Although it may seem intimidating, getting a business credit card is not a complicated process. While there is certainly effort required, the benefits offered surely outweigh any perceived downside, from airline miles and travel perks to cash back rewards and higher credit ratings—not to mention increased buying power.

In this guide, you will learn how to apply for a business credit card, the steps involved, how to increase the likelihood you will be approved and how to get the most out of a business credit card.  

What You Need to Know About Business Credit Cards

Business credit cards provide access to a revolving line of credit that expands your business’s purchasing power. Business owners can use the card for any business-related expense. The cardholder is responsible for paying back the amount borrowed, plus interest on remaining balances. Business credit cards are a convenient tool for small business owners in need of purchasing inventory, new equipment or to handle any significant or routine business expense.  

While personal credit cards and business credit cards share a lot of the same characteristics, business credit cards provide benefits to organizations that personal cards cannot (more on that later). Also, business credit cards help you build business credit and make record keeping much easier—two benefits that are certainly worthwhile for any owner.

The Three Different Types of Business Credit Cards

Much like personal credit cards, there is a large assortment of business credit cards to address the needs and preferences of business owners. Below, we will outline the three main types.

Business Credit Cards

Business credit cards are most likely to be the best-known card of the three. They are most similar to a personal credit card in that they have a predetermined credit limit that cannot be surpassed. This poses a potential drawback for business owners who are unsure of how much they will need to spend every month.

However, credit cards offer a faster solution for building a business credit history, and they also tend to come with additional perks and incentives such as:

  • Air miles
  • Reward miles
  • Cashback (up to 5%)
  • Low or no annual fees
  • Discounts on hotels, car rentals and more

Business Charge Cards

Unlike a business credit card, a charge card must be paid in full every month, rather than have the balance roll over month-to-month. The main benefit of this option is that, if paid in full, charge cards will not require you to make interest payments, and they usually do not tack on any surprise fees. However, failing to pay the amount in full could incur penalty fees and prevent you from using the card in the future.

Secured Business Credit Cards

If you are a business owner with little or no business credit, a secured business credit card may be the best way for you to establish it. With secured business credit cards, you provide a deposit upfront which acts as collateral to obtain the card. Purchases are reported back to the credit bureaus, and credit is built as the card is used.

Getting a Business Credit Card in 4 Easy Steps

Each time a lender works with a small business, there is a certain degree of risk each party assumes. Since any potential applicant and lender will want to limit their liability, it is important to understand the requirements for getting a business credit card. Let us identify the actionable steps regarding how to get a business credit card for your company.

Step 1: Weigh Your Options

The first step in finding out how to get a business credit card is to determine whether a business credit card is right for you. For instance, a business charge card may be the better option of the two, depending on your business’s financial circumstances.

The best way to determine this for yourself is by deciding which features you value most in a business credit card. Here are four of the pieces you need to consider before making a decision:

Requirements

This is, perhaps, the most important of any of the features we will describe simply because if you do not qualify for a specific card at the moment, it is best to continue exploring your options. Business credit card requirements vary by issuer, though each carries a similar set of stipulations which we will review in greater depth later.

Rates

Aside from determining whether you qualify for a specific business credit card, evaluating the rates each card offers is critical. The rate on a business credit card, which is typically expressed as an APR (annual percentage rate), is commonly broken out by two categories: introductory and ongoing.

The introductory rate is meant to entice you to apply for and accept a specific card, featuring perks like a zero-percent APR on purchases during the first nine to fifteen months. The ongoing rate, however, is the rate you will need to pay back on any unpaid balances after the introductory period has expired. Ongoing rates usually span between 13 and 25 percent.

Rewards

Credit cards often feature rewards incentives that include cashback benefits, airline miles and points programs, to name a few. Just like we see with business credit card rates, there are introductory rewards promotions that are offered to attract business owners to apply.

Making the best decision for your business comes down to how you operate. If, for example, your business expenditures skew more towards rail travel, place your focus on securing a card that offers great benefits or discounts for train tickets as opposed to one designed to benefit frequent flyers.

Fees

It is common for a credit card with a stellar rewards program to have an annual fee; the better the rewards, the higher the fee. Occasionally, card issuers will waive the annual fee, which can be as high as $500, for the first year as a way to provide more incentive to potential applicants. In many cases, the benefits you earn far exceed the value of the fee itself.

