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How Do You Get a Business Credit Card?

TLDR

What You Need To Know

  • If you sell products or services, you’re likely eligible for a business credit card
  • You may not qualify for a business card if you can’t provide proof of business revenue and expenses
  • If you have a thin business credit history or bad credit, you won’t qualify for all business credit cards

Contents

So you started a business – and business is booming! Now you’re in the happy situation of needing more capital to fund your business’s growth. This is where a business credit card can come in handy.

We’ve put together a guide outlining what you need to qualify for a business credit card, how to apply for a business credit card and the benefits and potential issues that come with getting one.

What Do You Need To Qualify for a Business Credit Card?

You may be wondering if you’re eligible for a business credit card. Well, if you sell products or services, you’re likely eligible for a business credit card.

Proof of business

Your business doesn’t have to be incorporated (think: LLC, S Corp, etc.) to apply for a business credit card. And the size of your business doesn’t matter, either (here’s looking at you, sole proprietors!).

Do you sell on Etsy, teach online fitness classes or drive for a rideshare app? When it comes to qualifying for a business credit card, businesses of all types and sizes may apply.

You may not qualify for a business card if you can’t provide proof of business revenue and expenses. So keep track of all business revenue and expenses, even if they are few and far between. It’ll provide the proof you need to show you’re operating some form of a business.

If your business isn’t bringing in a lot of money right now, you may not qualify for a card with a high credit limit. If the card you have in mind has a high credit limit, you’ll need to increase your revenue to increase your chances of getting approved for it.

Creditworthiness

When a business credit card issuer assesses your business to see if you qualify, they’ll run a hard inquiry on your business credit, reviewing credit reports generated by the three major business credit bureaus. Each bureau collects data and produces its own business credit report and credit scores.

The three major business credit bureaus are:

FYI: Credit scores for businesses aren’t calculated like consumer (aka personal) credit scores, though there is some overlap like credit utilization, age of accounts and payment history.

The business card issuer may also run a hard inquiry on your personal credit report to confirm your reliability as a borrower (more on this later). Because business credit scores have a similar effect as consumer credit scores on credit applications, higher business credit scores can get you better card terms. If your business credit scores are in the lower range, you may end up paying higher interest rates or may not be approved for the cards you want.

Creditors will also review your business’s financial data (like your revenue and debts) to determine your debt-to-income (DTI) ratio.

Differences Between Business Credit Cards and Consumer Cards

Business credit cards work a lot like consumer (or personal) credit cards. You can make purchases with both cards, and you pay back what you spent. Both cards accrue interest in the same way and, in most cases, both earn rewards in the same ways.

You may even get a tax break on annual fees for both business and consumer credit cards if you use them for business expenses.

But there are a handful of differences you should be aware of:

  • Bonuses and rewards: Business credit cards will likely have rewards that are more focused on business expenses, like internet bills or office supplies. The rewards you earn with consumer credit cards might be more focused on everyday expenses, like groceries or dining out.
  • 0% interest APR periods: These offers tend to be rare for business cards. They generally don’t last as long as they do for consumer credit cards. And they usually only apply to purchases, not balance transfers.
  • Protections: Most business card issuers extend some form of protection to their cardholders, but they don’t go as far as personal credit card protections, which may include protecting cardholders from high fees for late payments or maxed out a card. Make sure you know what protections your business credit card offers.
  • Credit reporting: Some business credit card companies only report your business card activity to business credit bureaus, but some will report your activity to both business and consumer credit bureaus. Depending on the card company, your business activity could show up on your personal credit report.
  • Credit limits: You’ll likely qualify for a much higher credit limit on a business credit card than on a consumer credit card because the spending limits on business cards are based on your personal income and your business revenue.

Generally speaking, you should only use a business card for business expenses. Some business card issuers even include limitations on a cardholder’s ability to use a business card for personal expenses.

What Are the Benefits of a Business Credit Card?

If you have a small business and have a consumer credit card, you might think you don’t need to apply for a small business credit card. You may be wondering if all the researching into cards and the time spent applying for them will be worth the hassle. But a small business credit card can be a great asset. Even if you’re a large company, getting a business card can open doors to more cash.

