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If you have a small business – whether it’s a home-based side hustle or profitable brick-and-mortar endeavor – you could probably benefit from applying for a business credit card, especially one that earns rewards. Applying for a business credit card can be intimidating, though, and maybe even a little confusing. So, here’s how to apply and qualify for a small business credit card?
To help clear the air, here’s what you need to know about getting your business’s first credit card. That way, you’ll be able to make an informed decision and choose the best business credit product for your needs.
Tip: You can see our favorite business credit card offer the Ink Preferred here.
How to Apply and Qualify for a Small Business Credit Card:
You Don’t Need an EIN to Apply for a Business Credit Card
Many small business owners and sole proprietors hold off on acquiring a business credit product because they don’t believe that they are “big enough” to qualify. What they don’t know is that there aren’t any regulations for defining a “business” for credit card purposes. In fact, you don’t even need to have an EIN (employer identification number) in order to apply.
If you are a sole proprietor, you can use your SSN to apply for your new credit card. In fact, approval for an account will be based on your personal creditworthiness and income anyway.
So, don’t hold off on applying for that business-branded credit card just because you’re not yet the successful business that you aspire to be. Credit card companies not only want to see you grow – they want to grow with you!
Your Business Doesn’t Need to Make a Lot of Money
As mentioned above, your business doesn’t need to make a lot of money before you’re eligible for a new business credit card. In fact, there is no minimum financial threshold for your small business in order to qualify for an account.
Of course, there are still requirements in order to be approved. These approval requirements are actually based off of your personal income and credit history. Keep this in mind, though: if you wouldn’t qualify for a new personal card, you probably aren’t going to qualify for that new business card either.
When filling out your first business credit card application, you’ll want to include your total income. That means both personal and from your business. If your business made $2,500 this year and you made $61,000 from your day job, you’ll want to answer $63,500 for the income portion of the application.
You Can Earn Business Rewards
The best part about spending on credit cards is the ability to earn cash back or rewards for what you buy anyway. Luckily, this feature isn’t just limited to personal credit card products! For example, the Ink Preferred earns 3x points per $1 on select business categories.
By getting a rewards-based small business credit card, you’ll start earning cash back or miles for the things that your small biz needs to function and grow. Plus, business rewards are typically directed the most common company expenses: travel, office supplies, postage, and even cell phone charges.
Often, you’ll earn cash back for these categories at a higher rate than you would on a personal rewards credit card. (Personally, I can’t remember the last time I had the ability to earn more than a flat-rate 2% back on office supplies with a personal card, for example.)
Before deciding which business credit card is best for you, take the time to comparison shop. Calculate what your business is actually spending and in which categories. Look at your projected plans for the next couple of years, and how that growth may translate into spending. Then, pick a business credit card product that will result in the biggest cash back earned. You may even find one that will give you an initial sign-up bonus to boot.
Check out our review to get a better view of the best small business credit cards perks.
You Won’t See It on Your Credit Report
Depending on your personal credit report goals, this may be an upside or a downside. Even though your personal income and credit history will be considered when you apply for that first business credit card, the card’s activity will more-than-likely not be reported on your monthly consumer credit history.
This means that if you are trying to build a positive credit history, your business credit card won’t really help much. However, if you plan to carry a balance on that card (perhaps you’ll use a 0% introductory offer to make a big business purchase or transfer a balance), that also won’t negatively impact your personal credit.
Responsible credit card management is always important. This means to pay your bills in full, on time, and don’t open too many new accounts in a short period of time. And even though that shiny new business card might not be reporting your timely monthly payments to your personal credit history, it doesn’t mean you can be irresponsible with the account. If you fail to pay on time, or even neglect a balance altogether and trigger a charge-off, you can rest assured that it will show up on your personal credit, since you’re responsible personally for any default.
So, the takeaway here is: you may not see the positive benefits of your business credit card’s wise account management, no matter how long you hold the card. However, if you fail to pay your balance as agreed, you can bet your bottom dollar that your personal credit will pay the price.
Reconciling Accounts Will Be Easier
One of the great benefits of having a separate business credit card – versus using your personal card for business-related purchases – is that it makes managing expenses easier.
For example, you won’t have to sift through personal purchases in order to reconcile your business expenses. You can simply pull your business statement and compare it against invoices and receipts. This will save you a lot of time throughout the year, and make your bookkeeping a much simpler task.
A dedicated business credit card will also help avoid trouble in the case of an IRS audit. You won’t have to answer for questionable purchase overlaps, whether the company was reimbursed for personal expenses, and whether your personal purchases were included in your deducted expenses come tax time. Mitigating this risk might be the most motivating factor for you when debating whether or not to finally apply for that business account.
Before You Apply for a Small Business Credit Card
Considering your first business credit card? There are a few things you can do beforehand to make the application process easier.
First, take a look at your personal credit, just as you would if you were considering a new personal credit card account. Do you have outstanding debts that could be paid down? If so, you might want to take some time to aggressively clear out the balances. Then, you can apply for new credit products. Are there negative references that are close to falling off of your report? If so, it might be worth waiting a few weeks, or even months, for those to disappear. That way, you’ll improve your chances of approval.
Second, you’ll want to spend some time calculating what you make. Since your first business credit card will be based on your total income — personal and business – you’ll need to have a good idea of both before filling out the application. If your business is just starting out and you don’t have much in the way of revenue (or any!), it might be tempting to fudge the numbers a bit.
However, avoid the temptation. You don’t want to start off on the wrong foot and earn yourself a financial review with the bank. Yes, your initial credit limit might be lower if your income is also low. However, this has the potential to grow over time.
Also, you will need to be able to forecast expenses if any. Basically, give the banks a reason for why you’re applying for a business credit card. It does help if you apply for a business credit card through a bank you already have a relationship with too.
Lastly, take some time to look at the various credit card products out there. We mentioned a few above, and they’re a great place to start, but our favorite is the Ink Preferred since it comes with a sign-up bonus worth $1,000 in travel. Compare rewards and calculate how much you’re likely to earn each year. Will your earnings warrant an annual fee? Think about bonuses and card benefits. Are the ones being offered in line with what you actually need (and will use)?
Getting your first business credit card can be intimidating. However, the process is easier and less painful than you might think. With a little bit of research, you’ll be well on your way to acquiring your small business’s very first credit product. Congratulations!
Chase Sapphire Preferred® Card
- Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,000 toward travel when you redeem through Chase Ultimate Rewards®.
- 2X points on travel and dining at restaurants worldwide, eligible delivery services, takeout and dining out & 1 point per dollar spent on all other purchases.
- Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards. For example, 80,000 points are worth $1,000 toward travel.
- Get unlimited deliveries with a $0 delivery fee and reduced service fees on orders over $12 for a minimum of one year on qualifying food purchases with DashPass, DoorDash's subscription service. Activate by 12/31/21.
- Earn 5X points on Lyft rides through March 2022. That’s 3X points in addition to the 2X points you already earn on travel.
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Editorial Note: The editorial content on this page is not provided by any bank, credit card issuer, airlines or hotel chain, and has not been reviewed, approved or otherwise endorsed by any of these entities.