After you establish your business, you may need to purchase supplies or inventory on credit. While you can use your personal credit card, having a credit card in your business’s name has distinct advantages. A business credit card can simplify accounting and give your business a more professional appearance. In the long run, it can help establish business credit, which you’ll need for financing your company’s future growth.
Several factors go into choosing and applying for a business credit card. We’ll outline what qualifications you need to apply for a business credit card and how to obtain one.
Several types of business credit cards are available. Some are reserved for large corporations with dozens or even hundreds of cardholders, employee expense reimbursement policies, and complex security needs. Others are geared toward small businesses with five or fewer employees.
With so many business credit cards available, there’s one for just about any type of business. However, you may encounter the following qualification restrictions from card issuers:
Unless you’re prohibited from getting a card due to these restrictions, getting a business credit card is often as easy as getting a personal card. Even if one issuer doesn’t give you a card, you may still be able to get a card from another company.
When you apply for a business credit card, you must provide the same information you’d submit when applying for a personal card. The application will include basic contact information like your name, mailing address, phone number and email. You must also provide several items specific to your business, including the following:
You must also provide your tax identification number (TIN). If your business is incorporated, this may be your business’s EIN. If you’re a sole proprietor or a single-member LLC, this may be your Social Security number. You must also state your position at the company and list Social Security numbers for business partners who own over a certain percentage of the business (usually 20 percent or more).
Depending on the issuer, a card application may also ask about your business’s industry, its nature (whether it’s for-profit, for example), and the number of employees or additional cardholders.
If you think you fit the criteria for a business credit card and would like to get one to support your operations, you can apply anytime. While an application is simple and only takes five to 10 minutes to complete, there are several things you should do first to ensure you get the right card for your company’s needs.
Dozens of business credit cards are available. Before you settle on a card, you should know your options. In addition to investigating your business credit card’s interest rates and any fees involved, consider the following:
Be sure to check the qualification criteria for any business credit card you’re considering to ensure you qualify for the card you want.
Once you’ve identified cards with the right mix of fees, rates and rewards, it’s time to decide on your business credit card. Ensure you’ve read the documentation carefully and understand all cardholder rights and obligations. If the card offers a 0 percent introductory period, you need to know when it ends. If there are caps on rewards or limits on how rewards can be redeemed, you should be aware before applying.
If you’ve been in business for three or more years, you may qualify for a business credit card using your business credit score. In most cases, though, you’ll be applying with your Social Security number, and issuers will check your personal credit score.
In either case, it’s usually a good idea to check these scores before applying to ensure they’re in good shape. The higher your scores, the better. If your personal credit score isn’t at least 650, you may want to consider holding off on applying altogether. That will give you time to improve your credit score by paying down debt, bringing accounts current, or resolving past credit disputes.
If you’ve chosen a card and your credit is in good shape, it’s almost time to apply. Your last task is gathering the information you’ll need for your application:
With all the pertinent information at hand, it’s time to apply for your business credit card. This process is usually completed online and only takes a few minutes.
Depending on the data you enter, the card issuer may have additional questions for you or may require more information. You may be able to complete subsequent steps online, or you may need a separate follow-up via phone or email.
After formally submitting your card application, wait and see if you’re approved. Approval decisions can take a few minutes or a day or two if additional follow-up is necessary. If approved, you’ll get your card (or cards) in the mail to activate and start using.
If you’re confused about whether you should use a business credit or debit card, consider your goals. If you want to build credit and need access to additional funds, a credit card is the way to go. If you prefer paying with cash, a debit card is the better choice.
Although applying for a business credit card only takes a few minutes, credit card issuers gather a great deal of information about you and your business. A few factors that can make or break the approval decisions include the following:
This list isn’t comprehensive. Credit card applications can be denied for many reasons. Even having an unusual business address — one that isn’t easily found in a postal code lookup — can be a disqualifying factor.
However, credit scores are the most common disqualifying factor. Most small business owners apply for business credit cards using their personal credit, not business credit. Because of this, if a business owner’s credit report isn’t in good shape — with a score of at least 640 to 700, depending on the card they’re applying for — they may be denied.
To get the most out of your business credit card, set spending limits for all cardholders, deduct interest and annual fees from your business taxes, and use card statements to verify business expense deductions.
Business credit cards are tied to personal credit in several ways:
Getting a business credit card can be a quick and easy way to access credit for your business. However, sometimes, it’s not your best option. Consider the following situations where you shouldn’t apply for a business credit card because you’re less likely to qualify:
A business credit card is intended strictly for purchases related to an organization; it is not for personal use. Business credit cards have distinct differences from personal credit cards:
Business credit cards provide four primary benefits:
If you pay your bill on time faithfully for at least six months, you can ask the card issuer to increase your credit limit. Your chances of getting a credit limit increase are better if you consistently pay more than your minimum payment or pay off the entire balance each month.
If you will be carrying a balance from month to month, the interest rate is paramount. If you pay your balance off in full each month, the interest rate is not important. In that case, the fees and rewards are the most important factors to consider.
If you’ve had debt problems, reserving your card for emergencies is a good idea. However, if you’re confident you can use the card responsibly, you can enjoy its benefits. For example, using a credit card provides fraud protection. Some cards give you additional purchase protection, price protection, or warranties; others provide cash-back rewards.
Yes. Most business credit cards allow you to set spending limits on individual cards. For example, you could assign a limit of $350 monthly to your office manager for office supplies but have a limit of $5,000 monthly for salespeople to use for entertaining clients.
Applying for a business credit card is relatively quick and easy — it’s usually as simple as completing an application online. However, before you apply, ensure that a business credit card is the right financing option for your business. If so, research cards, pick the best one for you, gather your relevant info, and confirm that you’ll likely qualify based on your credit score before submitting an application.
That way, you can ensure that you’ll be approved — and thus not waste a hard inquiry on your credit — and that you’ll find the best card for your business.
Jennifer Dublino contributed to this article.