It is easy to apply for a business credit card. It’s simple to apply for a business card. First, you will need to do some research on the available cards, then choose one that interests your company. Although the application process is straightforward, it’s important to prepare in advance the 5 C’s of credit so that you can successfully choose the right card for your business and get approved.
Who can apply for a business credit card?
There are many types of business credit cards. Some cards are only for large corporations with hundreds or thousands of cardholders. Others are designed for small businesses with five to fewer employees.
There are many business credit cards that can be used for any business. Even sole proprietors that aren’t incorporated can still qualify for some credit cards.
These restrictions can vary from card issuer to card issuer, but they are the ones you might see.
- Type of organization: Some card issuers won’t issue business credit cards for nonprofits and unincorporated businesses like sole proprietorships.
- Industry: Businesses that operate in certain industries may not be eligible for credit from some institutions, such as multilevel marketing and cannabis- or firearm-related companies.
- Applicant qualifications: Each issuer sets its own minimum qualification criteria for card applicants. These include income, credit score, and time in business.
A business credit card can be obtained unless you are prohibited from applying for a card by one of these restrictions. You may be able to obtain a card from another issuer even if you have been banned from receiving a card from that issuer.
Why do you need a business credit card?
You will need to provide all the information you would normally give to apply for a personal credit card. The application will include basic contact information such as your name, address, telephone number, and email. You will also need to include information specific to your business.
- Name of the business
- Address of the business
- Many years in business
- Annual revenue
- Monthly expenses estimated using the card
You will also need to provide your tax identification (TIN) This may be your EIN if your business is an LLC. This could be your Social Security Number if you are a sole proprietor, a single-member LLC, or a sole proprietor. It is also necessary to indicate your company’s position and the Social Security numbers of any business partners that own more than a certain amount (usually 20%).
Depending on the issuer of the card, it may ask about the industry, nature of the business (e.g., profit or loss), and how many cardholders are involved.
Also read: How To Find The Best Credit Card
The process to apply for a business credit card
You can apply for a business card anytime if you feel you meet the requirements. Although the application process is easy and takes only five to ten minutes, there are a few things you need to do before you apply to ensure you get the right card.
1. Research your options.
There are many types of business credit cards. You should be aware of your options before you decide to settle on a card. To find out which categories your business is spending money in, you can look at your expenses and see if you could be eligible for rewards. These are ideal for startups with low capital requirements and offer long 0% introductory periods. Some are great for companies that have a lot of travel reps, as they earn reward miles. Other cards offer cash-back programs, which can give you great rewards for spending in specific categories. Check cards can also be used to pay fees or interest rates.
2. Pick a card.
Once you have identified the cards that offer the best mix of rewards, fees, and rates, you can decide which card is right for your needs. You should carefully read all the information and be aware of your rights and obligations as a cardholder. Find out the end date of any introductory period that includes 0%. Before you apply, be aware of any restrictions or caps on the rewards you can redeem.
3. Check your credit.
You may be eligible for a business card if you are a veteran business owner who has been in business for at least three years. Most likely, you will need your Social Security number to apply. Issuers may also examine your personal credit score.
It’s a good idea in both cases to verify your scores before applying to ensure they are in good condition. Higher scores are better. You might want to hold off applying if your personal credit score falls below 650. This will allow you to work on improving your credit score, such as paying off debts, making accounts current, or resolving credit disputes.
4. Gather your info.
You are almost ready to apply once you have established that your credit score is in good standing. It’s time to get all the information that you need to submit your application.
- The TIN of your business (found on IRS Form W-7, SS-4)
- Your Social Security Number
- Social security numbers for business partners who own 20% of your company
- To confirm how long you have been in business, your incorporation documents
- Check out the most recent financials to see your monthly revenue and spend estimates
- Here is a list of employees who will require cards
Once you have found the card that suits your needs, verified that your credit score is in good shape, and collected all the information you will need to complete an application, you can start to fill out the form. The process can be completed online in a matter of minutes and is generally done quickly.
The card issuer might have additional questions or request information based on what you provided initially. These can be completed as part of your online application or separately via email or phone.
6. Await the card issuer’s decision.
Once you have submitted your card application in writing, you can wait to see if it is approved. Approval decisions may take several minutes or take up to two days depending on how much follow-up is required. Once your application is approved, you will receive your card(s), which you can activate and begin using.
Factors that impact business credit card approval
Although it takes only a few minutes to apply for a business credit card, they collect a lot of information about you and your company in the short application. It’s easy for you to see how much information can affect your approval.
- Your business type (some issuers won’t support sole proprietorships or nonprofits).
- Your revenue and revenue expectations
- Time is money in business
- Your personal credit score
- Personal guarantees are available from you and your partners in the business
- Your industry
This list is not exhaustive. There are many reasons credit card applications may be denied. A disqualifying factor can be just having a strange business address, one that isn’t easily located in a postal code search.
Your credit score is the most important factor that can disqualify you. Small business owners apply for business credit cards using personal credit and not business credit. This is why a business owner who has a poor credit score (or a score below 640-700 depending on which card they are applying for) may not be approved.
The relationship between the small business credit card owner and his credit card owner is two-way. A business owner’s personal credit score could cause a denial of a card application. Additionally, misuse of the company credit card could result in a repercussion on the owner’s credit rating.
Also read: 15 Finance Companies For Small Business Loans with Bad Credit score
Impacts on personal credit
Your personal credit will be a major factor in your business credit card application, especially if you are applying for a small business card. The card issuer will conduct a credit check on you before you submit your application. This will be a negative impact on your credit score and may take several months for it to disappear from your credit report.
If you are approved for a card, any balances that you have on your business credit could appear on your personal credit report. This is the same as your personal credit card balances. If you apply for any other type of financing, or personal loans, this will impact your credit.
Last but not the least, a business credit card application usually requires a personal guarantee from everyone who owns 20% of the business and sometimes each cardholder. Your personal credit score will be affected if your business defaults or fails to pay its balances on time.
When not apply for a business credit card
Although a business credit card is a fast and simple way to get credit for your company, there are times when it may not be the best option.
- Your credit score is not in the best shape.
- There is already a lot of business debt.
- Your business is just starting and does not yet have a reliable income.
These cases may mean that you don’t want to apply for a business credit card because your chances of qualifying are lower.
Just as often, though, a business credit card simply may not be the ideal type of financing for your business. A fixed-rate, long-term loan may be better for financing a long-term project. A term loan or credit line may be more suitable for seasonal financing that will last between four and six months.
It’s easy to apply for a business credit card. Before you do that, though, make sure that a business credit card is the right financing option for your business. Next, research the cards available, choose the one that suits you best, gather all relevant information, and confirm your eligibility based on your credit score before you submit an application.
This will ensure that you are approved and that there is no waste of time in requesting credit information. It also means that you will find the right card for your business.
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