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How to Apply for a Business Credit Card as a Sole Proprietor

Andrew Martins
Andrew Martins

If you're a sole proprietor, here's a step-by-step guide on how you can obtain a business credit card.

Owning and operating a small business comes with a plethora of expenses for sole proprietors, and if managed properly, credit cards can infuse some much-needed capital into your business. You're also able to build a positive credit record, which can boost your chances of getting future loan applications approved and securing better interest rates.

By following the tips below, you'll understand what you need to apply and how you can increase your chances of getting approved for a business credit card.

Can you get a small business credit card as a sole proprietor?

Most sole proprietors who apply for a business credit card are likely to be approved; however, you will have to be continually vigilant about using the card responsibly. Having a credit card can, if it isn't carefully managed, lead to financial hardship for your business.

According to the Small Business Administration, from a legal standpoint, there is no separation between you and the sole proprietorship you own and operate. You are responsible for the debts your business ‒ i.e., you ‒ incur.

"A credit card is a tool that can be used correctly or incorrectly," said LJ Suzuki, CEO of CFOshare. "Yes, you should get a business credit card, because it is a good tool to have in your toolbox. But, it is up to you to use that tool wisely."

How sole proprietors qualify for a small business card

As the owner of a sole proprietorship, your ability to be approved for a business credit card (and the interest rates you will pay if you carry a balance) is tied directly to your personal credit history.

Your personal credit affects the initial credit limit of the credit card and the interest rate.

"The factors impacting an applicant's eligibility for card membership can vary based on the card product," an American Express spokesperson told business.com. "No two small businesses are alike, which is why there are a variety of business credit cards and products to help entrepreneurs in any industry, and at any stage of their business journey."

4 steps to improve your chances of being approved for a small business credit card

Many of the same rules that govern being approved for a personal credit card apply to successfully getting a business credit card.

"Getting a business credit card is just as easy or difficult as getting a personal credit card," said Suzuki. "Generally speaking, it is still one of the easiest forms of credit to get – you can apply online for any variety of cards with different perks. But don't be surprised if they ask for your Social Security number and run a credit check on you personally."

It also helps to keep in mind what credit card companies look for when processing a potential applicant.

Consider where you want to apply.

There are countless business credit card providers to choose from. When assessing the best option for your sole proprietorship, these cards are backed by financial institutions, banks, or credit unions that are more inclined to approve businesses they already have a relationship with.

As a starting point, look at the banks you already have accounts with, either professionally or personally, and find out if they offer a business credit card. By reaching out to a bank that already knows your creditworthiness, you may have a better chance of getting approved.

Check your credit score.

As a sole proprietor, your personal financial situation matters more than it would for business owners of other types business structures. Your personal credit score will be scrutinized by card issuers.

Before you apply, check your credit score. According to Experian, a good credit score is in the 700s. However, there is some flexibility here. For example, FICO considers scores starting at 670 to be good, while VantageScore considers anything above 660 to be a good score.

Make sure you have all relevant application information handy.

You'll be asked to provide your Social Security number, recent financials to show monthly revenue and expenditures, and your company's tax ID number (TIN).

While most other small businesses will be required to provide an employer identification number (EIN) as their TIN to apply for a business credit card, your status as a sole proprietor means you'll use your Social Security number instead. (That rule changes once you have employees, however, since you'll then be required to have an EIN assigned to your business by the IRS.)

The card issuer will also want to know how long you've been in business. Banks and other financial institutions want to minimize their risk. Card issuers are more willing to work with a more established sole proprietorship than a new one.

Decide what you can offer as a personal guarantee.

Since credit card issuers want to manage their risk with the borrowers they take on, sole proprietorships that offer a personal guarantee or collateral have a better chance of being approved. Collateral can be company equipment or real estate, or monetary guarantees as a down payment.

Benefits of credit cards for sole proprietors

By using a business credit card responsibly, you can improve your credit score and take advantage of other perks.

"Credit cards are an excellent form of debt to float temporary cash shortfalls or finance large online purchases such as furniture or software," said Suzuki. "Credit cards are a terrible form of long-term financing. You would be better to get a working capital line of credit or term loan if you need debt for more than a few months."

The following are just some of the benefits a business credit card can offer your sole proprietorship.

Build better credit

The higher your personal credit score is, the more likely you are to be approved for a business credit card. You'll also receive more favorable interest rates and higher credit limits.

Additionally, by using a business credit card and paying it back in full each month, you demonstrate to financial institutions that you're trustworthy and reliable. And that means that banks are likely to extend other types of financing to you in the future because you have a demonstrated history of paying your balance in full and on time.

Earn rewards

As an incentive for applying to certain business credit cards, card issuers offer great rewards such as sign-on bonuses, travel miles or cash back that you accrue as you use the card. Since you may spend thousands on purchases using a business credit card, these rewards can rack up quickly.

"Rewards designed for business owners can go a long way," an American Express spokesperson said. "They can be reinvested back into the business by spending them on business purchases, such as on telco bills, office supplies, and even marketing, as well as help to fund business travel, or on ways to recognize employees."

While it's impossible to list every potential credit card option available to sole proprietors, below we've provided a starting point for your search.

Benefits vary by card issuer, so consider rewards, the interest rate and the fees. Below are the major credit card providers:

Image Credit: LightFieldStudios / Getty Images
Andrew Martins
Andrew Martins,
business.com Writer
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I am a former newspaper editor who has transitioned to strictly cover the business world for business.com and Business News Daily. I am a four-time New Jersey Press Award winner and prior to joining my current team, I was the editor of six weekly newspapers that covered multiple counties in the state.