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How do you apply for a business credit card?

how do you apply for a business credit card

You can apply for a business credit card by finding a lender, filling out a formal application form, and submitting all the information that they ask for. 

Thinking of a business credit card but unsure where to start and want to learn more about applying? Continue reading to learn more about business credit cards, how to apply for them, and whether they are the right option for you. 

What Exactly Is a Business Credit Card?

If you haven’t looked into business credit cards before, you may not be exactly sure what these credit cards are. A business credit card is exactly what it sounds like a credit card that businesses can use for any business-related purpose (examples below). According to a study conducted by the National Federation of Independent Business, it is estimated that 79% of small employers had business credit cards.1

Just like a standard credit card, business credit cards offer the ability to borrow as you need until you reach your credit limit. Once you pay for that card, you’ll be able to use the card again. 

Many business owners prefer a business credit card over a personal credit card for a few reasons. 

One of them is that when tax season comes around, having all your business expenses separated into a single credit card—which is only meant for business use—can make it much easier to claim those expenses on your tax return. 

Another reason is that it will be easier to check how much a business has spent and keep others using company money accountable. 

And finally, depending on how the business is set up, you may not need to use your personal credit score and instead can rely on your business credit score for approval and your credit card limit. However, most of the time, credit card lenders will ask about your personal credit score for approval or a personal guarantee, which also factors in your personal credit report/history and score, so keep that in mind! 

What Expenses Can a Business Credit Card Be Used For?

Business credit cards can be used for various business expenses; here are some examples: 

Business ExpensesExamples
Start-up costs for a businessInitial expenses for launching a new business
Equipment/furniture rentals or purchasingRenting or buying equipment and furniture
Workspace rentalsLeasing office space or co-working spaces
Hiring new employeesRecruitment and onboarding expenses
Covering existing employee costsPayroll, benefits, and other employee-related costs
General business growthInvestments for expanding and growing the business
Company outings and social eventsTeam-building activities, social gatherings
Transportation costs related to the businessBusiness-related travel expenses

Steps to Get a Business Credit Card?

Ready to apply for a business credit card? Here is how you can go about it: 

Step 1: Figure Out Your Options

The first step in your business credit card search is to take a look at your finances and figure out what is realistic. In most cases, your personal credit history and business credit history will both be looked at with your lender. If you have a high credit score and high income, then you are likely to get a higher credit limit and a lower APR. On the other hand, low credit scores and low income will limit your credit and increase the costs of borrowing funds. 

Step 2: Research Different Kinds of Business Credit Card Types and Issuers

There are several different kinds of rewards you can earn with credit cards along with different types. Knowing about them can help you figure out which one is the right business credit card for your needs. Here are some of the different business credit card options you can look into: 

  • Secured Credit Cards — These types of business credit cards require an asset for collateral. Suppose you don’t have the best credit history and are having trouble finding a credit card issuer for an unsecured credit card. Or if you are still building business credit. 
  • Credit Cards With Travel Rewards — With a travel rewards credit card, you can look forward to things like deals and rewards for expensing travel costs. If your business requires a lot of travel, whether it is driving or flying, a travel regards credit card can mean saving a lot of money and extra perks. 
  • Cash Back Reward Cards — Cash back reward credit cards are some of the most common credit card rewards. With these business credit cards, you will get money back for simply spending. Generally, there are two types of cash back rewards:
    • Flat Rate — With a flat rate, you’ll get some money back for any purchase you make on your business credit card. Usually, this percentage is pretty low, 1% to 5% cash back. 
    • Bonus Categories — Sometimes, credit card issuers will provide you with bonus rewards depending on the spending category. These usually change often. 

If you have a lot of costs that range, then a cash back reward card may be the best fit for you. 

In addition to the type of business credit card, you’ll want to research different lenders. You can find credit card companies online, but you can also turn to financial institutions like banks or credit unions. Make sure to look at average credit card limits, APRs, and past customer reviews

Step 3: Apply With Credit Card Issuers and Wait for Final Approval

Once you figure out what kind of credit card you want and potential lenders, you can apply for pre-approval. With pre-approval, you will then know more accurately what your options are, and it will be easy to compare options. Once you pick the credit card issuer/credit card you want to move forward with, you will have to fill out a formal business credit card application. You will then find out about final approval. 

Once approved, it is up to you to decide whether the credit card is right for your business needs. If everything looks good and you move forward, you can expect your business credit card to be mailed to you. 

