This article is all about the benefits of business credit cards, how to open a business credit card, and good credit card habits you should implement.
If you have not set up a bank account for your business, check out our previous articles on setting up and operating a business bank account.
Important to note: if you don’t qualify for a business credit card, you can use a personal one. You must ensure that it has no balance and is only used for business purposes.
Checklist
- Determine which type of card you want by comparing card features. Look at:
- Annual fees
- Rewards
- Sign-up bonuses
- Interest rates
- Foreign transaction fees
- Additional perks
- Check if your bank offers any special deals on cards
- Decide on which card you want
- Check your personal and business credit scores and address and issues before applying
- Gather necessary documents required for the application
- Fill out the application
- If approved, review the terms and conditions and activate your card
- If denied, request an explanation for the denial and consider applying for a secured business card
What Business Credit Cards Help With
Business credit cards are financial tools designed specifically for business owners. They offer a line of credit that can be used for business-related expenses, helping to manage cash flow and separate personal and business finances.
Benefits of Business Credit Cards
- Build Business Credit: Regular use and timely payments can help establish and improve your business credit score.
- Higher Credit Limits: Business cards often come with higher spending limits compared to personal cards.
- Rewards Programs: Many business cards offer rewards tailored to common business expenses like office supplies or travel.
- Expense Tracking: Detailed statements and integration with accounting software can simplify bookkeeping.
- Employee Cards: You can often get additional cards for employees, making expense management easier.
Types of Business Credit Cards
- Cash Back Cards: Offer a percentage of cash back on purchases
- Travel Rewards Cards: Provide points or miles for travel-related expenses
- Low Interest Cards: Feature lower APRs, beneficial for carrying balances
- Secured Business Cards: Require a cash deposit and are easier to qualify for
Eligibility Requirements for Business Credit Cards
Business Structure
Most card issuers will approve applications from various business structures, including:
Credit Score
While requirements vary by issuer, a good personal credit score (typically 670 or higher) can increase your chances of approval.
Business Revenue
Some cards have minimum revenue requirements. Be prepared to provide information about your business’s annual revenue.
Time in Business
While not always required, having been in business for at least a year can improve your chances of approval.
Preparing for Your Application
Gather Necessary Information
Before applying, collect the following:
- Business name and address
- Tax Identification Number (EIN or SSN)
- Annual business revenue
- Years in business
- Number of employees
- Personal income
- Personal Social Security Number
Check Your Credit Scores
Review both your personal and business credit scores. Address any issues before applying.
Determine Your Business’s Credit Needs
Consider factors like:
- Average monthly expenses
- Desired credit limit
- Types of purchases you’ll make
Choosing the Right Business Credit Card
Assess Your Spending Patterns
Review your business expenses to determine which type of rewards would be most beneficial.
Compare Card Features
Look at:
- Rewards programs
- Sign-up bonuses
- Annual fees
- Interest rates
- Foreign transaction fees
- Additional perks (like travel insurance or purchase protection)
Consider Issuer Relationships
If you already have a business banking relationship, check if your bank offers any special deals on business credit cards.
The Application Process
Decide Between Online and In-Person Application
Most issuers offer online applications, but some may require in-person visits, especially for newer businesses.
Fill Out the Application Accurately
Provide all requested information accurately. Inaccuracies can lead to delays or denials.
Be Prepared for a Personal Guarantee
Many business credit cards require a personal guarantee, meaning you’re personally responsible for the debt if your business can’t pay.
Submit Supporting Documentation
You may need to provide:
- Business tax returns
- Financial statements
- Business licenses
After You Apply
Understanding the Decision Process
Approval can be instant or take several days. Some applications may require additional review.
If Approved
- Review the terms and conditions carefully
- Activate your card
- Set up online account management
- Consider adding employee cards if needed
If Denied
- Request an explanation for the denial
- Work on improving factors that led to the denial (e.g., credit score, business revenue)
- Consider applying for a secured business credit card
- Look into alternative financing options
Final Thoughts
By understanding the benefits, choosing the right card, and using it responsibly, you can leverage credit cards to support your business growth. Use it wisely and it will contribute to the overall financial health and success of your business.
If you have further questions on getting a business credit card, contact us!
