The process of applying for a business credit card is fairly simple. You'll need to research cards, pick the one you want, gather relevant information about your business, complete an application and await the issuer's decision. While the actual application is quick and easy, preparing beforehand ensures that you choose the right card for your business and get approved.
Who can apply for a business credit card?
There are several types of business credit cards. Some are reserved for large corporations that have dozens or even hundreds of cardholders, their own expense and reimbursement policies, and complex security needs, while others are geared toward small businesses with five or fewer employees.
With so many business credit cards available, there's one for just about any type of business. Even sole proprietors who aren't formally incorporated usually qualify for some business credit cards.
Restrictions on who qualifies usually vary by individual card issuers, but these are some you might encounter:
- Organization type: Some card issuers will not issue business credit cards to nonprofits or unincorporated businesses, like sole proprietorships.
- Industry: Some institutions will not extend credit to businesses operating in certain industries, such as multilevel marketers and cannabis- or firearm-related businesses.
- Applicant qualifications: Every issuer has its own minimum qualifying criteria for card applicants, including income, time in business and credit score.
Unless you're prohibited from getting a card due to one of these restrictions, getting a business credit card is often just as easy as getting a personal card. Even if you are prohibited from getting a card from one issuer, you may still be able to get a different card from a different issuer.
What do you need to apply for a business credit card?
When you apply for a business credit card, you'll need to supply all of the information that you'd customarily provide to apply for a personal card. Basic contact information like your name, mailing address, phone number and email will all be part of the application. You'll also need to provide several items specific to your business, including your:
- Business's name
- Business's address
- Years in business
- Annual revenue
- Estimated monthly expenses using the card
In addition, you'll need to provide your tax identification number (TIN). If your business is incorporated, this may be your business's EIN. If you're a sole proprietor or a single-member LLC, this may just be your Social Security number. You'll also need to state your position at the company, as well as Social Security numbers for any other business partners who own over a certain percentage of the business (usually 20% or more).
Depending on the issuer, a card application may also ask what industry the business is in, the nature of business (whether it's for profit, for example) and the number of employees or additional cardholders.
How to apply for a business credit card
If you think you fit the criteria for a business credit card and would like to get one to support your operations, you can apply anytime. While an application is simple and only takes five to 10 minutes to complete, there are several things you should do first to make sure you get the right card for you.
1. Research your options.
There are dozens of different business credit cards available. Before you settle on a card, you should know your options. Study your business expenses to see what categories you're spending money in that could qualify you for rewards. Some are great for small startups that need cheap capital, offering long 0% introductory periods. Others are ideal for more established companies with reps who do a lot of traveling, because they accumulate reward miles. Still other cards have cash-back programs that offer great rewards for spending in certain categories. Also, check cards for fees and interest rates.
2. Pick a card.
Once you've identified cards that offer the right mix of fees, rates and rewards, you'll have to decide which one is right for you. Make sure that you read the literature carefully and understand all of the cardholder rights and obligations. If the card offers a 0% introductory period, find out when that period ends. If there are caps on rewards or limits on how rewards can be redeemed, you should be aware of them before you apply.
Also, be sure to check the card's qualification criteria to make sure that you can qualify for the card you want.
3. Check your credit.
If you have been in business for three or more years, you may qualify for a business credit card using your business credit score. More likely, though, you'll be applying with your own Social Security number, and issuers will check your personal credit score.
In either case, it's usually a good idea to check these scores on your own before you apply to make sure they're in good shape. The higher your scores, the better. If your personal credit score isn't at least 650, you may want to consider holding off on applying altogether. That will give you time to improve your credit score by doing things like paying down debt, bringing accounts current or resolving past credit disputes.
4. Gather your info.
Once you feel that your credit is in good shape, you're almost ready to apply. The last thing to do is to gather all of the information you'll need as part of your application:
- Your business's TIN (found on IRS Form W-7 or SS-4)
- Your Social Security number
- Social Security numbers for any business partners who own 20% or more of your company
- Your incorporation documents to confirm the number of years you've been in business
- Recent financials to check your revenue and monthly spend estimates
- A list of employees who will need cards
5. Apply.
Now that you've found t.he card you want, confirmed that your credit is in fine shape, and gathered all the relevant information that you'll need to apply, it's time to actually complete an application. This process is usually completed online and only takes a few minutes.
Depending on the data you enter initially, the card issuer may have additional questions for you or require other information. This may be completed in subsequent steps as part of your online application, or it may require separate follow-up via phone or email.
