s the ideal scenario for a small-business owner: Your company is experiencing year-over-year growth, your business is profitable and your...

What are corporate credit cards and how do they work? #1

It’s the ideal scenario for a small-business owner: Your company is experiencing year-over-year growth, your business is profitable and your revenue increases every quarter. This is the kind of growth most small-business owners dream of.

When you start to see your company shift from a small startup to an established corporation, it’s time to think about transitioning your financial tools. This might mean switching from a business credit card to a corporate credit card — but before you begin the lengthy corporate credit card application process, it’s worth asking yourself whether a corporate card is really the right choice for your business.

Let’s take a closer look at how corporate cards work, how to manage a company card and how to decide whether your small business is ready to make the transition from a business credit card to a corporate credit card.

What is a corporate credit card?

A corporate credit card is a type of card issued to a corporation. This means that the business entity, not the business owner, is legally responsible for all charges made on the card. Because of this, corporate credit cards are generally only issued to large companies with a track record of success and an established business credit history. If your business is an LLC, S-Corp or C-Corp with a solid business credit score and revenue in the millions, your company might be eligible for a corporate credit card.

Corporate credit cards may come with certain beneficial perks, such as cash rebates and frequent flyer miles. However, the biggest benefit to a corporate credit card is that individual employees can be issued their own cards to handle their work-specific business expenses. Whether it’s paying for plane tickets or renting office space, having a corporate credit card can make handling business expenses for a large corporation much more efficient.

How do corporate credit cards work?

In many ways, corporate credit cards function a lot like personal credit cards or small-business credit cards. You can use your corporate credit card to make purchases for your business, and many corporate cards allow your business to earn rewards on corporate purchases. Your business will need to make regular payments on your corporate credit card account, and your corporate card usage and payment history will factor into your business credit score.

However, corporate credit cards also come with several features that small-business credit cards do not offer. These include the ability to issue employee credit cards without having to assume personal liability for the charges. Corporate credit cards also often include access to accounting software and services designed to help your business manage its corporate line of credit, and your company may receive discounts on common business expenses and retailers.

Pros of corporate credit cards. Access to a corporate line of credit. Earn rewards on purchases. Company cards issued to employees. Access to premium accounting services to help your company budget and track expenses. Cons of corporate credit cards. Only available to established companies with high annual revenue. Lengthy application process that may include a financial audit. Business must have good credit to be eligible

Corporate credit cards and small-business credit cards are not one and the same. While corporate credit cards are designed for corporations with multiple employees and revenue in the millions, business credit cards are designed to meet small-business owners’ needs, including freelancers and side hustlers. Knowing which option is best for your business will help you apply for the right card — and having the right line of credit is a great way to help your business grow.