How To Qualify For A Business Credit Card

business credit card

Run your own small business? It might be time to apply for a business credit card.

These business credit cards are a great way to track your expenses, something that is especially useful come tax time. If you’re building your business and spending big dollars while doing so, a business credit card can earn you plenty of rewards points quickly. And business credit cards offer perks specifically targeted to business owners, everything from free Wi-Fi on flights to discounted hotel stays and cash-back bonuses at office supply stores.

Best of all, you can take advantage of these perks even if you aren’t running a restaurant, retail shop, hardware store or any other physical business. You can apply for a business credit card, and get approved, even if your business is a side hustle such as selling jewelry on eBay, snapping shots as a freelance photographer or fixing leaky faucets as a handyman.

What Business Credit Cards Can You Apply For?

Adem Selita, chief executive officer and co-founder of The Debt Relief Company in New York City, said that most business credit cards are available to any entrepreneur, no matter the size or scope of their businesses.

“Anyone who is self-employed, a sole proprietorship or independent contractor can actually apply for a business credit card,” Selita said. “The definition is quite broad, but anyone who operates a business with the goal of making a profit – whether it is a side hustle or major operation is irrelevant – can technically qualify for a business credit card.”

But what does it take to qualify for a business credit card? It’s not much different from what you need to get a traditional credit card. Banks will look at your credit history and your income. They’ll also want some basic information about your business.

How Do Business Credit Cards Differ From Personal Credit Cards?

There aren’t many differences between business and traditional credit cards. They both give you a set credit limit and charge you interest when you don’t pay your purchases off in full.

The biggest difference lies in the perks and rewards categories. Business credit cards tend to generate rewards on purchases that business owners make more often. Your business card, for instance, might give you a 5% cash-back bonus on any purchases you make at office supply stores. Or they might give you more rewards points for money spent on cellular phone service or hotel stays. You can also order extra cards for your employees to use. You can then set different credit limits on each of these cards. It’s a good way to give your employees the ability to buy the supplies your business needs or charge meals and other expenses when they are meeting clients. By giving employees their own credit limits, you gain control over how much of your company’s money they can spend.

Another big difference? The banks providing these cards don’t always report your payment and spending activity to the three national credit bureaus of Experian™, Equifax® and TransUnion®. Different banks have different policies here, but if your business credit card doesn’t report to the credit bureaus, a late payment won’t drag down your personal three-digit credit score. That means, though, that on-time payments won’t help your personal score, either.

Many business credit cards, though, do report your activity to three business credit bureaus. These bureaus – Equifax Business, Experian Business and Dun & Bradstreet – will then issue a credit score and credit report on your business. Much like your personal credit report, a business credit report will track how well you’ve paid your bills and how much of your credit you are using. The difference? Your business credit report will only include activity from your business credit cards.

Who should apply for a business credit card?

You should consider a business credit card no matter what type of business you run. You don’t need a physical storefront and your business doesn’t have to be an LLC or S Corp. You don’t even need an Employer Identification Number, better known as an EIN. If you run your own side gig selling items online, snapping wedding photographs or repairing cars, you can apply for a business credit card as a sole proprietor. Having one of these cards isn’t a necessity. But a business credit card can be a valuable tool.

First, these cards make recordkeeping more efficient. It’s easy to keep your business and personal expenses separate if you make all of your company purchases with a business credit card. This helps you track your spending patterns and make changes if necessary. This is also useful at tax time: It’s easier to track and claim deductions when your business and personal charges are separate.

Business credit cards often offer their own online analysis of your business’ finances, too. You can log onto your card’s online portal to analyze the purchases you’ve made with your card. This can help you determine if you might be overspending on certain products or services.

Luke Smith, founder of Louisville-based house-flipping company We Buy Property in Kentucky, said that business credit cards have helped him better analyze his own business’ financial health.

“The business credit card will allow you to keep all of your expenses in one place,” Smith says. “You can then utilize the software from your credit card company to view your cash flow and what categories of expenses you have for useful insights into spending.”

Then there are the rewards. Business credit cards come with rewards categories that reflect the type of purchases that small business owners make, which is why these cards usually offer bigger cash-back bonuses or rewards for such items as office supplies, Internet service and cell phone plans. The perks are usually focused on business owners, too. Cards might provide you with free Wi-Fi on airplanes, reduced hotel stays or rental car discounts.

Using a business credit card, then, could provide you with more rewards points or cash-back bonuses and help you cut down on the expenses of running a business.

How To Qualify For A Business Credit Card

The most important factor in getting approved for a business credit card is your personal credit. Banks will pull your credit reports – you have three personal credit reports, one each maintained by the national credit bureaus – and study your three-digit credit score.

This last number is especially important: It sums up, in just a single figure, how well you’ve paid your bills and managed your credit. If you make certain payments 30 days or more past their due dates – such as your auto loan, mortgage, student loan or credit card payments – your credit score could fall by 100 points or more. This is why it’s so important to protect your credit score, even during challenging times. Letting it fall could dramatically hurt your chances to qualify for loans and credit cards.

However, if you have a history of paying your bills on time and keeping your credit card debt low, your credit score should be strong. Each bank will have different credit score requirements, however most lenders consider a FICO credit score 740 or higher to be an excellent one.

“Check your credit score before you apply,” says Ethan Taub, chief executive officer of Newport Beach, California-based Loanry. “Applications always take into account your credit rating. The better it is, the more chance you have of qualifying.”

You can build your credit by making all your payments on time and cutting down on your credit card debt. You can also improve bad credit by applying for a secured credit card, one with a credit limit that is determined by a deposit you make with your bank. By making charges on this card and paying them off in full on time each month, you’ll steadily boost your credit score.

Banks will also want to know your monthly income and debts. Again, how much debt is too much will vary by bank, but many lenders don’t want your total monthly debts to consume more than 43% of your gross monthly income.

Banks will ask about your business, too. For instance, when applying for business credit cards from American Express, you’ll have to enter your business’ legal business name and, if it is different, your company’s Doing Business As name. You’ll also have to provide your business’ address and phone number. You’ll then have to choose your business’ industry type and structure, corporation, partnership or sole proprietorship.

American Express also asks some basic questions about your business’ operations. You’ll have to tell the bank how many years your company has been in business, how many people you employ, your annual business revenue and your business’ estimated monthly spending. If your business is a partnership or corporation, you’ll also have to provide its Federal Tax ID. American Express will also ask what your role in the company is, such as general manager, owner or partner.

Once you provide this information, you’ll have to add your personal information, including your total annual income and non-taxable annual income.

The Bottom Line

Though you don’t need a business credit card to successfully run your company, these cards can help you organize your expenses, track your spending and build valuable rewards and cash-back bonuses. And the best news? Applying for a business credit card is a simple process, and these cards are available to businesses of all kinds, including the smallest.

These are challenging times for business, with the COVID-19 pandemic still keeping plenty of customers home. Fortunately, you have other options for funding your business and keeping your company strong during the pandemic. You might explore taking out a business loan to help cover the costs of running your company. Click here to learn about even more financing options for your small business.

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