Small business owners who want to build credit and earn rewards without running the risk of falling into credit card debt should look into acquiring a charge card for their business.
Business charge cards are similar to business credit cards, with the key difference being that you are expected to pay off the balance of your charge card in full at the end of each month. Because of this, charge cards don’t have interest rates. But if you are late on your payment, you will be hit with heavy fees.
If you are launching a business in the tech industry, a charge card you may consider is the Brex corporate card. Founded in late 2017, the Brex corporate card specializes in providing credit to tech startups. In less than a year, Brex has raised $182 million in funding and is valued at over $1.1 billion. The company’s backers include PayPal founders Peter Thiel and Max Levchin.
Let’s take a closer look at the Brex card to see why the payments industry is so bullish on this product, and whether you might want to be too.
How the Brex Corporate Card Works
Because the Brex corporate card is designed for tech entrepreneurs rather than small business owners, it functions a bit differently from your regular business credit card.
Signing Up
You can apply for a Brex corporate card via the Brex website by providing information about your company and linking your business bank account. Because Brex is a corporate card, it underwrites with employer identification numbers, not Social Security numbers, so consumers, sole proprietors, and other unregistered businesses are ineligible to apply.
There is no credit check required. Instead, Brex considers factors relevant to your business when underwriting, such as your investors, cash balance, and spending patterns, and sets your limit accordingly. The application process takes minutes. If approved, you will have access to a virtual card immediately. Physical cards are delivered within three to five business days.
No Personal Guarantee
To mitigate the risk an entrepreneur takes when they launch a tech startup, Brex does not require a personal guarantee. A personal guarantee is a commitment to transfer ownership of one’s personal assets (such as a house or car) to cover a debt.
Using Your Brex Card
Brex cards are on the Visa® network, and can be used in over 200 countries with no foreign transaction fees or travel alerts needed. In addition, Brex does not place a limit on the number of cards your business can use at any one time, and account holders can set spending limits on individual cards via the online dashboard.
It is important to reiterate that the Brex corporate card is a charge card, not a credit card. This means you cannot carry a balance on the card from month to month. Brex automatically debits your business checking account to collect payment. If you fail to pay off your card in full at the end of each payment period, Brex will cancel your card.
Bookkeeping
Brex offers several tools that make it easier to keep track of your expenses. Pictures of receipts can be uploaded to the Brex dashboard and matched with card transactions using artificial intelligence. Brex will also transfer your transaction data directly onto your accounting software. Currently, Brex integrates with QuickBooks, Xero, NetSuite, and Expensify.
In addition, account holders can provide bookkeeper access so that their accountants can have oversight over their Brex account.
Rewards
Brex gears their rewards program toward tech entrepreneurs by offering points on things they spend on most often. Account holders can get 7x points back on rideshare purchases, 3x points back on restaurants and travel, and 2x points back on recurring software usage. (Note: The value of the rewards is $0.01 per dollar you spend.) These rewards multipliers are uncapped, no matter how big your business gets, and can be redeemed for a statement credit by applying your points to a specific transaction on the card dashboard.
However, it is important to note that these points multipliers are only available to Brex Exclusive members. In order to qualify for Brex Exclusive, you must make Brex the exclusive corporate card for your business. All non-Exclusive members receive 1x points back on all purchases.
Brex also partners with different businesses to offer special signup deals relevant to tech entrepreneurs. For example, new card members will receive a $5,000 credit to Amazon Web Services. Other deals include up to $150 in Google Ads credit and a 15% rent discount on your first six months in a WeWork office. These signup rewards are redeemable for Exclusive and non-Exclusive members.
Brex Corporate Card Details
Brex Card Price
There are no signup or annual fees on the Brex corporate card. Because the card is a charge card, there are no interest payments either, as you are expected to pay back your balance in full at the end of each pay period. Clients will receive five free credit cards when they open their account. Additional cards cost $5 per user per month.
Brex Card Pros
Based on the what the Brex card offers, here are what we see as its benefits:
No Personal Risk
Because Brex underwrites your business and does not require a personal guarantee, you do not have to put any of your personal assets at risk to become a Brex corporate card holder.
