How to apply for a business credit card

A business credit card can give you a myriad of flexibility. Business credit cards can help you manage your cash flow and separate your business expenses from your personal expenses. You can also quickly access cash capital to fund your day-to-day operations, as well as business-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 what most think, you don’t need an office or a certain number of employees to qualify as a business. In fact, you don’t even need an LLC or corporation to have a small business credit card, you can apply as an unincorporated sole proprietor.

Anyone with a for-profit business can get this type of credit card, including gig workers, freelancers, online sellers, and more. As long as you make a profit, or just intend to, you can be approved for a small business credit card.

When should you apply for a business credit card

You can apply for a small business credit card as soon as you start your business, even if you haven’t had any income or expenses yet. And if you’ve had your business for a while, here are some circumstances when you should consider applying for a business credit card:

  • You want to simplify accounting: The first rule of business is to separate your business and personal expenses. This will protect your personal finances in the event of legal issues with your business. Although many entrepreneurs start out by using their personal credit to make business purchases, be aware that this can make your life a lot harder when tax time comes around.
  • You want to build a business credit history: Having a solid credit history is necessary to obtain financing when it comes time to develop your business. The process of establishing good credit is long and slow. The earlier you can start, the better. Making business purchases with your business credit cards and then paying the balance on time each month will help you build good credit for your business.
  • You need an additional source of funding: Whether you need financing for larger initial inventory or want to amplify your presence with a larger marketing campaign, having a business credit card gives you working capital you can use. to meet your business needs. Additionally, many business credit cards offer introductory financing at 0% APR on new purchases, balance transfers, or both. That way, you can make the new purchase without having to pay interest on your balance during the introductory financing period.

What you need to apply for a business credit card

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

Business information. You will need to provide the following information about your business, including its legal name, mailing address, and phone number. You may also need to provide the industry type of your business and its legal structure, such as a corporation, LLC, nonprofit, or sole proprietorship. Other common questions include how long you have been in business and how many employees you have.

Income and tax information. You will probably be asked a few questions about your business finances. This can include your business’s annual revenue and how much you plan 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 Social Security Number (SSN) instead.

Personal informations: You will need to enter your legal name, contact information, total annual income, and social security number. This is how 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 steps.

The application stage. Once you have gathered the required information, the business credit card application process becomes much easier. You can apply in person through the local branch of your preferred credit card issuer or complete an online application.

Questions will cover your business structure, income, and personal information during the application process. Note that if another person has a 25% or greater stake in your business, you will need to provide their information as well.

The verification step. Once you submit your application, 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, your payments and debt history. They will also review your reported income to make sure you can afford a credit card.

The decision stage. Your credit history and submitted information will be analyzed to see if it matches the credit card issuer’s eligibility criteria. If your credit score isn’t great, the card you qualify for may have lower benefits and higher interest rates. Cards with higher benefits have higher standards.

Once they have made a decision, you will be notified. You can receive instant approval online and receive a physical credit card in the mail within 7-10 days (exact number of days may vary by bank). Or you may receive your refusal in the mail. If your request is denied, you will receive a reason.

The reconsideration stage. If your small business credit card application is initially declined, you can always contact the card issuer for reconsideration. Often applicants are able to provide new information or clarify their application, which may result in an 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. This means a FICO® score of 670 or higher. Those with a lower credit score may qualify for a card with a smaller line of credit or a secured business credit card that requires you to make a cash deposit up front which 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:

  • Awards: Review your business transactions for the past six months to identify your top spending areas and choose a credit card that offers the greatest benefits when you spend in these categories. For example, if you travel a lot for business, choose a card that offers cash back, gift cards, or rewards points for airline tickets, office supply stores, and gas station purchases.
  • Sign-up bonuses: Although you may be inclined to choose the card with the highest offer, remember that you don’t get the bonus just by signing up for the credit card. You will need to qualify the welcome offer by meeting the spending requirement. If you have a big purchase coming up 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 high annual fees usually come with more generous rewards. But consider whether what you’re going to spend will unlock enough rewards to justify the annual fee. It is also worth considering the benefits offered by the card which can offset the annual fee paid.
  • APR: Annual Percentage Rate (APR) refers to the interest charges on your balance if you don’t pay it off each month. You may qualify for a low interest rate if you have excellent credit. But having a lower credit score can mean receiving a card with a higher APR. If you’re worried about incurring interest charges, consider a credit card with a 0% APR introductory financing offer.
  • Foreign transaction fees: If your business often takes you overseas or you make purchases that are processed outside of the United States, then you’ll want to have a card with no foreign transaction fees. Unfortunately, many cards charge a 3% fee on all foreign transactions, but there are more and more that don’t.

At the end of the line

Whether you own a large or small business, or are simply 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 one, you can take advantage of one of the most valuable business tools available.

This article was originally written on February 3, 2022.

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