There are many benefits to having a business credit card:

  • Bookkeeping: Being able to keep your business expenses separate from your personal expenses makes things easier when tax season rolls around. It also protects your personal finances from legal issues that could arise with your business, like business audits. LLCs and corporations require this separation so individuals aren’t liable for business debts or legal claims.
  • Access to working capital: If you’re a new business, you may need help with cash flow but may not have enough credit history to qualify for business loans or lines of credit. A business credit card gives you access to a revolving line of credit to start growing your business right away.
  • Building business credit: Business credit activity is usually tied to a business’s employer identification number (aka tax identification number) and can help build your business credit scores and history. You may not be able to build business credit if your business is tied to your Social Security Number, which is the case for some sole proprietors.
  • Rewards: You can earn travel rewards, cash rewards, points, gift cards and more on eligible purchases. You may earn discounts when you shop at certain retailers and get sign-up bonuses or other perks, like extended warranties.

What Are the Potential Issues of a Business Credit Card?

While there are many benefits to having a business credit card, there are some potential issues we should mention.

  • Payment liability: Generally, you pay off your business card balances with business revenue. If you can’t use business revenue to pay off your card’s balance, you’ll have to pay it off with your own money.
  • Credit limits: If your business spending varies widely, it may be harder to estimate a credit limit that will cover all your expenses. If you get a card with a low credit limit that can’t cover larger purchases, you may have to delay purchases or pay out of pocket.
  • Credit history: If you have a thin business credit history or bad credit, you won’t qualify for all business credit cards. You may even have to apply for a secured credit card. The card acts like a revolving line of credit for business owners with bad or limited credit and requires a refundable deposit to open.

How Do You Get a Business Credit Card?

Now that you’ve got some background on business credit cards, let’s walk through how to get one.

Check your eligibility and credit

First, make sure you’re eligible for a business credit card and check your business credit history by purchasing a credit report from one or all three business credit bureaus. This will help you determine which credit card(s) to apply for.

You’ll also want to check your personal credit scores since business credit card issuers may review your business and personal credit when you apply for a credit card, especially if your business is new and hasn’t established a credit history.

Make sure your personal finances are in good shape and that your credit scores and credit history reflect responsible debt management, including on-time payments, a low DTI and low credit use.

Remember, credit card issuers may perform hard credit checks on both your personal and business credit reports. The hard credit inquiries may cause your credit scores to dip temporarily.

Get organized

There are some documents and information you’ll likely need to apply for a business card. Preparing them ahead of time can speed up the application process. Keep in mind that what’s required on an application may vary by credit card issuer.

  • Legal business name, address, phone number and tax identification number (aka EIN)
  • Industry and business structure (nonprofit, corporation, sole proprietorship, etc.)
  • Years in business and number of employees
  • Annual business revenue
  • Estimated monthly business expenses
  • Personal income, Social Security number and date of birth

Decide and apply

Research business credit cards and pick the ones that best fit your business’s needs and goals. Ask yourself a few questions to help you narrow down your search:

  • How can you maximize rewards based on your spending?
  • What are the card’s fees (annual fees, foreign transaction fees, maintenance fees, etc.)?
  • What kinds of purchases do you plan on making with the card and where (restaurants, wholesalers, airlines)?
  • How often do you anticipate using the card and how much are you looking to spend?
  • Does the card issuer report your business card activity to business credit bureaus and consumer credit bureaus?

Once you’ve decided on what card(s) to apply for, the application process is fairly similar to applying for consumer credit cards. You can apply online or in person at a bank, credit union, etc. Avoid applying for too many credit cards at once. One hard credit check will briefly drop your scores. You’ll only multiply that effect with several hard checks.

If you aren’t immediately approved, the credit card issuer should send an approval letter in 7 – 10 business days. If you’re approved, you’ll likely receive your new card in 7 – 14 business days.

Start using your card

Once you receive your card, activate it and start swiping – responsibly. Use your business credit card for purchases that help your business grow.

Pro tip: Use your card for purchases you can pay off in full by the statement due date.

When you pay off your entire card balance, you aren’t charged interest, you stay out of credit card debt, you keep your credit utilization (which plays a big part in calculating your credit scores) low and you give your credit scores a boost.

And if you’re having trouble paying off your business debts, there are steps you can take and strategies you can implement to help get you back on track.

Build a Strategy Before Getting a Card

The process of getting a business credit card is fairly simple, especially when you’re prepared and know what to expect.

Always consider your business’s needs and goals when deciding which credit card meets the assignment. Make your life, or at least the application process, a little easier and collect all the information you’ll need to apply ahead of time.

And have a strategy in place for responsibly using the credit card and paying it off.

ICYMI

In Case You Missed It

  1. Generally speaking, you should only use a business card for business expenses

  2. If you can’t use business revenue to pay off your card’s balance, you’ll have to pay it off with your own money

  3. Card issuers may consider both your business and personal credit when you apply for a credit card, especially if your business is new and hasn’t established a credit history

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