6. Await the card issuer's decision.
After you formally submit your card application, the only thing left to do is wait and see if you're approved. Approval decisions can take a few minutes, or they may take a day or two if additional follow-up is necessary. If approved, you'll get your card(s) in the mail to activate and start using.
Factors that impact business credit card approval
Though applying for a business credit card only takes a few minutes, credit card issuers gather a good deal of information about both you and your business in that brief application. With all of this information going into an application, it's easy to see that many items that can make or break your approval:
- Your business type (some issuers don't support nonprofits or sole proprietorships)
- Your revenue or revenue expectations
- Your time in business
- Your personal credit score
- The availability of personal guarantees from you and any partners in your business
- Your industry
Of course, this list isn't comprehensive. Credit card applications can be denied for any number of reasons. Just having a weird business address – one that isn't easily found in a postal code lookup – can be a disqualifying factor.
The most common disqualifying factor, however, is your credit score. Most small business owners who apply for business credit cards apply using their personal credit, not their business credit. Because of this, if a business owner's credit report isn't in good shape – with a score of at least 640 to 700, depending on the card they're applying for – they may be denied.
What's more, the relationship between a small business credit card and the owner's credit card is a two-way street. The business owner's personal credit score may cause the business's card application to be denied, and any misuse of the company card may come back on the company owner's personal credit.
Impacts on personal credit
When you apply for a business credit card – especially if it's a small business card – your application will likely hinge on your personal credit. This means that when you apply, the card issuer will run a hard check on your credit. This hard inquiry will count against your credit and take several months to drop off your credit report.
Additionally, if you're approved, sometimes (depending on the issuer and card) any balances you carry on your business credit may also appear on your personal credit report – the same way balances on your personal credit cards do. This will further impact your credit if you apply for other business financing or even a personal loan.
Last but not least, applying for a business credit card usually requires a personal guarantee from anyone who owns 20% or more of the business, and sometimes from each cardholder. If your business fails to make on-time payments or defaults on a balance, those items will hurt your personal credit score.
When not to apply for a business credit card
Getting a business credit card can be a quick and easy way to access credit for your business, but sometimes, it's not your best option, like in these situations:
- Your personal credit isn't in good shape.
- You already have a lot of business debt outstanding.
- Your business is just getting started and doesn't yet have reliable income.
In these cases, you may not want to apply for a business credit card, because you're less likely to qualify.
Just as often, though, a business credit card simply may not be the ideal type of financing for your business. If you need financing for a long-term project, for example, you may be able to secure better financing with a long-term, fixed-rate loan. If you have seasonal financing needs that last four to six months, you may be better off with a term loan or a line of credit. [Read related article: How to Apply (and Get Approved) for a Business Loan]
Bottom line
The process of applying for a business credit card is relatively quick and easy – it's usually as simple as completing an application online. Before you do that, though, make sure that a business credit card is the right financing option for your business. Then, you need to research cards, pick the best one for you, gather your relevant info and confirm that you'll likely qualify based on your credit score before you submit an application.
That way, you can ensure not only that you'll be approved – and thus not waste a hard inquiry on your credit – but also that you'll find the best card for your business.
Business Credit Card FAQs
How do business credit cards work?
A business credit card is intended strictly for purchases related to an organization – it is not intended for personal use. There are two additional differences between a business credit card and a personal credit card. First, according to NerdWallet, business credit cards are monitored and reported in a different manner than personal credit cards. Personal credit card accounts are reported on a monthly basis to the major consumer credit bureaus: Experian, Equifax, and TransUnion. However, depending on who the credit card issuer is for your business credit card, the issuer may provide reporting to commercial credit bureaus and perhaps consumer credit bureaus, too.
The second additional difference between business credit cards and personal cards is that business credit cards typically have higher spending limits. This is due to the likelihood that purchases are likely to be for possible big-ticket items related to the business. Any type of bonuses offered are likely to be geared for commercial use, too. For example, business credit cards may advertise bonuses such as airline miles or travel discounts.
What are the benefits of business credit cards?
There are four benefits a business credit card provides. First, business credit cards can be helpful for tax-deduction purposes. Credit card statements can make it easy to track business expenditures. Second, you're keeping your personal credit separate from your business credit. If for some reason, your business credit score decreases, it should not adversely affect your consumer credit score and vice versa. Third, typically with a business credit card, the spending limit is likely to be higher than the spending limit set by card issuers on consumer credit card accounts. Fourth, money management is a benefit of having a business credit card. Cash flow is important for any business, but especially for startups. Business owners can better manage their cash flow using a business credit card to make and pay off expenses, such as new equipment and inventory.