A Step-by-Step Guide to Securing a Business Credit Card
Managing a small business involves juggling numerous tasks and responsibilities. Keeping your finances balanced is a challenge when weighing professional and personal costs. Even keeping your accounts and payments organized can present issues. To help with this, you may want to find out how to get a business credit card.
Understanding the process of applying for a business credit card can streamline your finances while also strengthening your 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.
Requirements for a business credit card
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. Applying for a business credit card is much like getting a personal one, but with some key differences. Here are the application requirements:
When applying for a business credit card, you’ll need to provide your company’s full legal name. This is what will appear on the credit card if you’re approved. Use the business name you initially registered with the state or your legal name if you’re a freelancer.
Business type: Is your business a corporation, nonprofit or sole proprietorship? You’ll indicate this in your application. If you’re a freelancer, you’ll typically choose a sole proprietorship.
Beneficial owners: If your business has other owners with more than 25 percent equity, include their information. The lender may want to learn about your biggest investors. Industry: You must include the industry your company operates within, chosen from a provided list. Select the one that best describes your business. It’s OK if it’s not an exact match.
Credit card issuers require details on your company’s annual revenue to assess its financial health. They need to ensure your yearly revenue can cover your card payments. If you’re brand new and don’t have an annual revenue yet, provide your personal income instead.
Years in business and number of employees: Note how long you’ve run the business and the number of employees you hired in that time. If you haven’t been in business for a year, you can put “zero.” If you’re a team of one and don’t employ anyone else, you can write “one” for yourself.
Employer Identification Number (EIN): Upon registering your business with the state, you receive a unique nine-digit identifier. Similar to a Social Security number, this is your EIN. Credit card issuers require it to verify your business. For business owners without an EIN, list your Social Security number instead.
Your full legal name, personal contact details, and Social Security number are required by credit card issuers during the application process. They help credit card issuers check your personal credit history. Unless you’re already an established business, your personal credit history likely determines whether or not you qualify. To ensure your reliability, they’ll look at your credit score, income and any current or outstanding debts.
Benefits of business credit cards
Although credit cards are useful for everyone, business credit cards come with unique benefits tailored to business owners. Business credit cards offer
Access to resources. A business credit card provides readily available funds to support your company’s financial needs. Whether you’re in an emergency or need to place a regular order, credit cards give you the resources you need.
Credit-building opportunities. Reducing debt on your business credit card can help boost your company’s credit score. Additionally, certain business credit cards offer rewards for regular spending, providing extra benefits for cardholders.
Higher credit limits. Business credit cards typically come with higher credit limits compared to personal credit cards, offering greater spending power for business expenses.
Track employee spending. If you need to give employees the ability to purchase items for the business on credit, a business card can allow you to easily track these expenses.
What if I have poor personal credit?
If you’ve suffered financial setbacks and your personal credit has taken a hit, 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. When managed wisely, this card can strengthen your business credit, allowing you to upgrade to a more beneficial option later.
Is personal credit tied to business credit?
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. Unlike personal credit, business credit is linked to your EIN and represents your company’s financial track record.
Business and personal credit are calculated differently:
Your personal credit score, created by the three major credit bureaus, comes out to a single number.
Business credit scores don’t follow a universal formula; each credit reporting agency uses its own criteria to calculate them. Still, the foundation of a good business credit score will always include things like paying your debts on time.
Tips for Maintaining a Strong Business Credit Profile
Setting up your business and obtaining a business credit card are essential steps in building a strong credit profile. 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:
Choose credit card vendors that report payments
Make your payments early
Look for errors on your credit reports
Establish your business as credible
Choose credit card vendors that report payments
Some lenders and credit card issuers do not share their customers’ credit history with 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.
Make your payments early. 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. Look for errors on your credit reports
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. Establish your business as credible
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. Work on your credit with Cent Savvy
Business credit cards are essential for many small businesses that 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 improve their credit in the long term.
If you’re dealing with unfair items or errors on your credit report, Cent Savvy 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.
For more information, please visit Cent Savvy Credit Repair Counseling