How to Get a Business Credit Card

Follow these steps to get approved for a business credit card.

Business credit cards can be a huge asset for small business owners. Faced with ongoing business expenses and unexpected costs, small business owners need a level of flexibility in dealing with their finances. Plus, small business owners often have to make large purchases that aren’t big enough in their amount to necessitate a business loan. In these cases, business credit cards can help streamline finances while building business credit, which is critical to your business’s future viability.

Read on to find out how to get a business credit card and how it can benefit your business.

How to Get a Business Credit Card

There are a few key differences between business and personal credit cards, however, the process for applying, in general, is similar. Follow these steps to apply for and get a business credit card:

1. Check Your Credit Score

As with personal credit cards, when applying for business credit cards, you’ll want to know what shape your credit score is in before you apply. If you already have a business, then you should check both your personal and business credit score. In either case, your personal credit score and history are critical because, in the eyes of credit card issuers, your personal financial behavior will likely be reflected in how you handle business finances. So, if you make poor decisions with your personal finances, credit card companies assume you’ll make similar bad decisions as a business owner.

The differences between personal credit and business credit are important as they can affect the approval process for business credit cards. When you apply for a business credit card, credit card companies may look at your business’s financial history and your personal credit. To check your personal credit, credit card companies will run a credit inquiry and do a hard pull of your personal credit score. A hard credit pull typically creates a temporary drop in your personal credit score so the timing of your credit applications is important.

In general, though your personal credit score is used in the approval process, once you have your business credit card, purchasing with it shouldn’t affect your personal credit, just your business credit score. There are exceptions, however, depending on the business credit card issuer. Some credit card companies report all of your account activity — personal and business — to the major credit bureaus, which means that a high balance on your business credit card could affect your personal credit score. It’s important to research any individual cards before you submit an application so you can find the card that best suits you, be it in terms of the rewards it offers or how credit is reported to the credit agencies.

In some cases, if you don’t have business credit, you might not be able to get certain business credit cards. In such cases, one option is to start building business credit by using a secured business credit card. With secured business credit cards, after applying and being approved, you’ll make a refundable cash deposit to get the card. This deposit creates the credit limit you can borrow against and acts as collateral for the credit card issuer. Using a secured credit card responsibly can help you build your credit so that your business can qualify for a an unsecured business credit card with better terms and rewards down the line.

Related: Dun & Bradstreet Rating — What It Is and It Matters

2. Research Business Credit Card Options for the Best Fit

Researching and evaluating available business credit card options is a big preliminary step. You don’t want to evaluate the card’s features after you’ve already applied for or received it — then you might realize it’s not the best option for you when it’s already too late. Some fundamental features of business credit cards to assess include credit card fees, purchase and introductory APR and rewards programs, among others.

Business Credit Card Fees

Business credit cards can have all types of fees, such as an annual fee, foreign transaction fee or balance transfer fee, to name a few. Pay attention to each card’s fees more than anything when researching your business credit card options. There are many business credit cards that come with no annual fee that are perfectly adequate for business needs. Higher fees do not necessarily equate to a better credit card.

Business Credit Card APR

Credit cards have interest rates that are described in an annualized form called an annual percentage rate, or APR. With both personal and business credit cards, there is usually more than one APR. For example, there is a purchase APR, which is the standard interest rate that credit cards usually advertise. There is also a balance transfer APR, which is the interest rate you pay on balances you transfer to a credit card. Another is the cash advance APR, which is the interest rate you’re charged for using your credit card to borrow cash. You want to aim for a business credit card that has the lowest APR that you can qualify for, with the purchase APR being paramount over others.

On top of these, there is often also an introductory APR. Some of the best business credit cards offer 0% intro APR for six months or more on purchases. Intro APR periods are great because you can use them strategically to make more expensive purchases early on and pay them back without being charged interest.

Deep Dive: How Credit Card Interest Works

Business Credit Card Rewards

A common feature of some of the best business credit cards is its rewards program. Usually, they work by giving you a percentage of your spending back as cash-back or rewards points that can be redeemed for things like airline miles, merchandise, gift cards or simply a direct deposit or credit towards your balance.

Business credit card rewards programs also tend to be divided up into categories, with certain categories — such as purchases of gas, food, office supplies, internet and phone services, travel and more — having a higher reward rate than the usual 1 percent back on all purchases. These rewards categories mean you can get very strategic with your credit card purchases, racking up cash-back rewards by spending in categories that are central to your business at opportune times.

