Digital Business Credit Card Guide For SME Owners

You need funds for your small business and weigh the various options available. The right type of funding for you certainly needs to offer flexibility – you want choices that can fund various expenses and you can take advantage of many times. If this sounds like something you want, a business digital credit card might be the right solution.

With a digital business credit card (or revolving credit), you will get access to a number of pre-agreed capital. Similar to a credit card; You do not need to use the entire amount, but you can withdraw whatever and whenever you need as long as it does not exceed the credit limit provided. Interest will be charged on the amount withdrawn and after this amount has been paid, your credit limit will rise again as before.

Does a digital credit card suit my needs?

bank

A Digital Credit Card is the right solution for your business if the following criteria apply:

You want to fund short-term expenses

One of the biggest benefits offered by digital credit cards is its flexibility. There is no limit on how much you can withdraw (as long as the amount is still within your credit limit) and for what you use the funds. So this can be used to:

  • Financing unforeseen costs: By opening a digital credit card in advance, small business owners can take advantage of credit facilities to finance costs that arise unexpectedly – such as the cost of replacing equipment or repairs.
  • Overcoming seasonal fluctuations: Balancing your cash flow across busy and lonely periods is a common challenge for seasonal businesses – and this is where digital credit cards can help. With this credit facility, you can still meet your operational expenses even though you are experiencing income fluctuations.
  • Closing the cash flow gap: Late payments are a significant cause of cash flow gaps for SMEs; according to the 2017 SME Survey conducted by SPRING Singapore and Dun & Bradstreet, 60 percent of SMEs face the problem of delayed payments from customers. With a digital credit card, you will be in a better position to manage cash shortages arising from delayed payments. Digital Credit Cards can function as a reserve fund to help meet your operational costs.

You need to avoid using digital credit cards for long-term investment because it will limit how much you can use when an urgent need arises.

You need flexibility

bank

Digital Credit Cards provide access to funding that you can use whenever a need arises. Therefore, this is a good funding option if you have unexpected expenses. Digital Credit Cards are also right for situations where you know you will need funding in the near future, but cannot determine exactly when you will need it or how much you need.

You need instant access to funds

After getting a credit line, using a digital credit card is one of the fastest and most convenient ways to access funding. If you have not made a digital credit card, you can consider getting one from an alternative loan platform. Unlike traditional banks and lenders, online lenders have usually streamlined the application process and can provide access to funding within 24 hours.

You need to pay for something that is repeated

With existing digital credit cards, you can withdraw from your credit limit repeatedly. This makes it the right choice to meet regular costs such as salaries or ongoing marketing activities.

Some common questions about digital business credit cards

money

What important factors should I consider when applying for credit?

Minimum Requirements:

The first step is to review the minimum requirements set by potential lenders; this will allow you to narrow down your choices and only consider lenders who have requirements that suit your business.

Traditional banks and lenders usually impose stringent requirements (for example having a flawless credit record, a minimum operational history of two to three years and a minimum annual income of USD. 240,000,000), while alternative lending platforms usually offer greater flexibility.

Credit limit:

Traditional lenders usually offer a larger credit limit, but small business owners may face difficulties meeting requirements to get funding from banks. If a lower credit limit is suitable for your needs, you might consider switching to an online lender.

Speed ​​of funding:

There are two factors that can affect how quickly you can access a digital credit card:

  1. Loan ceilings: Usually, smaller credit limits can be more easily agreed upon than facilities that offer larger credit limits.
  2. Types of financial institutions: Banks and traditional lenders have a strict application process and a lengthy approval process. Approval time usually takes between three to six weeks before you get access to funding. Online lenders are a better choice if you need funds as soon as possible because certain lenders can approve your application and provide access to funding within 24 hours.

Payment structure:

In general, ordinary lenders offer a payment schedule on a weekly or monthly basis. Before you apply for a digital credit card, it is important for you to set up a payment structure that suits your business, so that you will be able to fulfill your payments without problems.

The key is to see your customers and how you get paid. The writer and consultant Michelle Dunn suggests: “If a regular customer pays on time or is usually 15 to 30 days late, this will affect the way you pay back a line of credit. you don’t want to be in a difficult situation because of it. “

Start small and slowly increase your credit line

You may not be immediately offered the required credit line, especially if your business’s financial or credit profile is not in good condition. Be prepared to start with a smaller credit limit, because this can be a way for you to get a larger credit limit later. Over time, you can renegotiate for higher credit limits when you have new achievements – such as achieving revenue growth, or showing that you can meet payments in a timely and consistent manner.

