How to Apply for a Business Credit Card: A Step-by-Step Guide

news image

Learning how to apply for a business credit card is vital for business owners aiming to streamline their financial management. If you’re a business owner, understanding how to apply for a business credit card can be beneficial.

You can apply for a card specifically designed for business use, enhancing your capacity to manage expenses efficiently. Even as a sole proprietor, you have a good chance of getting approved for a card.

The following guide will explore deeper, providing you with a step-by-step walkthrough to navigate the application process efficiently. From understanding the prerequisites to managing your finances adeptly with separate business and personal cards, we’ve got you covered.

Here’s a word from Noelle Randall about “How To Get A Business Credit Card For A Startup” to check out after reading. It’s a nice little companion piece to the article:

Now, let’s explore how you can set yourself up for success in securing a business credit card.

Navigating the Application Without an EIN

how to apply for a business credit card - social security card

What if you don’t possess an Employee Identification Number (EIN)? There’s no need to worry. When figuring out how to apply for a business credit card without an EIN, you’ll find that you can alternatively use your social security number on the application, a process that many business owners utilize.

Additionally, you should already have a business checking account. You’ll be asked to provide that information on the credit card application. Also, you should already have registered your business.

It makes good sense to have separate personal cards and business cards. That makes all your financial reporting much easier, whether you do that monthly, quarterly or annually.

What is a Business Credit Card?

how to apply for a business credit card - businessperson using a business credit card

As it sounds, the card is only used for business purchases or activities. The uses can include things like travel and supplies.

You can even use the business card to pay utilities such as phone services and electricity or buy items at office supply stores. That’s a good move if you’re using a card that issues a percentage of cash back to you as a statement credit. The cash-back credit will be issued based on the amount you pay against the balance.

Personal credit cards are only used for personal purchases, such as household items, clothing and groceries. Those items aren’t eligible purchases for a business card.

Why You Should Apply for a Business Credit Card

Understanding the benefits that come with a business credit card can be instrumental in managing your business finances more efficiently. Now that you have unraveled the answer to what business credit cards are, the natural progression is to explore why securing one would be a prudent step for your enterprise.

Here, we outline a number of compelling reasons to consider applying for a business credit card:

  • Boost Business Credit Scores:
    • Credit Separation: When you apply for a business credit card, the credit assessment initially takes into account your personal score, which aids in securing the card. However, your personal score doesn’t influence your business’s credit rating over the long term.
    • Positive Impact on Business Rating: Utilizing the card wisely and ensuring timely payments on the balance can significantly enhance your business credit rating. It’s worth noting that during loan applications, many financial institutions scrutinize both personal and business credit scores to gauge your financial responsibility.

how to apply for a business credit card - business rating icons being chosen by a person

  • Tax Deductions:
    • Business Expense Deductions: Expenses accrued, such as the annual fee and interest charges on a business credit card can be counted as business expenses, which are tax-deductible, potentially saving your business money during tax season.
    • Simplified Accounting: Having a business credit card simplifies the accounting process as it helps in itemizing expenses, making tax calculations more straightforward.
  • Financial Tracking:
    • Year-End Summaries: One of the perks of having a business credit card is the receipt of year-end summaries for both your business and personal cards, facilitating smoother tax reporting at the end of the year.
    • Separate Finances: Maintaining distinct business and personal cards aids in keeping financial matters separate, thus simplifying financial management and reporting, particularly for small business owners.
  • Line of Credit:
    • Ease of Access: Obtaining a business credit card is generally less cumbersome compared to securing a business loan, especially if your credit rating is only fair.
    • Building Credit History: Consistent and responsible usage of the card not only prevents overextension but also contributes positively to building a strong business credit history.
  • Cash Back and Rewards:
    • Cash Back Rewards: Many business credit cards offer cash back rewards, where a percentage of your expenditures is returned to you, serving as a form of savings on business expenses.
    • Additional Perks: Aside from cashback, business credit cards often come with additional rewards and perks such as travel benefits, discounts with partner merchants, and access to business-related events and seminars, which can be beneficial for networking and growth.

By weighing these advantages, you can decide whether applying for a business credit card aligns with your business objectives and financial strategies.

For more information go to Why Use a Business Credit Card? Here are the Top Reasons.

