Company credit cards would make it easier to run your small business, but maybe you just aren’t sure you can trust employees to use them wisely and honestly.
Time to consider prepaid cards, which are no longer just for consumers with limited budgets, such as parents trying to keep their teenage children’s spending in check.
Small businesses are now also using them, underscored by a New York company called PEX Card. It offers a web-based prepaid card service that gives you greater control over how employees spend your money in real time.
“It’s petty cash on steroids,” Toffer Grant, the company’s founder and chief executive, tells NerdWallet. “This is an app that a company uses to manage time and money.”
With his company’s prepaid card, he adds, “you can load 15 bucks to buy Cokes or Windex for the office or something like that.” This is an ideal service if running your small business requires making a lot of small and big purchases. “If more people can spend, we can get more done,” Grant says.
PEX Card offers a two-month trial period for small-business owners who want to try it out. If you like the service, there’s a $49.95 sign-up fee.
Here’s how it works:
- To qualify, you need to submit key information such as your tax ID and other legal documentation of your business so PEX Card can check out “the vitals of the company,” Grant says. But no need to worry about credit scores, he adds: “We’re not lending any money. The businesses are underwriting themselves.”
- In fact, you should think of your PEX Card account as a savings account in which you have total access to and control over the funds. The minimum amount you need to put in is $50, but you can deposit as much as you need.
- You also can request as many prepaid cards as you need. You pay $7.50 a month per card; the fees are capped at $150 for a total of 20 cards. You don’t have to pay a fee for each card over that number.
- You decide how much money each card can have; you can even set a card to zero if you want. You typically can store a maximum balance of $25,000. But if you need more, all you need to do is ask. “You can call us and say, ‘This card needs the ability to have more than $25,000,” Grant says. Having bigger balances is particularly important for small businesses that need to make major purchases, such as computer gear.
Prepaid cards also are perfect for small businesses that use contract labor or hire temporary workers or interns. “They can issue a card to whoever they want,” Grant says.
In fact, small businesses going through rough times, including those on the verge of collapse, could benefit from prepaid cards, he says.
“We’ve had bankrupt companies use the PEX Card solution,” he says, explaining that a prepaid card can help a struggling small business deal more efficiently with expenses as they try get their finances back in order.
Lisa Nestor, a graduate student focused on high-tech finance at the Anderson School of Management at UCLA, says the PEX Card is an example of how financial technology is changing the lending industry. She says the company is “another tech startup innovating in a historically bank-enabled business.”
“PEX Card’s value proposition is really interesting,” says Nestor, who is also a consultant at the startup Payoff, which develops products to help consumers pay off credit card debt.
“It’s not a pure prepaid card in the sense that a consumer would use, as a physical or digital payment solution,” she says. “Instead, PEX is an interesting hybrid between a physical payment solution and a personnel management platform.”
The PEX Card will likely work for certain kinds of small businesses, she says. She sees it as “an immediately compelling solution for businesses with lower revenue or perhaps salary per worker … geared towards smaller businesses with a higher number of short-term contract employees who require funds to complete their work remotely.”
On the other hand, she says, “I don’t see this as being an obvious or highly compelling solution for businesses with higher-revenue-earning employees.”
One reasons, she argues, is the “stigma associated with prepaid cards, and I would guess that moving ‘high-worth’ employees from credit to a prepaid solution would come as a significant cultural challenge.”
Grant stresses the control that a small-business owner can have with the PEX Card system.
“Think about how much flexibility you have as a business owner,” he says. “You don’t have to worry about your card getting shut down. … We help business owners feel more comfortable giving cards to people they normally would not give a card to.”
For more information about how to start and run a business, visit NerdWallet’s Small Business Guide. For free, personalized answers to questions about starting and financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page and NerdWallet’s Best Business Loans page.
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