Ask yourself what your business needs from a credit card. It may be that you need a standard no-frills card to start building credit. Some of the best business credit cards for small businesses on the market in 2019 include:

Step 2: Know the Score

The next step in learning how to get a business credit card is to check your personal FICO credit score. Unlike your business’s FICO SBSS score, which is a unique number assigned to small businesses to evaluate business credit obligations, your personal FICO score only values how you, the owner, have handled your debts. For new businesses and first-time applicants, banks will look at your personal credit history and score.

To help you understand your personal credit score, let us review the score categories below:

  • Poor: 300-580
  • Satisfactory: 581-670
  • Good: 671-740
  • Excellent: 741-800
  • Outstanding: 801-850

Whenever you apply for a business credit card, you will be asked to include your personal credit score. You can find your credit score by working with your bank, credit card issuer or by working with one of the big three credit rating companies, Equifax, Experian and Dun & Bradstreet.

You personal credit score is one of the most significant factors creditors evaluate from your application. The higher it is, the more likely it is that you will be approved and receive better terms. If your personal credit score is below the “Satisfactory” range, you are considered a high-risk borrower. However, by posting collateral, there are options you will have for getting approved for a business credit card.  

Step 3: Know Your Financials

When the question “What do you need to open a credit card for a small business?” comes up, the broad answer is your business’s financials. You will need to have all of your business’s financial records on hand (or at least those from the past few years). To complete your application, gather the following pieces of information:

  • Personal income information
  • Annual business revenue
  • Monthly business expenses
  • Tax ID numbers (personal and business)
  • One government-issued ID
  • Mailing address and business name

Depending on the lender you choose to work with, you may be required to provide additional information or documentation, including your Articles of Incorporation or balance sheets, especially if your credit history is poor or non-existent.

Step 4: Apply for the Best Card for You

Once you have assembled all of your necessary paperwork and information, the final step in the process is applying for a card. Conveniently, many business credit cards can be applied for online, rather than in-person through your bank or credit union. Beyond the time and travel saved from visiting one of these financial institutions, online applications may also generate an instant decision, though this is not the case for each applicant. If your application takes longer than a few hours, your account may be under review and subject to greater scrutiny which may take as long as two weeks to complete.

Once approved, you can expect the issuer of the card to send it via mail within a couple of days. Usually, business cards are received at the business’s mailing address within one or two weeks of the approval date.

Getting a Business Credit Card After You Have Been Denied

If you are denied for a business credit card, do not allow it to discourage you from trying again. There are actions you can take today to improve your business’s creditworthiness.

Improve Your Personal Credit Score

Credit scores below the “Satisfactory” range (essentially, anything under 580) need to be addressed before you apply again. Ideally, business credit card companies like to see applicants in the middle of the “Good” FICO range (anything above 640) to feel comfortable issuing a card.

The best way to improve your personal and business credit is to pay your credit card bills on time and pay down any existing debt on your current credit cards. Focusing on these two pieces of your credit activity will also naturally address how you utilize your credit. Credit utilization is how much credit you have versus how much you have used. Ideally, it should be below 30 percent.

Reduce Your Expenses

Depending on the credit card company you are working with, you may be asked to provide a list of monthly expenses so the issuer can get an idea of how much you can afford. Your business’s variable costs, such as your Cost of Goods Sold (COGS), materials and supplies, packaging materials and labor, would be your best opportunity to cut your expenses.

Increase Your Business Revenue

Finding ways to increase your business revenue improves your chances of being approved for a business credit card. Whether it comes in the form of one large new client or expanding your product line to meet market demands, increasing your revenue makes it much easier for a credit card company to say “yes” to your application.

Be Patient

The three recommendations we have listed above are all excellent ways to be approved for a business credit card. However, sometimes all your business needs is time. If you have been in business for less than two years, biding your time (and improving your business in the meantime) may be the only thing standing between you and getting a business credit card.

Making Your Business Credit Card Work for You

Getting business credit cards involves more than simply knowing how to apply. No matter the size of your business, you need to exercise due diligence and do your homework before you start sending off applications.

Once you have a business credit card in your possession, it is ultimately up to you as to how it will benefit your organization. While the perks and rewards are great, you need to use your card as a tool for growth.

Even if you are just getting your business off the ground, applying for a business credit card is an astute decision. With a convenient source of capital available at your fingertips, there is no reason not to take advantage of the many benefits that they offer. Once you have a business credit card, you can start building a business credit history that will pay dividends in the long run.

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