Credit despite sick pay

Those who receive sick pay probably don’t have a small cold, but a really serious illness. Restoring the patient is often completely open. Not only do illnesses occupy a large space, but sickness benefit is also provided with a reduced income. If a rehabilitation measure is still pending, the period will be even longer. Because of this, many patients find themselves in a financial emergency. A loan despite sick pay could then be the solution.

The loan despite sick pay – the prospects

The loan despite sick pay - the prospects

Most banks take a skeptical view of a loan despite sick pay. After all, the customer does not know whether and when he will be restored or whether a disability pension will be due in the end. Unemployment was not uncommon after a long illness. A situation that banks also know and therefore keep very low on a loan despite sick pay.

But there are probably important reasons why a loan is sought. The best served is the customer who goes to his bank where the salary account is kept. It can be seen from this that the customer very well has an income. But it is often assumed that sick pay is not attachable. But this is only partly true. Because sickness benefit is legally equivalent to a pension and pensioners are given a loan.

Of course, the clerk will not offer the customer a long-term loan. If the customer’s economic situation is not quite sufficient for a loan, he could hope that he will be given an increased overdraft facility. However, the customer should exercise caution here. In a tight financial situation, a disposition that is used unreasonably could be a debt trap.

If there are only urgent bills that have to be paid or pending urgent repairs, the overdraft facility could be useful. However, the customer should know that the overdraft facility should only be used at short notice. Even with a limited income, the overdraft facility should then be balanced out month after month.

If the customer is healthy again and can start working again, he could also convert the expensive overdraft facility into an installment loan. The bank will see that the income is allocated in the usual high amount, so that it would have to agree to an installment loan.

The loan exception

The loan exception

But a loan in spite of sick pay can also have a chance of success if certain conditions are met. For example, civil servants. These not only have an extended continuation of wages, the job is also safe in the event of illness. As a result, civil servants and civil servants have significantly better credit chances with a loan despite sick pay.

If the illness is such that it is certain that work will resume after recovery, the bank will agree to a loan despite sick pay. Banks see the limitation of loans in the fact that often sick people can no longer continue to work. This ultimately means that the income is reduced. This then raises the question of whether the customer can still pay his installments.

The customer should know that existing loans can continue to be paid without the bank making any changes. Given this, that recovery is not certain, the bank will not approve a loan despite sick pay.

The loan form

The loan form

A loan despite sickness benefit could also be approved if the loan seeker can name a guarantor. The bank receives the loan protection it needs and the loan seeker can get a comparatively cheap loan. The guarantor then bears the credit risk.

If a guarantor is found, he must be fully informed about the risks of a guarantee. In most cases, banks require a joint and several guarantor, which immediately takes a guarantor back when the borrower stops paying. The guarantor must therefore be solvent, ie his income must be sufficiently high, his Credit bureau must be clean and a permanent job must be available.

A co-applicant would also have the same requirement. He would also secure the loan despite sick pay.

A long illness often brings with it boredom. If the customer then wants to buy a new television, he can finance it through the dealer. For example, if you buy a new television in an electronics store, you only have to enter the name of the employer, and the Credit bureau will also be asked.

Even if you regularly order from mail order companies and have been a customer in one of these stores for a long time, you can order consumer goods without having to check the creditworthiness. If payments were always made on time in the past, the customer can also take out a loan there.

Many customers with poor credit ratings are looking for a Credit bureau-free loan from abroad. But the customer is not suitable for this, as he receives sick pay that is not paid as income by these banks, since it can only be seized to a limited extent. The prerequisite for these loans is an income that shows a attachable portion.

If the customer does not find a lender and the loan is urgent, they could contact a credit broker. The business of these brokers is to broker loans under difficult conditions. Credit intermediaries know banks that are not so well known and also grant loans in difficult situations.

However, the customer should know that the loan will then become more expensive. Firstly, he will have to count on the loan broker’s commission and secondly, he will receive a loan with an increased interest rate. These loans are advertised with low interest rates, but ultimately creditworthiness counts, which often only brings a loan with really high interest rates.