How to Get a Business Credit Card

hether you are starting a small business or looking to grow yours, a business credit card can be a great tool to help you finance your expenses. It’s why more than two-thirds of business owners have one.

For starters, the average business credit card limit is roughly double the average personal credit card limit – $56,100 versus $26,900. A larger credit line has more qualification requirements and needs more management, but there are also some great perks to be had.   

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The benefits of a small business credit card include: 

• Higher credit limits than personal cards 
• Ability to build your business’s credit history
• Business-focused features and tools to track spending
• Ability to download and import expenses into your company’s accounting software
• Perks and rewards

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The first step is deciding whether you need a small business credit card. While your overhead expenses, business size, and growth potential are great metrics, there are other considerations. Here are some signs a business credit card maybe beneficial for your company: 

• You have business specific expenses    
• You need to finance large purchases 
• Your labor and rent costs are high 
• Your employees spend their money on your companies behalf 
• Your bottom line would benefit from rewards 

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In this article, we will explain how to get a credit card for your small business, and, most importantly, how to manage the bills.

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Preparation

To start this process, you’ll want to get a handle on your financial situation and your credit goals. Here are some essential steps to take before you apply:

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1. Assess your business’s financial needs

When it comes to applying for a business credit card, start by assessing your upcoming expenses and your timeline for covering those expenses. Whether you need to finance a one-time large purchase or smaller recurring expenses, this information can help you compare and find the right credit offer for you.

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2. Determine your personal and business credit scores

Your credit score is the most important aspect of qualifying for a credit card. If you are just starting, your ability to qualify for a business credit card will likely depend on your personal credit score. Most credit card issuers require “average” to “outstanding” credit scores in a personal and business capacity. While personal scores are measured on a scale from 300-850, business scores are measured on a scale from 1-100. You’ll want to have a personal credit score of 700 or higher to get the best business credit cards. A business credit score of 75 is considered “acceptable”.

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3. Research options to find the card that fits your needs

Compare different small business cards to find the one that suits your business needs. It’s essential to shop around; many banks offer perks like welcome bonuses, cashback rewards and high credit limits. 

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When researching options, consider:

• Annual fees 
• Start-up fees
• Annual Percentage Rate (APR)
• Foreign transaction fees 

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4. Gather documents and information 

Applying for a credit card isn’t a complicated process – it just requires some paperwork! Here’s what to prepare:

• Business name, address and phone number 
• Type of business
• Legal business structure
• Federal tax identification number, which can either be an SSN or EIN.
• Number of employees on payroll
• Estimated company revenue
• Estimated monthly expenses on the credit card

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Applying for a small business credit card

Credit card applications are typically submitted online via the bank’s website, but you can also complete them over the phone. The issuer’s main goal is to assess your business’s creditworthiness, so they will ask for the documents we discussed above and ask specific questions about your business. 

Transparency is key, so even if your business isn’t growing as fast as you would like or it hasn’t generated a large profit, answer as honestly as you can! Reporting inaccurate data can come back to bite you. If you overspend on the card and can’t pay it back, the issuer may point to falsified information on the application.

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Tips for applying

There is no foolproof way to be approved for a credit card, but we have some tips to increase your chances of qualifying. 

• Leverage relationships: Use a bank you already have a relationship with, whether it’s a personal or business relationship. They have already investigated your credit history, making the process easier. 
• Manage your usage and bills: Don’t ‘max out’ any of your personal or business cards. Maxing out your card is defined as using more than 75% of your credit limit. This will hurt your credit score, making it more difficult to be approved for another card. The easiest way to boost your credit score is to pay all your bills on time.
• Prepare reports: Be prepared to report your actual gross annual revenue (revenue before taxes and other expenses are taken out) for your past two years in business, rather than just sales projections.

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Managing your company credit card

Below are some suggestions to managing your business credit card:

1. Set a budget (and stick to it!): Create expense policies within your organization and let all employees know the spending limits. This will help your company stick to its budget and spend appropriately. Many small businesses find success using the Profit First accounting method.

‍2. Pay your bills on time: Set reminders and ensure your credit card bills payments are made on time. Not paying on time may result in a late fee and damage your credit score. If you want to manage your monthly interest expenses, you may also want to pay down the principal faster.

‍3. Monitor and track expenses: It’s easy to get carried away with a card and an increased credit limit. Monitoring purchases allows you to see where your money is going which, in turn, helps you understand where you can cut spending. To do this easily, you can download your spending history from your business credit card and import it directly to your accounting and bookkeeping platform.

‍4. Don’t mix personal and business purchases: 46% of small business owners fail to separate their business and personal expenses, which not only makes your accounting messy, but may be viewed as irresponsible by future creditors. 

Maintaining separate finances make it easier to:  

• Build up both personal and business credit.
• Streamline accounting.
• Pay taxes and assess tax deductions.
• Identify business value and profit.
• Enhance your professional image.

‍5. Reap the benefits of available rewards: Most business credit cards have rewards in place to incentivize spending. Some common perks include bonus offers, travel discounts (such as miles and rental car discounts), and gift cards.

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Takeaways

Getting a business credit card can be highly beneficial for your small business. Not only can it help you finance expenses and grow your business, but it can also open the door to building your credit history and earn you rewards. 

But before diving in, it’s important to consider all your options and have a plan in place for how you intend to manage the card to avoid fees and penalties.

Lastly, if this article has made you realize you need a better business credit score, know that the average business only needs 12-18 months to improve it!

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Novo Platform Inc. strives to provide accurate information but cannot guarantee that this content is correct, complete, or up-to-date. This page is for informational purposes only and is not financial or legal advice nor an endorsement of any third-party products or services. All products and services are presented without warranty. Novo Platform Inc. does not provide any financial or legal advice, and you should consult your own financial, legal, or tax advisors.