A small business credit card can provide you with much-needed capital for everyday business expenses. The grace period also gives you time to pay off your balance, which can help improve your cash flow management.
Fortunately, business credit card requirements are also easier to meet than it is for most small business loans. They rely more heavily on your personal credit, but will typically also request information about your business.
If you’re considering a business credit card, here’s what you need to know.
Requirements For a Business Credit Card
Like other forms of business financing, you’ll need to meet certain requirements in order to get approved for a business credit card. These requirements can depend on the card, with options ranging across the credit spectrum.
In addition to your creditworthiness, the card issuer may consider other pieces of information about you and your small business. This information will be used to not only determine whether you qualify for the card but also determine what your interest rate and credit limit will be.
The good news is that you don’t have to have a set amount of time in business to get approved for a business credit card. You also don’t need to meet certain revenue requirements. Here are some of the pieces of information you’ll need to provide.
Your Business’s Legal Name
You’ll need to share the name of your business, which is the name that you’ve listed on your business registration and business license.
If you’re a sole proprietor, you can use the “doing business as” (DBA) name, but you can also just put your own name if you don’t have a set name for your business.
This information ties the account to your business and will make it easier for the commercial credit bureaus to match up your account with your business credit reports so you can build your business credit scores.
You may also be asked to include the name of your business as you want it to appear on your credit card. This may be a shortened version of the business name, a DBA, or anything else you want that identifies your business.
Business Contact Information
You’ll need to share some basic information about your business so the credit card issuer knows where to contact you. That includes your business address and phone number.
As you enter this information, make sure it’s not your personal details unless you don’t have a separate address and phone number for your business.
Also, keep in mind that the card issuer generally wants to know the physical address of your business. As such, they typically won’t accept a P.O. Box.
Make sure you include accurate information. Not only will the card issuer use these details to contact you, but they may also ask for them when you call customer service to verify that the account belongs to you.
Industry Type
Your industry will be considered during the underwriting process, primarily because certain industries are riskier than others when it comes to failure rates for small businesses.
For example, restaurants, casinos, firearms, and even accounting are all considered risky by commercial lenders.
Your industry will be based on your NAICS code, which is used throughout North America to classify different businesses. You can enter your NAICS code or you can enter some keywords to narrow down the list of options.
Depending on your business, it may be difficult to find your industry from the card issuer’s list. If you need help, you may be able to get some help finding the right one to list on the application.
Legal Structure of Your Business
You’ll also need to share the legal structure of your business. You’ll typically be given a drop-down list of options from which you can choose. Options typically include:
- Sole proprietorship
- Corporation
- Partnership
- Non-profit corporation
- Single-member limited liability company
- Multiple-member limited liability company
- Other
This structure will be the same structure that you used to register your business and file your taxes. In the event that you’re an LLC that’s taxed as a corporation, you’ll choose LLC instead of corporation because it’s your legal structure, not your tax structure.
Time in Business and Number of Employees
In some cases, you may be required to share how long you’ve been in business. In others, it may be an optional selection.
As previously mentioned, you don’t necessarily need to have an operating history to qualify for a small business credit card. But if you have been in business for several years, it could help improve your chances of getting approved for a card.
You may also be asked how many employees you have, though not always. In some instances, this is only asked when you’re prompted to add employee cards to your account.
Finally, you’ll typically be asked what your role is in the business, such as owner, partner, manager, member, or other options.
Federal Tax ID
You’ll need to share your employer identification number (EIN) if you have one. This is a nine-digit number that the IRS uses to identify your business for tax purposes. You’ll also need it to apply for a business license and other important things.
If your business is structured as a sole proprietorship or a single-member LLC, you’re not legally required to have an EIN. If you have one, you can still include it on your application. But if you don’t, you’ll likely be given the option to note that you don’t have one.
That said, your EIN is another crucial piece of information that helps the commercial credit bureaus create a business credit history for you. So even if you’re not technically required to have one, it may still be a good idea if you want to establish a credit history for your company.
Annual Business Revenue
You’ll be asked to share your annual business revenue, which is typically an approximation of last year’s revenue. Make sure you include your revenue numbers and not your profits.
If your business is brand new, you may not have a full year of revenues that you can include. In this case, you may want to contact the card issuer to find out what information they’ll accept.
In some cases, you may be able to share your projected revenue for the current year or revenue you’ve earned so far for the current year.
In others, you may just simply write $0 and note that your business is in its first year.
Don’t worry too much if your business revenue is low or non-existent. While it may result in a lower credit limit or a higher interest rate, it’s not an automatic reason to deny your application.
Annual Business Income
You’ll likely also be asked to provide your personal income information.
This is because business credit card issuers require a personal guarantee (we’ll cover that in more detail in a minute), and knowing your annual income tells the card issuer if you’ll be able to personally afford to pay the bill if your business can’t.
Because your personal income may be more certain than business revenues, you can choose to use your previous year’s income or your current income.
If it’s the middle of the year, you can simply enter your salary, or you can use your most recent pay stub to calculate what your income should be for the year.