Related: Which Business Credit Cards Help Build Business Credit?

3. Apply for a Business Credit Card

After you’ve zeroed in on one or more business credit cards that make sense for your business, you’ll need to fill out the credit card application. Nowadays, most credit card companies have online applications, which provide you with their decision almost immediately. Sometimes, however, your application is typically reviewed in a few business days with a decision coming shortly thereafter.

When applying for business credit cards, you’ll have to have some key information lined up for the application. Here is some of the typical personal and business information that business credit card applications will ask from you:

  • Legal business name
  • The business entity or legal structure
  • Business address and phone number
  • EIN or federal tax identification number
  • Years in business
  • Number of employees
  • Annual business revenue
  • Monthly business expenses
  • Personal income
  • Social Security number
  • Date of birth

Qualifying for a credit card almost always involves an assessment of your personal credit score. Since you as an individual are applying for the business credit card, your personal credit score and history is a critical factor in getting approved for a business credit card. Be aware of the fact that when you apply for a business credit card, the credit card company does a hard pull of your credit. Unlike a soft pull, a hard credit pull tends to cause a temporary drop in your credit score. Thus, you’ll want to avoid applying for too many business credit cards at once. Additionally, if you are planning on applying for something critical like a mortgage or loan, you should avoid any hard credit pulls for a few months prior to ensure your score is at its best.

When reviewing your credit history, credit card issuers review your overall financial behavior for major red flags. These can be negative marks like bankruptcies, tax liens, collections or judgments, which often disqualify applicants from getting approved for business credit cards.

When looking at overall behavior, credit card issuers want to see that you pay your bills reliably on time and in full. What’s more, they assess your credit utilization ratio, which is the ratio of your outstanding credit card balance to the overall credit limit. Thus, if you have an outstanding balance of $3,750 out of a $5,000 credit limit, then your credit utilization ratio is 75 percent, which is quite high and can hurt your credit score. Generally, it is best practice to keep your credit utilization ratio below 30 percent.

A similar metric credit card issuers use is debt-to-income ratio. Like it sounds, this is the ratio of your outstanding debt to your income, which helps issuers determine your financial capacity to repay debt. If you have a high debt-to-income ratio, credit card issuers see you as someone who might not be able to pay back the debt reliably and timely, thus making you a risk. This could result in outright rejection on your application. Often, however, a high debt-to-income ratio isn’t a deal-killer, and instead, usually leads to higher interest rates on the business credit card.

4. Use Your Business Credit Card Responsibly

Once you’ve been approved for a business credit card, you’ll generally wait about one to two weeks to receive the card by mail. You’ll then activate it and begin purchasing with it as you would with a personal credit card.

Getting a business credit card helps with good accounting practices, namely by creating a separate line of credit for business purposes from your personal expenditures. Intertwining business and personal expenses on your credit cards make for confused, bad bookkeeping, which can be especially costly come tax season. Just as you should open a business bank account separate from your personal checking and savings accounts, you should do the same with credit cards.

Using business credit cards wisely can help towards building business credit for your company. This is a huge point because greater business creditworthiness means greater access to various forms of capital such as business loans, business lines of credit and many other forms of financing you can use to expand your business. If your business credit score is bad, then your options for getting necessary funding narrow substantially.

See: What Is Alternative Lending?

The Bottom Line

Getting a business credit card is a smart move for any small business owner. Though credit cards open you up to more debt, the benefits business credit cards bring to the table are crucial. Business credit cards can help a lot in terms of flexibility, such as paying for ongoing business expenses. Business credit cards are a form of revolving credit, not finite like a term loan so you can keep using the credit over and over again so long as you pay back your balance. Plus, lenders typically won’t provide business loans that are too small, with the lower threshold typically around $50,000. Thus, business credit cards provide a good alternative for covering business expenses and purchases if it’s too hard to get a small business loan.

When searching for the best small business credit card, the main features to look at are the costs (credit card fees and APR), terms and rewards. On the other side of the equation, the main factors credit card issuers look at are your personal and business credit as well as the financials of your company, like revenue and business expenses. With diligent research and by staying on top of your credit, you can get small business credit cards that are the right fit for your business.

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Photo credit: Olena Yakobchuk/Shutterstock.com

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