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How to Apply for a Business Credit Card
Business credit cards are valuable finance tools for businesses and business owners. They come with a wide range of features and capabilities, and many offer significant rewards and perks. Some are oriented toward large businesses with hundreds or thousands of employee cardholders. Other business cards are more suited to small business owners with only a few employees.
There's a card for almost any type of business — even for a business owner going it alone. Exactly when and how to apply for a business credit card can be confusing for those who've never done it. But it's actually pretty straightforward. And avoiding simple but common mistakes from the start can result in a better long-term experience. Here, we'll explore what it takes to get a business credit card, how to apply, and what factors to consider.
What you need to fill out a business credit card application
Applying for a business credit card is much like the process for personal credit cards. But there's more involved when it comes to the business credit industry. Card issuers want additional details before they'll consider an application for business financing. Typically, it's a combination of personal and business information. This helps a credit card company form a fuller picture of the risks and upsides that shape their lending decisions. The basics include:
- Personal information: name, address, Social Security number (SSN), phone number, email, annual income
- Business contact info: phone number, email, mailing address
- Legal name of business if it's an LLC or S- or C-corp. For a sole proprietor, it's the business owner's legal name
- Business federal tax ID. If you've formally registered your business, it's your nine-digit federal employer identification number (EIN). Otherwise use your SSN
- The North American Industry Classification System (NAICS) code for your industry. The application may provide a list from which to choose this. Still, it's good to know the code in advance for certainty's sake
- The business legal structure: corporation, partnership, nonprofit, LLC, cooperative, etc. You'll include business owners/controllers as well. If you're an unregistered one-person business, it's probably a sole proprietorship
- Revenue: This should be your prior-year annual revenue before taxes/expenses
- Years in business and your personal role, such as owner or partner
What to consider and do before you apply
Is it the right time to apply for a business card? Your personal credit score plays a part in approvals and interest rates, so make sure your credit's in good shape. Obtain your credit report, review your credit history, and dispute any inaccuracies with the relevant credit bureaus. When credit card issuers review your credit score, you'll want everything to be optimal.
For new businesses without business credit history, be prepared to submit a business plan that projects revenue and monthly expenses. Without an established history of business credit, lenders need to feel confident the business has a future. And the credit limit your card receives will be tied to the business stability the card issuer calculates.
For cards you're interested in, compare the annual fees. There's a wide range for business cards. No-fee cards are always a popular choice. Premium business cards with extra features or extra perks may charge annual fees of $95, $295, or even $695. Make sure the features are worth it before taking on the extra cost.
Review business expenses
Prior to jumping in with a new card, review your business expenses for the year. What items constitute the majority of your business spending? It's good to know because that information can help you select the right business card. Many cards offer significant rewards for eligible purchases. Targeting a specific card for those purchases helps maximize rewards.
If you'll use your card for frequent gas purchases, one that offers 4X rewards for fuel purchases makes sense. Some cards offer multipliers not in a specific category (e.g., gas stations), but in categories where you spend the most. Other cards provide extra bonuses for travel purchases, like hotels, flights, and rental vehicles.
Then there's the "all-purpose" rewards card, good for businesses making a wide range of purchases. These typically give cash-back rewards of 1% or more for every purchase. That way, you're not limited to only one or two categories for rewards — you'll earn them with every purchase.
Here's how the rewards work: let's say you use a 2% cash-back rewards card for all your expense buying, and you spend $2,000 a month. After one year, that's $480 cash back in your pocket. With one of these all-purpose rewards cards, it may make sense to charge every monthly expense. That also makes record-keeping easier. Come tax season, all your expenses are recorded in one place.
What else to know about how to apply for a business credit card
Even if you apply for cards using a business EIN, credit card companies may still run a personal credit check. This "hard inquiry" will likely drop the score for your personal credit by a few points. There's nothing to be done about it — just be aware of the possibility.
Business cards often have minimum credit score requirements, especially for non-incorporated businesses. That's because your personal guarantee as the owner is what supports credit limits. To avoid unnecessary denials, check out the minimum score requirements before applying.
Generous sign-up bonuses are tempting — as they are designed to be. Some give hundreds of dollars in rewards, either to start or after certain spending criteria are met. That could carry potential cost risk to you, the credit card account owner. Failure to pay off the statement balances of all those purchases means interest will be charged every month. If this becomes regular, those once-tempting bonuses can lose much, if not all, of their value.
Many lenders prefer to see a separation of personal finances and business finances, even for businesses just starting out. For this and other reasons, consider establishing a dedicated business bank account if you haven't already. This makes for more streamlined record keeping between that and your new dedicated business credit card.
A business credit card may still be a good addition to your business even if you don't use it much. It starts you on the road to an established credit history for your business. When handled well, it can help build your business credit score, too.
Tips for choosing the best credit card for you
Which card to choose varies from one business to another for an array of reasons. Factors to weigh include how you run the company, your business spending needs, and the rewards or perks you value most. Review your spending patterns and target your card choice to take advantage of those purchases.
Keep in mind the APR you'll pay
Also assess your bill-management habits and cash-flow trends. Charges carried over month after month incur compound interest. Many businesses pay off all their purchases every month to avoid interest charges. That's never a bad idea. But some businesses face seasonal peaks and troughs in income. Their cash flow situation may cause them to wait a few months to pay off a card. While they wait, interest charges accrue and compound. It all adds up. You'll want a credit card that can best protect you from unreasonable fees, rate hikes and more.
Preapproval offers may improve your odds
For newer businesses and business owners with lower credit scores, preapprovals might help. In any case, don't flood the market with applications. Pick the card you feel is best for your business and apply for that one. Repeat as needed but space out the applications if you can. Too many credit inquiries in a short time may have a negative impact on your credit report.