6 Simple Steps to Apply for a Credit Card for Your Small Business

Steps to Apply for a Credit Card - couple applying for a business credit card

1. Check You Meet the Business Credit Card Requirements

Card issuers for businesses will look at your (personal) credit score. Good personal credit scores may get you a lower annual fee. Business credit card issuers will make a personal credit check of your financials.

2. Make Sure You Have all the Documents Needed

You’ll need proof that your business is registered. You’ll provide an EIN or use your social security number.

If you’ve been in business for a year or more, you can provide business financial reports.

Major credit card issuers may also set low credit limits for you at first. This may be based both on your personal credit report and your business report. If you make timely payments, your preset spending limit may be adjusted, and your business’s credit score will continue to improve.

3. Compare Business Credit Cards

There are many card options and it’s important to do your research and choose the right business credit card. Here are some key business categories of the card features:

Credit Limit – Credit card companies are understandably cautious and may start with low limits. But the best business credit cards adjust this number up as you make timely payments. Secured business credit cards require that you make a deposit as your personal guarantee before you can use the card. This works similarly to a rent deposit – it’s there for the card company to seize if you default on payments.

Annual Fee – Many cards advertise a 0% annual fee. The 0% fee can last as long as 15 months. However, it’s important to know that if you make a late payment, an annual fee will be assessed.

Foreign Transaction Fees – If you’re not going to travel or conduct business in foreign countries, you don’t need to worry about this one.

Perks – Most business credit cards include perks such as cash back, points or miles (to apply to air travel). You may get a sign up bonus. Choose the perk that best suits your needs.

Additional Cards – Will you need cards for your business partners? Will you need cards for employees (such as for gasoline)? Will the card company provide free employee cards or are there fees?

4. Find Out Your Credit Score Based on Your Personal Credit History

how to apply for a business credit card - person perusing their credit score online

Before you apply for the card, pay off or pay down your personal card. Definitely don’t have any overdue balance amount, which would greatly impact your credit record. Your payment history for items such as a mortgage, utilities and more will be scrutinized.

Commercial credit bureaus will look at your personal finances. If your rating is “good to excellent” you’ll have lots of business credit card options. If you’re rating is “fair” you may be offered an APR as high as 25%. To get a lower APR you may only get a business credit card “secured” by a deposit.

5. Complete Your Business Credit Card Application

Fill out the application and check your work.

If you use a PO Box for mail at your home of business, make sure to also provide the physical address of each.

6. Start Using Your Small Business Credit Card

Start building your business credit score by using your small business credit cards for everyday business purchases. Building business credit leads to a favorable business credit report. Stellar business credit reports are a huge help when you apply to a lender for a loan.

Your Business Credit Card Application Checklist

Navigating through the process of applying for a business credit card can sometimes seem overwhelming. This step-by-step checklist serves as a practical guide to keep you organized and ensures you don’t miss any crucial steps while aiming to secure a credit card for your business. Simply tick off each box as you complete the corresponding steps to keep track of your progress effectively.

hecklist Description Checklist
Check You Meet the Business Credit Card Requirements Card issuers evaluate applicants based on personal credit scores, potentially offering lower annual fees for good scores. The process includes a thorough check of personal financials.
Make Sure You Have all the Documents Needed Applicants must provide proof of business registration and an EIN or social security number. Existing businesses (1 year or more) should prepare financial reports. Credit limits may initially be low but can increase with timely payments, improving the business’s credit score.
Compare Business Credit Cards Choose a card considering factors such as credit limit (which might increase with responsible use or require a deposit for secured cards), annual and foreign transaction fees, perks like cash back or air travel points, and the provision for additional cards with potential associated fees.
Find Out Your Credit Score Based on Your Personal Credit History Prioritize settling personal card balances to enhance your credit record before application. Credit bureaus will evaluate personal finances, with good to excellent ratings providing more options and potentially lower APRs compared to fair ratings, which might necessitate secured cards with deposits.
Complete Your Business Credit Card Application Thoroughly fill out the application, ensuring accuracy in all provided details, including the physical address if a PO Box is used for mail at your business location.
Start Using Your Small Business Credit Card Begin utilizing the business credit card for regular business expenses to cultivate a positive business credit report, which would be advantageous when seeking loans from lenders in the future.

Image: Depositphotos

More in: Credit Cards

Read More