Your Personal Details
In addition to your income, you’ll also be asked for other personal details. That includes your full legal name, date of birth, Social Security number, and your contact information.
If your business has multiple owners, you may need to provide that information for each owner. If you have employees who will be getting credit cards, you typically only need to provide their names.
Personal Credit History
During the underwriting process, business credit card issuers rely more on your personal credit history than your business credit, especially if you don’t yet have an established business credit history.
This is why you need to provide your name and Social Security number. The card issuer will review the information to determine if you’re a good fit for the card.
Keep in mind that some business credit card issuers may report some or all of your account activity to the consumer credit bureaus in addition to the commercial credit bureaus.
Personal Guarantee
The vast majority of small business credit cards require a personal guarantee when you apply.
This guarantee, which is technically called a joint and severability clause, effectively states that if your business can’t repay the card balance, you and any other business owner on the account will be held personally liable for the debt.
If you can’t pay it off with your income, you may be sued to recoup the debt.
How to Apply for a Business Credit Card
The process for applying for a business credit card is relatively simple, but it’s important to take each step to ensure that you not only qualify but also that you find the best card for you.
The application process for a business credit card starts well before you actually fill out an application online. Here are the steps you should take from start to finish.
Research Your Options
There are thousands of small business credit cards out there, each with its own set of features. It’s important to avoid taking the first offer you see. Rather, take some time to shop around and compare multiple credit cards to determine the best fit for you.
As you take the time to do your due diligence, you’ll want to think about which features you want for your small business.
For example, if you plan on carrying a balance, a card with a low APR may be the best fit. But if you plan to pay in full every month, you may consider a card with a rewards program, so you can earn cash back, points, or miles.
If you need to make a large purchase or have some irregular cash flow coming up, a card with an introductory 0% APR promotion could be a good fit.
Pick a Card
Once you’ve decided what you’re looking for in a card, take some time to compare different credit cards that fall into the categories you’re looking for.
If you’re not quite sure where to start, run an internet search for the best business credit cards. You may even want to include a descriptor, such as best rewards or best 0% APR. Regardless, these lists can help you find the best card for you.
Check Your Credit
Before you submit an application, it’s important to gauge what your chances are of getting approved for the card. Most of the top business credit cards require good or excellent credit, which generally starts at a FICO score of 670.
You can check your FICO score using credit monitoring services offered by Experian and Discover. Neither requires you to pay or be a bank customer to be able to view your credit information.
If you find that your credit score needs some work, consider taking time to work on improving it before you submit your application. Alternatively, you could also consider cards designed for business owners with fair or poor credit.
The important thing is that you ensure you’re applying for cards in your credit range, so you don’t end up with hard inquiries on your credit reports with nothing to show for it.
Gather Your Information
Make sure you have all of the information shared above before you start the application process.
This will help make it go more smoothly and quickly. If your business has multiple owners, make sure you get the information you need from all partners before applying. It can be frustrating to try to get in touch with each partner while you’re in the middle of the online application.
Of course, the information requested on a credit card application can vary by card issuer. If you’re not sure, consider going through the application process beforehand to get an idea of what you need.
In some cases, you may also be asked to provide bank statements or tax returns to provide income and revenue information. Have these documents prepared, just in case you need them.
Apply
The process to apply for a small business credit card typically only takes a few minutes, especially if you’ve already put together all of the information you need beforehand.
In most cases, credit card applications are filled out online, but depending on the card issuer and your preferences, you may also be able to fill one out over the phone or even in person. In-person applications are more common for smaller banks and credit unions.
But if you want to get through the application as quickly as possible, doing it online is likely the way to go.
Note that you’ll typically need to complete the application all at once, though some may allow you to save your application and complete it at a later time.
If you’re already a customer with the bank that’s offering the card, you may even be able to sign in to your account and have it pre-fill a lot of the information.
Wait For the Issuer’s Reply
Once you’ve submitted a credit card application, you’ll typically get a response immediately. There are a few different responses you can expect to see:
- Approval: If this is the notice you get, it means you’ve been approved, and your card has been opened. You’ll be able to see your credit limit, and you’ll get some information about when your card should arrive in the mail. In some cases, you may also have the chance to get access to a virtual card number that you can start using now while you wait for the physical card.
- Pending: If this happens, it means the card issuer needs some more information from you, or it may mean that it requires a manual review from a card issuer employee. For the most part, credit card applications are underwritten using a computer program, but in some cases, it might take a set of eyes to make a final decision.
- Denial: While a pending application may or may not mean you’ve been denied, a straight-up denial means you don’t qualify for the card. You should receive a letter in the mail within 7-10 days outlining the reasons you were denied.
If you’ve been denied, you can call the card issuer’s reconsideration line and speak with a credit analyst. Here, you may be able to plead your case, especially if the reason for denial can be overcome in a reasonable way.
Conclusion
Business credit card requirements aren’t as strict as the requirements you’ll see with small business term loans and lines of credit. But they do rely heavily on your personal credit history to determine your eligibility.
If you’re thinking about applying for a business credit card, make sure you know what you’ll need to qualify and the steps you need to take in order to maximize your approval odds.
