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Some businesses are best served by getting a business credit card immediately after launch. For others, it happens once the business reaches a certain size. At some point in developing your business, you’re going to either want or need a business credit card.
Here’s how to make it happen.
How to Get a Business Credit Card
There are four steps in the process of getting a business credit card.
1. Make Sure Your Business Qualifies
The process of applying for a business credit card is similar to applying for a personal card. The issuer will want to know you have both acceptable credit and the financial ability to make payments on the card.
However, there is one critical difference between applying for a business credit card versus a personal one. You will want the card to be specifically associated with your business and not a personal card that’s used for business purposes. That means having your business name appear on the front of the card.
As a startup business, you will be required to be on the account since your business is too new to have credit independently. Issuers will primarily use your credit and income for qualification purposes.
If you already have personal credit established, this should not be a problem. The issuer will require you to have good or excellent credit, and a personal cash flow – from your business or other sources – to qualify for the credit line requested.
Since you want to begin developing credit for your business, you’ll need to establish the business as a separate entity.
If you’re a freelancer, sole proprietor, or gig worker, you’ll most likely file Schedule C for income tax purposes. If so, you should have an Employer Identification Number (EIN), which you can easily obtain with the IRS. If you don't have an EIN, you can use your social security number.
The credit card issuer will still need your Social Security number. However, the EIN will add a federal identification number to the account as well, allowing you to begin building business credit.
If you’ve established your business as a partnership, limited liability company (LLC), or corporation, you will need an EIN for the business for tax purposes. You can provide the EIN to the bank, but they’ll likely request Social Security numbers from each of the principals in your business, especially if it is closely held.
Nonprofit organizations can also apply for business credit cards to help manage expenses. Note that you'll need an EIN specific to nonprofits.
2. Assess Your Business Needs
Here's a breakdown of how to figure out what you need:
One of the advantages business credit cards provide is the ability to finance major purchases over time. Some credit cards are better at doing this than others.
For example, these cards:
- Ink Business Cash® Credit Card
- The American Express Blue Business Cash™ Card
- The Blue Business® Plus Credit Card from American Express
- Ink Business Unlimited® Credit Card
Each provides a 0% introductory APR on Purchases for a full 12 months after opening your account. The interest-free term can be a big benefit for a startup business looking to maximize cash flow at the lowest possible cost.
Many business credit cards pay rewards. But how much they pay varies considerably from one card to another. If rewards are important to you in your business, you’ll naturally want to choose a card with the most generous rewards program. It offers an opportunity to reduce business expenses.
Perhaps the business credit card with the most generous rewards is the Ink Business Cash® Credit Card from Chase. It pays 5% cash back on the first $25,000 spent in combined purchases at office supply stores and on Internet, cable, and phone services each account anniversary year. The card then pays 2% cash back on the first $25,000 spent in combined purchases at gas stations and restaurants, then unlimited 1% cash back on all other purchases.
If your business involves a significant amount of travel, you may want to focus on a business credit card that offers generous travel rewards.
For example, the Ink Business Premier℠ Credit Card pays 5% cash back on travel purchased through Chase Travel(SM) (although you can't transfer the points to other Chase cards). If that isn’t enough, it also pays 2.5% cash back on purchases of $5,000 or more, and unlimited 2% cash back on all other business purchases.
Many business credit cards offer valuable business features. For example, the Ink Business Premier℠ Credit Card provides employee cards at no additional cost. The card also enables you to monitor employee spending with a variety of tools, like preset spending limits and purchase alerts for each employee. You can also integrate business activity with popular bookkeeping software.
3. Gather the Required Documents and Information
Since most credit card issuers will require you to qualify for the card personally, at least as a guarantor, the bank will be looking at your qualifications as well as those of your business. The process is more complicated with a business than when you apply for a personal credit card.
Unless your business already has established credit, you’ll need to personally have a good or excellent credit score. Depending on the credit card issuer, this will generally require a credit score starting between 650 and 680 or above. The higher your credit score, the better your business credit card terms will be.
When you apply, be prepared to provide personal information, including your Social Security number. The bank may also request your business EIN, as well as any legal business documents. These can include articles of incorporation (if you’re incorporated), or a partnership agreement for partnerships.
In addition, the bank may require corporate registration information from your state Secretary of State if your business is incorporated.
You’ll need to provide evidence of income. As a business, you’ll typically need to provide fully completed income tax returns, both personal and business, for the most recent two years.
If it’s more than a few months into the next tax year, the bank may require evidence of current income. That can be in the form of either financial statements prepared by a CPA, or copies of business bank statements showing deposits.
The bank will also require you to provide the legal name of your business, your business address, the type of business, how long it has been operating, how many employees you have, and anticipated future business revenue.
4. Apply for the Business Credit Card
You can start by reading our guide, Best Small Business Credit Cards. Zero in on the best card for your business, and then apply.
The quickest way to apply is online. Many lenders can approve an online application in a matter of minutes. However, if you’re looking to establish a business relationship with a bank, it may be helpful to set up an appointment with a bank officer.
An in-person application may take a couple of days to be approved, or the bank officer may have the ability to approve the card on the spot.
Whether you apply online or in person, you should expect to receive your business credit card 7 to 14 business days after you apply. Check with the credit card issuer to know exactly how long the process will take.
Why Get a Business Credit Card?
There are four major benefits to getting a business credit card:
- Separating personal and business expenses. Many small businesses get started using the owner’s personal account(s). But that can be a nightmare at tax time. You’ll need to separate business expenses from personal expenses at year’s end. By then, you might not even remember which is which.
- Building business credit. As your business grows, it will become increasingly important to build a business credit rating. It'll be necessary to acquire equipment, obtain financing, or purchase one or more vehicles. Getting a business credit card early in the process will give you a head start.
- Cash flow management. If you’re a business owner, you’re probably already painfully aware of the up-and-down nature of cash flow. A business credit card can help you maintain necessary spending levels during times when income is at a low point.
- Rewards. This benefit is a bonus, but many credit cards pay generous rewards. This can be in the form of either upfront offers or ongoing rewards. They’re typically available as either cash back, a statement credit, or to be used toward travel.
- Building your business image. Having a business credit card is a way of showing that your business is well-established and credit-worthy.
How to Manage Your Business Credit Card
As is the case with a personal credit card, it’s important to properly manage your business credit card.
- Be sure to make all payments on time. This will not only help to build a favorable credit profile for your business, but it will also avoid any derogatory information appearing on your credit report.
- Use the business credit card strictly for business purposes. Not only will it avoid the need to separate expenses at year-end, but you’ll be able to deduct all interest and fees paid on the card over the year if it’s used 100% for business.
- Avoid carrying a balance. Interest rates on credit cards can run as high as 29.99%. That will be a major expense if you regularly carry a balance. But by paying the balance in full each month you’ll get all the benefits the card offers, with none of the interest expense. That’s an excellent business strategy!
- Finally, know your budget. Just as is the case with a personal credit card, the business credit card should never be used as an extension of your paycheck/cash flow. Avoid accumulating a larger balance on your card than you’re prepared to pay off out of next month’s revenue. You'll avoid late payments and defaulting on the card.
If you’re in business long enough, you’ll eventually need to get a business credit card. Following the steps above will help you get the best credit card for your business. The right card can help you build your business credit profile and provide valuable financial and business benefits.