What Other Options Are Available for Business Expenses?

A business credit card isn’t the only type of funding that is available for business owners looking to start, grow, or maintain their business. Here are some alternative options to consider: 

Personal Loans

Personal loan options are some of the most versatile loan options available. They are a great alternative to payday loans. These loans can be used for all kinds of expenses, including business expenses. Loan amount and interest rates will depend on your financial situation, including your credit score, income, and ability to repay the loan. In most cases, you’ll repay your funds in equal monthly installments—which is normal for all installment loans.CreditNinja has a great resource to compare personal loans and business loans you can use!

Business Loans

Business loans are another option to consider if you don’t want a business credit card right away. These can work well if you know how much you will need and if you want to repay your debt in steady monthly payments, rather than the unpredictability of credit cards, which the more you use, the higher your monthly payment. 

SBA Backed Loans and Grants

The Small Business Administration operates under the federal government and helps small business owners get funding through their backed loans. This way, those who don’t have the best credit history or income may still be able to get funding through one of their loans. There are many lenders that offer SBA-backed business loans, so definitely look around. Another thing to keep in mind is that there are several grant programs available from the SBA, spending on what kind of business you are trying to build. 

Crowdfunding

Crowdfunding allows strangers and people you know to donate to your cause with as little money as they individually can. Over time, this can become a large enough amount of money to fund your business costs. Depending on your business type (for example, something that helps out the community or a personal dream), you may get a lot of support online! 

You can use online platforms like GoFundMe to get started. Many restaurants and other small businesses turned to crowdfunding during the 2019 pandemic to stay afloat. And the best thing about these types of funds is that you don’t have to worry about paying money back. 

FAQS

How does a business owner’s personal credit score affect the approval of a business credit card?

A business owner’s personal credit score is often considered by credit card issuers during the business credit card application process. A good personal credit score can increase the chances of approval and potentially result in better credit terms.

What is the difference between a business credit score and a personal credit score in the context of business credit cards?

A business credit score reflects the creditworthiness of the business itself based on factors like payment history and credit utilization. In contrast, a personal credit score is tied to an individual’s credit history. Credit card companies may consider both scores when evaluating a business credit card application.

Can a new business owner without an established business credit history apply for a business credit card?

Yes, new business owners can apply for business credit cards. However, in the absence of an established business credit history, credit card issuers might place more emphasis on the owner’s personal credit score and may require a personal guarantee.

What is a personal guarantee in a business credit card application, and why is it required?

A personal guarantee is a commitment by the business owner to be personally responsible for the credit card debt if the business fails to pay. Credit card issuers often require this for businesses without a strong business credit history to mitigate their risk.

How can a business credit card impact both personal and business credit scores?

A business credit card can impact both personal and business credit scores. Responsible use, like timely payments, can positively affect both scores. However, missed payments or high utilization can negatively impact them, especially if a personal guarantee is involved.

What factors should a business owner consider when choosing a credit card issuer for a business credit card?

Business owners should consider factors like the issuer’s reputation, the credit limit offered, interest rates, reward programs, and how the issuer reports credit activity to credit bureaus.

How does the use of a business credit card differ from a personal credit card for a business owner?

A business credit card is intended for business-related expenses and can help in separating personal and business finances, which is beneficial for tax and expense tracking. Personal credit cards, on the other hand, are meant for personal use and may not offer the same benefits and protections for business expenses.

Key Takeaways When Applying for Business Credit Cards

Applying for a business credit card is pretty simple and similar to applying for a personal credit card. The first thing you will need to do is take a look at your personal credit and business credit to figure out what options will work for you. From here, there will be a little more research you should do. Because there are so many different types of business credit cards—pertaining mostly to their rewards—you’ll want to make the most strategic choice. For example, if your business requires a lot of travel, then you should think about a business credit card that has travel rewards. 

Once you figure out the type of credit card you want to get, you should start researching the lenders and applying for pre-approval with a handful. Once you get pre-approved, it will be easy to compare your credit card options. Then, you can finally move forward with final approval. Once you do get final approval, your business credit card will be mailed to you. As a business owner, it is important to know that business credit cards are not your only option when you need funding for business costs. There are personal loans, business loans, SBA-backed loan options, grants, and even crowdfunding. And so, definitely look at those options as well! 

References: 

  1. Credit Study – NFIB

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