No Credit Check
Brex does not perform a credit check on you or your business, instead opting to evaluate factors like funding and spending habits to determine a fair credit limit.
Save Time
Brex estimates that their bookkeeping features reduce the time employees spend on expense report processing and accounting by as much as 50%, which saves each employee an average of 26 minutes per month.
Rewards
According to Brex, a startup using Brex as their exclusive corporate card will earn at least 20% more annually from rewards points than they otherwise would with a competitor card. The company also says their signup bonuses are worth over $25,000 in value.
Unlimited Credit Cards
The company does not place limits on the amount of Brex cards a business can have at one time. However, businesses with more than five cards in use will receive a $5 charge for every extra card each month.
Build Business Credit
Despite being a charge card, you can still build credit with Brex. The company partners with Experian to report your on-time payment history. If you are using the card as intended (i.e. pay it off in full each month), you will build valuable business credit.
Brex Card Cons
The main drawback of the Brex card is that it is a charge card—not a credit card. This means the balance must be paid off in full at the end of each pay period. Some venture-backed startups may be able to cover these monthly expenses. However, businesses that need to invest a lot upfront to grow in the future may not be able to pay off their balance in full at the end of each month.
You could always use the Brex card for smaller daily expenses and get another business credit card for larger expenses, but then you are not eligible to be a Brex Exclusive member, which provides you access to the rewards points multipliers.
Overall, well-funded businesses or businesses with a lot of income will probably find this card more desirable, as it can provide a turnkey short-term credit solution and robust rewards. Businesses that are being bootstrapped or that don’t have a lot of investment capital will probably find it difficult to comply with Brex’s monthly payment schedule.
Alternatives to the Brex Corporate Card
If you are looking for a card that can help fund your business over a longer period of time, here are some top alternatives to consider:
American Express Business Gold Card
The AMEX Business Gold Card is a charge card without spending limits that allows you to pay over time on purchases greater than $100. Like the Brex Corporate Card, the Business Gold Card offers a generous rewards program, including 4x points back on the two business expense categories where you spend the most each month (selected retroactively). New customers will also receive a free year of G Suite Basic and ZipRecruiter.
The Business Gold Card does come with an annual fee of $295, and a credit check is required. Because this is a charge card, if you fail to pay back your full balance at the end of each month, you will be hit with heavy fees. There are no foreign transaction fees.
The Business Gold Card is a good option for big spenders who also want the flexibility to pay off large purchases over a longer period of time.
Chase Ink Business Cash Credit Card
If you’re looking for an outright credit card that still offers you generous rewards on everyday purchases, consider the Chase Ink Business Cash Credit Card. Cardholders can earn 5% cash back on the first $25,000 spent annually on office supplies and phone, internet, and cable services, and 2% cash back on the first $25,000 spent annually at gas stations and restaurants.
New customers will also receive $500 cash back if they spend $3,000 within their first three months. Plus, the Chase Ink Business Cash comes with no annual fees and a 12-month 0% introductory APR period. However, after these 12 months, your APR will set in at a rate that will vary with your creditworthiness and the market prime rate, so be sure to see the issuer’s terms and conditions for the latest APR information.
This card does have foreign transaction fees, it and requires a credit check.
Get the Chase Ink Business Cash Credit Card if you spend a lot on typical small business-related products and want to be able to carry a balance from month-to-month.
Is the Brex Corporate Card Right for Your Business?
Brex’s main offering is tailored to tech startups that can afford to pay off their debts every month. It is important to note that Brex is still a very young company, and has plans to offer more financial products in the future. It will be interesting to watch how tech-minded companies like Brex work to solve the issues around small business finance.
As it stands, you might decide to opt for the Brex corporate card if you have deep pockets, as they offer great rewards with no fees. If the Brex payment schedule is prohibitive, the Business Gold Card from American Express offers more flexibility, but with a monthly fee. And the Chase Ink Business Cash Credit Card will let you carry a balance from month to month, but you will have to pay interest on the balance after the first year.
The post Brex Corporate Card Review for 2019: The Best Card for Tech Startups appeared first on Fundera Ledger.
from Fundera Ledger https://www.fundera.com/blog/brex/
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