Business credit cards to be shut off
On Saturday, up to 1 million business credit cards through Advanta Bank Corp. will be shut down, frozen, terminated, however you want to put it.
What is the owner of an Advanta business credit card to do? There are a couple of things you should find out before you panic.
Business credit cards without personal guarantee
If you set up your Advanta business credit card as business credit without personal guarantee, that means you won’t have to dip into your personal bank account to pay you Advanta credit card bill.
The process of setting up business credit cards without personal guarantee is pretty involved, it’s not like getting fast payday loans in Daly City. However, if you complete the process your personal finances will remain intact even if your business goes bankrupt.
Sudden credit freeze
With little to no warning, Advanta plans to shut down nearly 1 million business credit card accounts on Saturday.
Advanta sent notifications to customers via snail mail, the company says. However, because of “postal problems,” customers will likely receive notice that they can no longer use their Advanta business card on or before the day their accounts are frozen. Read the full story here.
How to establish credit without personal guarantee
In order to ensure that your business credit card isn’t backed by a personal guarantee, you must follow these steps:
- Form a corporation or LLC, and get an Employer ID Number, which works like a social security number for your business.
- Separate your personal finances and credit from your business finances and credit
- Open a business bank account in the exact business legal name as it appears on your paperwork.
- Apply for lines of credit with trade suppliers, and make sure they will report how your business pays to the credit bureaus.
- Make sure your business is listed with all 3 business credit agencies (EquiFax, Dun & Bradstreet and Experian).
Separate business entity
If you had already done all of these when you received your Advanta business credit card, you should not be held personally liable for the balance on your soon-to-be-frozen account.
Business finance.com says you must have five trade supplier accounts and three business credit cards in order to obtain business credit or loans without personal guarantee.
Why get business credit?
If you are a small business owner, you might want to make sure that your business and personal finances are separated, and quickly. In a couple of weeks the Small Business Association will start issuing emergency loans.
Reuters describes the program as an “emergency bridge-lending program geared toward helping struggling small businesses ride out the current recession.
Details on SBA emergency loans
From Reuters:
Calling it another “tool to our toolbox” SBA head Karen Mills said the new American Recovery Capital (ARC) program will offer “viable” small businesses temporary six-month loans of up to $35,000.
Mills said typically these short-term loans will be used for helping ease a credit crunch, as banks call in balances on credit cards.
“You can pay down your credit card line and now you have $35,000 more of liquidity.”
The interest-free loan must be used within six months and borrowers have up to six years to repay it. The only other stipulation is that it cannot be used to pay any previous SBA-backed loan the business may have outstanding.
