In the early days of starting a new business, it can be easy to confuse your personal and business finances. You can finance your business out of your own pocket, and any business profits may become your personal income.
However, it’s important to separate your personal finances from your business. One way is to apply for a business credit card.
A dedicated business credit card makes it easier to track your business expenses. It also gives you some flexibility if you need short-term financing, for example. B. If you have bills due and are still waiting for the customer to pay the bill. You can also earn points and cash back and take advantage of additional cardholder benefits – on essential business purchases only.
As a bonus, business credit card interest is tax-deductible when used only for business purchases. If you think a business credit card is right for you and your business, read on to learn how to get a business credit card.
How do business credit cards work?
Business credit cards often look very similar to personal credit cards in terms of perks and rewards structures, but many offer higher spending limits and enhanced rewards for specific business categories. Business credit cards also include business-focused features and tools that allow you to track spending across categories or employee cardholders. Most business cards leave expense information available for download and import into the accounting software your company uses.
Your company does not need an Employer Identification Number (EIN) to apply for a business credit card. An EIN is sometimes called a business’ tax identification number; it’s somewhat similar to an individual’s Social Security Number (SSN). Especially for companies without an established credit history, the SSN and the owner’s credit history are often used to determine creditworthiness. However, if your company has an EIN, you can provide it when you apply for a business card.
Note that business credit cards usually require a personal guarantee. This means that you, as the business owner, are personally responsible for repaying the amount charged to the card. If you are late or miss a payment with a business card, this negative information could show up on your personal credit report and affect your personal credit score.
One difference to note between business and consumer cards is that consumers enjoy a number of protections under the CARD Act 2009 – card issuers are now required to notify consumers in advance, for example, of increasing the APR on an account – business cards are not subject to the same protection laws.
How to Get a Business Credit Card
Applying for a business credit card is easy, but like any financial decision, it requires careful research. Before completing the online business credit card application, there are a few key points to keep in mind.
Determine your eligibility
Your business doesn’t need to be established in any way to qualify for a business credit card, and the size of your business has nothing to do with basic credit card qualification. You can apply for a business credit card even if what you want to pay with your credit card is for a part-time job, or if you’re the sole owner of a small freelance business.
However, that doesn’t mean you’re guaranteed to get the business card you’ve always dreamed of, with its many benefits and rewards. The first step in applying for a business credit card is to determine which card you have a reasonable chance of getting. If your business doesn’t have an established credit history, your personal credit history can make this determination.
The most important factor when applying for a credit card is your credit history or that of your company. As a business owner, credit card companies will almost always want to check your personal credit score, so make sure you maintain healthy spending habits on your existing personal accounts. This ultimately determines which cards you may be approved for.
Greater equity and business income can also help your business qualify for a better card. If you’re just making a few dollars from a side hustle, don’t expect to get approved for a high-end business credit card with tons of benefits. You may need to demonstrate a substantial income to get the best business cards and the highest line of credit.
Collect required information
In addition to the personal information you would normally provide for a credit card application, a business credit card application will ask for proof of your company’s existence. Details may include your business name, registered address, annual revenue, number of employees, estimated spending needs, and Employer ID number (if your business does not have an EIN, your own social security number can usually be substituted).
The bank or card issuer will ask you to complete the above information about the nature of your business and may ask you additional questions during the verification process. Be honest and provide all requested documents. Even if your new business still has little or no current revenue, it’s best to disclose this and provide a business plan showing expected revenue.
It may be helpful to look for a card offered by a bank you have a relationship with – this can make the application process more convenient, efficient and successful.