A small business credit card is a line of credit that is acquired by an individual or individuals who own a small business. A small business is generally a privately owned business, which is operated with a relatively small number of employees. In most instances, small businesses maintain low sales volumes.
Small business credit cards work very similarly to personal credit cards. A lender will grant a business owner a specified line of credit. The business owner will be permitted to spend this line of credit; however, he/she will be required to pay back the original cost of the loan in addition to the stated interest rate.
Repayment will usually be achieved by making monthly payments. Every month, the business owner will pay a certain amount of money to the lender. As long as he/she maintains an available amount of credit, he/she will be permitted to spend this money. For example, if an individual obtains a small business credit card with a credit line of $10,000, spends this $10,000 and subsequently pays $9,000 to the lender, he/she will continue to have $9,000 to use.
The primary difference between a small business credit card and a personal credit card is the collateral that is used. When an individual obtains a small business credit card, the business and the associated assets will be used as collateral as opposed to an individual's personal belongings. In the event that the business has not yet acquired assets, a business owner may be required to use his/her personal assets, such as his/her home, as collateral.
Small business credit cards can be used to obtain any items necessary to effectively operate a business, and therefore, they are often an essential resource used to establish small businesses.
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