In recent years, business credit cards have become more difficult to get and seem to be coming with lower limits than many of us are used to. Of course, the main reason for this is the tightening of credit by banks across all sectors. However, there are also some other considerations that may make it a bad business to be in for the banks.
When you look at small business statistics, you will realize that most fail. Even a small business owner with excellent credit provides infinitely more risk than a large corporation. In addition, the upside to the banks is not overwhelming compared to the potential risk. I council a lot of companies that have been in business for years, but are still having a hard time getting the credit cards they need to grow their business.
I recently worked with a consulting company that has 12 employees, strong revenue and excellent credit. The company is looking to provide their employees credit cards for travel purposes. The problem is the amount of credit they need far exceeds the amount they are eligible for with most banks. Eight of the twelve employees travel 100% of the time and have an average credit card balance at the end of each month of over $10,000. The problem is further complicated as the business wants the flexibility to carry a balance on occasion while they wait for these travel reimbursements to come in.
The other complication is the business wants to make sure that if they offer credit cards, their employees will never have to worry about being stranded somewhere if the credit card hits the limit. For this reason, the requested credit limit was $200,000. Unfortunately, after months of trying the largest limit they could receive is $25,000. Considering the strong numbers this company has, the banks would have been lined up to give them over $200k even as little as 5 years ago.
After gathering their requirements, financials and assets, we were finally able to secure them a $200,000 line of credit that was in turn used as collateral for a business credit card account. This was not easy and took quite a bit of time and expense to get it done.
The reason I’m telling you this story is so you understand that it is difficult to get business credit, but it is not as impossible as you are led to believe. If you have a good reason to have a large limit, have a good history, and strong cash flow, you will eventually get the credit you need and then some.
The key is research. You will have to research every product that is on the market and research the banks that offer these products. Do not just blindly apply for loans or credit cards without fully understanding the criteria the banks use to approve loans and credit cards. All of this information is out there or you can simply ask. Of course, the banks try not to tell you anything until you apply, but if you stick to your guns and make sure they understand that you will not apply for anything until you have the information, you will receive it.
Just a thirty minute meeting with a commercial banker should give you a real good understanding of your situation and the best way to get the business credit cards you need to grow your business.