How To Get A Business Credit Card: 5 Steps

Businesses rely on business credit cards to streamline their operations, seize opportunities, and navigate the financial landscape with ease. These plastic financial tools have become essential for maintaining fiscal agility and securing a competitive edge. 

So, if you’re wondering how to get a business credit card to propel your company forward, you’re in the right place. Read on to explore the process of obtaining and effectively using a business credit card, unlocking a world of financial possibilities for your venture.

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MoneyLion can help you explore a wide variety of personal credit card options tailored to different needs and preferences.

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How do business credit cards work?

Business credit cards operate much like personal credit cards, but they’re tailored for business needs. Here’s a breakdown of how they work:

• Application: To get a business credit card, a company needs to apply to a bank or credit card company. The approval process depends on factors such as the company’s creditworthiness and financial track record.

• Credit limit: Once approved, the bank or credit card company assigns a credit limit to the business. This limit is the maximum amount of money the business can borrow using the card.

• Usage: With a business credit card, the company can use it to make purchases and cover expenses, just like a personal credit card. It’s a flexible tool for managing day-to-day financial transactions.

• Cash flow management: Business credit cards are handy for managing cash flow. They allow a business to delay the actual payment for purchases made with the card, which can be particularly helpful when dealing with seasonal income variations.

• Payments: Remember that business credit cards come with the responsibility of making regular payments. Just like personal credit cards, businesses must pay off the outstanding balance each month, usually within a specified grace period, to avoid interest charges.

5 steps to get a business credit card

Obtaining a business credit card can be somewhat more challenging than getting a personal credit card, mainly due to the additional factors involved. 

While personal credit cards primarily rely on your individual credit history and score, business credit cards take into account both your personal and your business’s financial standing. Here are the key steps you’ll take to apply for a business credit card.

1. Determine if you’re qualified for a business credit card

You’ll want to research and understand the specific criteria of the business credit card you’re interested in. Meeting these requirements not only improves your chances of approval but also helps you select a business credit card that aligns with your business’s financial situation and goals. 

Keep in mind that each issuer may have slightly different criteria, so it’s wise to explore multiple options to find the one that suits your needs best. Here are some things creditors look at.

Revenue

Many credit card issuers look for a minimum annual revenue when evaluating business credit card applications. The specific amount can vary significantly depending on the card issuer and the type of business credit card you’re applying for. 

For instance, some entry-level business cards might have lower revenue requirements, while premium cards with more benefits may require higher revenue. This requirement is used as a gauge of your business’s financial stability and ability to handle credit.

Credit score

Your personal credit score often plays a pivotal role in the approval process for a business credit card. Credit card issuers want to assess your creditworthiness because it reflects your ability to manage debt responsibly. 

While there’s no fixed credit score requirement across all issuers, a good personal credit score (typically above 670) can significantly enhance your chances of approval. It’s important to note that your business credit card activity may also impact your personal credit score.

Length of time in business

Some issuers prefer businesses with a certain level of experience and history. They may require your business to have been operational for a minimum number of years, often around two to three years. This requirement is a way for issuers to gauge your business’s stability and longevity.

Legal business entity

In most cases, you’ll need to have a legally established business entity, such as a sole proprietorship, Limited Liability Company (LLC), partnership, or corporation. Business credit cards are typically not available to individuals who don’t have a formal business structure.

Business bank account

Maintaining a separate business bank account is not always a strict requirement, but it can significantly strengthen your application. It demonstrates financial professionalism and separates your personal and business finances, which is beneficial for tracking expenses and tax purposes.

Personal guarantee

Small businesses and startups often require a personal guarantee from the business owner. This means that, in case of non-payment by the business, the owner is personally liable for the debt. This requirement is common for businesses with limited credit history, revenue or time in business.

2. Research and compare different business credit cards

The market is brimming with options, so take your time to explore the array of business credit cards available. While doing so, focus on critical factors like interest rates, rewards programs, and additional features that align with your business’s unique needs. 

Consider business credit cards that offer competitive interest rates, as lower rates can save you money if you carry a balance. 

