Do you know how to qualify for a business credit card? Unlike personal financial tools, business credit cards and bank accounts have different qualifications and requirements. They also provide greater rewards, and an easier way to keep business and personal expenses separate.
You don’t need to have a major corporate enterprise or even a single employee in order to qualify for a business credit card. If you have a for-profit venture, you have a small business. Therefore, you can have a business credit card—as long as you meet the company’s business credit card requirements.
Is a business credit card right for you? Read on to find out whether you need one, how to apply, and how to get the most out of your business credit card.
How do you know if you need a business credit card?
First, let’s talk about what business credit cards are not: they are not a way to make long-term investments or take on long-term debt. If your business needs long-term financing, loans or revolving lines of credit are better financial choices.
Business credit cards are designed for short-term expenses. Ideally, as with personal credit cards, owners should use them to:
- Bridge short-term cash flow gaps
- Earn rewards and bonuses
- Keep personal and business expenses separate
- Build good credit history
- Finance short-term purchases
Because all credit cards have high interest rates, you should only charge purchases which your company can pay back in one to three months. If you’re making a major purchase that will take longer than three months to pay off, other types of financing are more appropriate.
One of the best benefits of keeping a business credit card is how easy it makes it to keep your financial records separate from your personal expenses. It’s tempting to use a personal credit card for business expenses—after all, you already have it, and you might prefer your personal rewards. On the other hand, a business credit card will send you monthly, quarterly, and even annual statements. This makes it simple to track your expenses and see where your money is going.
The bigger your business is, the more likely you are to need a business credit card. But ultimately, even small businesses and side hustles can benefit from having one.
What kind of businesses can apply for a business credit card?
Both established businesses and for-profit side hustles can apply for a business credit card. This includes independent contractors. If you get a 1099 instead of a W-2, you are likely eligible to apply—even if you don’t think of yourself as “owning” a business. For example, Uber and Lyft drivers may benefit from having a business credit card for gas and other related expenses.
Even if you don’t receive a 1099, you might still qualify for a business credit card, as long as you’re making taxable income. From selling old items on eBay to generating rental income, if you’re conducting business activities, you can apply for a business credit card.
Non-profits can apply for business credit cards, too. You don’t need to register federally. Many states have low-cost ways to register as a non-profit, which are often simpler and cheaper than federal registration. Once registered, your non-profit can apply for a card.
What are the business credit card requirements?
Your business doesn’t necessarily need to have an established credit score, although that helps. Companies will also look at your personal credit score and history. This, along with the application information described in the next section, will help the lender decide whether you appear to be a good risk.
Generally, creditors want a personal credit score of at least 670. You might still be able to qualify for a business credit card with a lower credit score. But, the APR and rewards might not be as robust. Alternatively, a financial institution may use your business credit score, which needs to be above 75.
If you don’t already have a federal tax ID (EIN), you can either sign up for one or use your own Social Security number. EINs are free, and are required if you issue W-2s or 1099s to others. Smaller businesses without employees and side hustles can simply use their personal SSN.
Some owners are concerned their business income isn’t high enough to justify a business credit card. Because most business credit cards require a personal guarantee, business income is usually not a bar to qualification. Just keep in mind that you will be personally liable for those charges, even if your business fails.
What information do you need to apply for a business credit card?
Applying for a business credit card is slightly different from applying for a personal card. Not only will you provide your personal financial information and credit history, but information about your business finances, structure, and more.
Keep in mind that business credit cards are issued by a creditor’s commercial division. The process is often longer and more involved than a personal credit card application. Before applying, gather all the required documentation. The list below will help you do the necessary legwork before beginning the actual application process.
Gather the following business information:
- Business name: Use your business’s full legal name. If you’re a sole proprietor, you can simply use your own name.
- Contact information: This should be the address and phone number associated with your business registration. Sole proprietors can use their home address.
- Establishment date: The lender will need to know how long you’ve been in business. Provide either the date you established the business or how many years you’ve been in operation.
- Number of employees: This is the number of people working for you (not including yourself). If you’re a sole proprietor, the answer is zero.
- Business structure type: Declare whether you’re a sole proprietorship, corporation, partnership, limited liability corporation (LLC), or nonprofit organization.
- Federal tax ID: This can be either your EIN or SSN, depending on the type of business.
- Revenue and expenses: Finally, you’ll need to know how much revenue your company generates per year, plus an estimate of how much you’ll charge per month.
If your business is new, you might not have an annual revenue calculation yet. Contact the lender to find out how they want you to proceed. Business credit cards backed by personal guarantees might allow estimates or other documentation.
You will also need to provide certain personal information:
- Date of birth
- Social Security Number (SSN)
- Personal contact information
- Annual income from all sources
Steps to qualify for a business credit card
Here’s how to qualify for a business credit card:
- Have a business, side hustle, non-profit, or otherwise generate taxable income
- Establish an EIN, or apply with your own SSN
- Have a credit score of at least 670 (some exceptions may apply)
- Gather the required documentation
- Apply with your desired lender(s)
- Provide additional information as needed
That’s all it takes. If you’re turned down by one lender, find out why. You may be able to correct the issue before applying again, or try applying with another credit card company.
How to get the most out of your business credit card
Once you’ve received your business credit card, you can start building credit and earning rewards. Here’s how to get the most out of your card:
- Make business purchases: Remember, your business credit card is not for personal expenses. Limit your business credit card use to business purchases only. For example, entertaining clients, colleagues, and employees over lunch is valid, but solo personal meals should stay on your personal card.
- Understand your rewards program: Most owners choose a rewards program that works for them. For example, owners who travel for business frequently should look for a rewards program that offers good travel perks. Understand how the program works, then make a plan to get the most out of the rewards.
- Get familiar with fees: Know which fees your business credit card may incur, and budget appropriately. Annual fees are easy to plan for, but read the fine print to see if you should expect any others.
- Know your interest rate: Credit card interest can be high. If you don’t pay within the grace period, you could rack up significant additional debt. Find out whether the interest rate applies to the full or unpaid balance, and determine how much that will add to your debt.
- Use the financial features: Most business credit cards come with financial management tools. Some may integrate into your accounting software. Take advantage of these features. They’ll help you keep a close eye on your spending, as well as your rewards and other perks.
A business credit card can provide short-term funding solutions for any type of taxable-income-generating enterprise. Whether you have a corporate empire or a side hustle driving rideshares, you can benefit from having your own card.
With careful management and careful expense tracking, your business credit card is a great resource. It’s a smart way to keep business and personal finances separate. You’ll also earn perks to stretch those profits even further. Now that you know how to qualify for a business credit card, the only thing left to do is determine which ones will best suit your business.