Applying for a business credit card

A business credit card can give you a lot of flexibility. Business credit cards can help you manage cash flow and separate your business expenses from your personal expenses. You can also quickly access cash to fund your day-to-day operations, as well as company-specific rewards and benefits not available on a personal credit card.

Who can apply for a business credit card?

Anyone with a business can apply for a business credit card. But, contrary to popular belief, you don’t need an office or a certain number of employees to be considered a business. You don’t even need an LLC or a corporation to have a credit card for a small business, you can register as a sole proprietor without incorporation.

Anyone with a profit motive can obtain this type of credit card, including gig workers, freelancers, online merchants and more. As long as you’re making a profit, or just planning to, you can be approved for a small business credit card.

When should you apply for a business credit card?

You can apply for an SME credit card as soon as you start your business, even if you have not yet had any income or expenses. And if you’ve been running a business for a while, here are some circumstances in which you should consider applying for a business credit card:

  • You want to simplify accounting: The first business rule is to keep your business and personal expenses separate. This protects your personal finances if there are legal issues with your business in the future. While many business owners are starting to use their personal credit to make business purchases, know that it can greatly complicate your life when tax time rolls around.
  • You want to build a business credit history: Having a solid credit history is necessary to obtain financing when it comes time to scale your business. The process of establishing good credit is long and slow. The sooner you can start, the better. By making business purchases through your business credit cards and then paying off the balance on time each month, you can build good credit for your business.
  • You need an additional funding source: Whether you need financing for more upfront inventory, or you want to bolster your presence through a larger marketing campaign, having a business credit card provides you with working capital that you can use to meet your business needs. In addition, many business credit cards offer 0% APR introductory financing for new purchases, balance transfers, or both. This way you can make the new purchase during the introductory financing without interest being charged on your balance.

What you need to apply for a business credit card

Every credit card issuer has a different application, but most will ask applicants to provide the following information:

Company Information. You must provide the following information about your business, including legal business name, mailing address, and telephone number. You may also need to specify the industry type of your business and its legal structure, such as a corporation, LLC, nonprofit, or sole proprietorship. Other frequently asked questions include how long you have been running your business and how many employees you have.

Information about income and taxes. You will likely be asked a few questions about your company’s finances. This could be your company’s annual revenue and the amount you expect to spend on business expenses each month. You will also be asked to provide your company’s Employer Identification Number (EIN). If you don’t have an EIN, you can provide your citizen service number (BSN) instead.

Personal information: You must enter your legal name, contact details, total annual income and your Social Security number. This is so that the credit card issuer will use this information to check your personal credit score.

The Business Credit Card Application Process

When you apply for a small business credit card, your application goes through several stages.

The application phase. Once you have gathered the required information, applying for a business credit card becomes much easier. You can apply in person through the local branch of your credit card company or complete an online application.

The questions will revolve around your business structure, income and personal information during the application process. Keep in mind that if another person owns 25 percent or more ownership in your company, you must also provide their information.

The verification phase. After you submit your application, you can expect the provider to check your personal credit with one or more of the three major consumer credit bureaus, Equifax, Experian, and TransUnion, to obtain your credit score, payment and debt history. They will also look at your reported income to make sure you can afford a credit card.

The decision phase. Your credit history and the information submitted will be analyzed to see if they meet the credit card issuer’s eligibility requirements. If your credit score isn’t excellent, the card you qualify for may have lower benefits and higher interest rates. Cards with higher benefits have stricter standards.

You will be notified as soon as they have made a decision. You can receive instant online approval and receive a physical credit card within 7 to 10 days (exact number of days may vary by bank). Or you can receive your rejection in the mail. If your application is rejected, you will be given a reason.

The reconsideration phase. If your small business credit card application is initially rejected, you can still contact the card issuer to have it reconsidered. Often, applicants can provide new information or clarify their application, which can lead to approval.

What are the Qualification Criteria for Business Credit Cards?

Business credit card applicants must have good to excellent credit to qualify for most cards. That means a FICO® score of 670 or higher. Those with a lower credit score may qualify for a card with a smaller credit limit or a secured business credit card that requires you to make an upfront cash deposit that will be used as a security deposit.

How to choose the right business credit card

Here are some factors to consider when researching and analyzing your options:

  • Rewards: Review your business transactions over the past six months to identify your largest spending areas and choose a credit card that offers the most significant benefits when spending in those categories. For example, if you travel a lot for business, choose a card that offers cash back, gift cards, or rewards points for airfare, office supplies, and gas station purchases.
  • Sign Up Bonuses: While you may be tempted to pick the card with the largest offer, remember that you don’t get the bonus by signing up for the credit card. You must qualify the welcome offer by meeting the spending requirement. If you have a major purchase for your business within the first few months of getting your card, you may be able to use that purchase to earn the bonus.
  • Annual Fees: Credit cards with a high annual fee usually come with more generous rewards. But determine whether what you spend will unlock enough rewards to justify the annual fee. It’s also worth considering the card benefits that can make up for the annual fees paid.
  • April: Annual Percentage (APR) refers to the interest expense on your balance if you don’t pay it every month. You may qualify for a low interest rate if you have an excellent credit score. But if you have a lower credit score, it could mean you’ll receive a card with a higher APR. If you’re concerned about incurring interest charges, consider a credit card with a 0% APR introductory financing offer.
  • Foreign transaction costs: If your company often takes you abroad, or if you make purchases that are processed outside of the United States, you’ll want a card with no foreign transaction fees. Unfortunately, many cards charge a 3% fee for all foreign transactions, but there is a growing number that don’t.

What it comes down to:

Whether you run a large or small business, or are just a freelancer, having a dedicated card for your business expenses can reward you in many ways. By taking the time to find the right business credit card for your needs and learning how to apply for it, you can enjoy one of the most valuable business tools available.

This article was originally written on February 3, 2022.

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