Also, weigh the pros and cons of rewards programs, opting for one that matches your business’s spending patterns. Don’t forget to scrutinize annual fees and credit limits, ensuring they align with your financial requirements. 

Consider any extra features that some cards may offer, such as expense tracking tools or insurance benefits.

3. Gather necessary documents and information

You’ll need to gather all the essential documents and information to apply for a business credit card. These typically include your business’s:

• Legal formation documents
• Tax identification number (EIN or TIN)
• Financial statements (like income statements or balance sheets)
• Other personal identification documents 

The legal documents demonstrate your business’s legitimacy, while your tax identification number verifies your business’s tax status. 

Financial statements provide insight into your business’s fiscal health. Remember that personal identification documents, such as your driver’s license or passport, may be necessary to confirm your identity as the business owner.

4. Complete the application process 

Once you’ve selected the most suitable business credit card and assembled the necessary paperwork, it’s time to start the application! 

During this phase, attention to detail is key. Double-check that the information you provide is accurate and up-to-date, as any errors or discrepancies could lead to delays or application rejection. 

5. Wait for approval and start using your card

After you send in your application, you’ll need to be patient. The folks who issue the credit card will look at your application, and this can take different amounts of time, usually a few days to a few weeks.

Once they give you the green light, they’ll send your business credit card to your address. When it arrives, it’s time to start using it sensibly.

Make sure you pay your bills on time to avoid extra charges and keep your business finances in good shape. If your card comes with rewards, make the most of them. A well-handled business credit card not only gives you more financial flexibility but also comes with valuable perks that can help your business grow.

5 Benefits of business credit cards

Business credit cards are helpful when used responsibly. There are tons of perks that could really boost your business’s financial well-being.

1. Separation of personal and business expenses

Business credit cards help draw a clear line between personal and business expenses. This can help simplify your finances. It can also help you maintain professionalism by keeping personal and business finances apart, which can be crucial for legal and tax purposes.

2. Access to credit and financing

Business credit cards offer access to a revolving line of credit, which can be valuable for small businesses or startups with irregular cash flows. They provide a financial cushion to cover expenses or invest in opportunities when needed, even if your business doesn’t have significant cash reserves or access to traditional loans.

3. Improved cash flow management

Business credit cards can help bridge temporary gaps between income and expenses, allowing your business to meet obligations and seize opportunities without undue financial strain. This can be extra helpful for seasonal businesses or those with varying income cycles.

4. Rewards and perks 

Many business credit cards come with rewards programs that offer cashback, travel miles, or other incentives for spending. These rewards can add up over time and provide valuable perks like discounted travel or cashback on everyday business purchases. Leveraging these rewards can even help reduce your business expenses.

5. Build business credit

Using a business credit card responsibly can help establish and build your business’s credit history. A positive credit history can open doors to better financing options, lower interest rates, and higher credit limits in the future, strengthening your business’s financial position overall.

3 Potential risks of business credit cards

But just as there are many benefits associated with using a business credit card responsibly, there are some major potential risks if you get in too deep or fall behind on payments.

1. Personal liability

One significant risk of business credit cards is personal liability. Depending on your business structure and the card’s terms, you may be personally responsible for the debt incurred on the card. This means your personal assets could be at risk if your business can’t repay its credit card debt.

2. High-interest rates

Business credit cards can carry relatively high-interest rates, especially if you carry a balance from month to month. These rates can quickly accumulate, making it costly to finance business expenses. It’s crucial to pay attention to the card’s Annual Percentage Rate (APR) and consider paying the balance in full each month to avoid interest charges.

3. Debt accumulation

The convenience of a business credit card can sometimes lead to overspending or debt accumulation, especially if you’re not diligent about managing your finances. 

Accumulating significant credit card debt can strain your finances and harm your creditworthiness. It’s best to limit credit card debt to what you can reasonably afford to pay off. 

The Power of Business Credit Cards

If you’re a business owner who can handle the responsibility and make smart choices, a business credit card can be an excellent choice. 

It not only can make managing finances easier but also can come with advantages like tracking expenses, earning rewards, and accessing financing options. 

With proper preparation and responsibility, a business credit card can become a valuable tool to support your business journey.

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