The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
As a small business owner, you have a lot on your plate. Keeping your finances balanced is a challenge when weighing professional and personal costs. Even keeping your accounts and payments organized can present issues. So, many business owners decide to separate their finances by learning how to get a business credit card.
Learning how to apply for a business credit card can simplify your finances and help you build business credit. Beyond this convenience, paying off credit card debts helps establish your business and support its long-term success. If you’re just starting and don’t have any business credit yet, you can still get a business credit card. To help you along, we’ll walk you through the required steps and answer a few common questions.
You need to build business credit as a newly established company. If you haven’t found your business footing, credit card companies will consider your personal credit history to assess you as a borrower. So, before you apply for a business credit card, review your personal credit report and check your credit score (and remember that your score doesn’t show up on your credit report, so you will need to look elsewhere for it).
While every business credit card approval will have different requirements, most require good to excellent credit for approval:
The three nationwide credit bureaus—Equifax®, Experian® and TransUnion®—offer you one free copy of your credit report every year. You can order yours from AnnualCreditReport.com. Take advantage of those free reports and ensure your credit is healthy enough for approval before you apply.
There’s no one-size-fits-all approach when choosing a business credit card. Every business credit card has different rates, fees and perks you’ll want to investigate. Your choice will ultimately depend on your situation, financial goals, purchasing needs and industry-specific factors. You can weigh these considerations by asking:
Remember that every business credit card offers something different. You should tailor your choice according to how your business operates and where you’ll use your card the most.
The majority of business credit cards require a personal guarantee when you apply. A personal guarantee holds you responsible for any debt if your business cannot repay it. This guarantee helps credit card companies mitigate risk when extending lines of credit. So, you should check for this requirement before applying.
If your business fails or you can’t keep up with your payments, this liability holds you personally responsible for repayment. Worst case scenario: this puts your personal assets at risk.
Once you have completed the steps above and have chosen the best business credit card, you can start the application process online. If you’ve ever applied for a personal credit card, the process will feel similar:
You don’t need a large amount of revenue, a team of employees or even a full-time business to qualify for a business credit card. The process is similar to applying for a personal credit card, with a few differences. Here are the application requirements:
While anyone can find a use for credit cards, business credit cards offer distinct advantages to cardholders. Business credit cards offer:
Running a small business comes with its fair share of risks. For example, suppose you’ve suffered financial setbacks, and your personal credit has taken a hit. In that case, you might wonder how you’ll qualify for a business credit card.
Instead of a standard unsecured business card, a secured business credit card with low credit score requirements may be your best option. With a secured card, you can deposit cash up front to guarantee payments to lenders. If used responsibly, you can use this card to improve your business credit and switch to a better card option in the future.
While lenders use your personal credit score as a qualifying factor in obtaining a business credit card, your credit is separate from your business credit. Your personal credit is tied to your Social Security number and depends on your personal spending history. Business credit, however, is tied to your EIN and reflects your business’s financial history.
Business and personal credit are calculated differently:
Establishing your business and applying for a business credit card are the first steps toward building solid business credit. From there, it just takes time, discipline and following a few basic principles to keep your business credit in good standing. Here are some best practices for business credit management:
Not all credit card companies or lenders report their customers’ credit history to credit bureaus. If this is the case for a supplier you work with, no amount of stellar credit-building will improve your business credit. Confirm that your lender will report your payment history to the credit bureaus to ensure your credit-building efforts don’t go to waste.
Since your credit score primarily comes down to your payment history, consider the timeline of your payments. Additionally, while paying on time can help you secure better credit, making your payments early will improve your credit even more.
Credit reporting errors aren’t uncommon, but it is common for them to go unnoticed if you don’t periodically check your credit reports. Errors and fraudulent activity can hurt your credit. Unless you make a point to check your account activity, you may find yourself in a difficult position the next time you try to borrow money or get a loan. Avoid this by checking your reports for errors multiple times a year.
Lenders consider more than just your payment history when determining your creditworthiness. You should also work to establish your business’s credibility. You can do this by giving your company a legal name and filing it with your state. Additionally, provide its phone number, mailing address and website in your application. This signals that you’re a legitimate business and puts you in a better position to receive any financing in the future.
Business credit cards are essential for many small businesses that rely on loans and grants and want to build their company credit profile. By learning how to get a business credit card and using it responsibly, small business owners can develop their company’s reputation and increase their credit in the long term. If you’re dealing with unfair items or errors on your credit report, Lexington Law Firm provides credit repair services that may be able to help. Our team can help you navigate your credit history and work to make changes before applying for a business credit card.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
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