The Complete Guide To How To Get a Business Credit Card

When it comes to financing, small business owners need all the options they can get both long-term, and short-term, for purchases big and small. A business credit card is one such financing tool; fortunately, it’s also one of the easiest to obtain. It’s also one of the best options for building credit when your business is just starting out, and financing choices are limited.

This guide will cover how business credit cards function, how they can be useful to small business owners, and the process of applying for one. 

What Is a Business Credit Card?

A business credit card is exactly what it sounds like, a line of credit for all of your business’s expenses. They’re not just for big corporations either. Any size business can have a credit card: LLCs, partnerships, sole proprietorships. It doesn’t matter if you have one employee or 50 (though some companies will charge a fee for each card you obtain for staff). Business credit cards offer all sorts of advantages for businesses needing short-term financing options.

Why You Need a Business Credit Card

Think about how you use your personal credit card. Many of us make the majority of our purchases with a credit card these days as it helps us track our expenses and earns us valuable points or cash back bonuses. The same can be true for a business credit card, though they have many of the same burdens that always come with easy credit. Be aware of your balance and only make purchases when you know you can pay them off.

Advantages

When used effectively, a business credit card can be a lifesaver for small business owners. So long as the balance is regularly paid off, the card is essentially interest-free financing. These are a few of the other advantages that come with applying for a business credit card. 

Financial Flexibility

Sometimes you only need a little cash to purchase equipment or materials while you wait for an outstanding invoice to be paid. For these smaller transactions, applying for financing isn’t feasible or worth your time. A business credit card provides you with the flexibility to make purchases throughout the month and pay them off at the end.

Easier Record for Keeping

Keeping personal and business expenses is a nightmare for small business owners using a personal credit card. Having a separate card that’s used for all business transactions helps with tracking expenses at the end of the month.

Boost Your Credit Rating

The first few years of owning a small business can be challenging, not least because many banks won’t lend to businesses they don’t consider “established.” When no one will lend to you, it’s harder to establish the business’s credit score, putting you in a Catch-22 cycle of being denied credit because you haven’t successfully repaid any loans because no one will lend to you. Your business is more likely to be approved for a credit card, which you can use to establish its credit history. 

Perks

Similar to personal cards, business credit cards often earn points, cash-back, or other sorts of perks. At the end of the year, these can turn into free flights or hotels, which help to limit your out-of-pocket expenses. So long as you use the company checking account to pay off the card each month, these perks are essentially free money.

Disadvantages

There are some downsides to be aware of when using a business credit card, though they’re usually offset by the benefits of flexible financing.

Eligibility is Affected by Your Personal Credit Score

Credit card companies have little to go off of when assessing the eligibility of your small business. As such, they rely on the owner’s personal credit score to determine the likelihood of repayment. Bankruptcies, collections, and missed payments that have nothing to do with your current business can come back to haunt you when applying for a business credit card.

Any Debt is the Owner’s Personal Responsibility

If the business is unable to meet its financial obligations for the month, the credit card company may go after the owner’s personal finances. Business credit cards also may lack the consumer protections offered by personal credit cards, like zero liability for fraudulent purchases.

Higher Interest Rates

For big purchases or long-term financing, business owners are better off seeking traditional loans with lower interest rates. Business credit cards should only be used for purchases that can be paid off in the next month or two, as the higher interest rates that come with any credit card will offset the previously mentioned advantages.

How To Get a Business Credit Card

Applying for a business credit card is fairly simple and not all that different from choosing a personal credit card. You want a card that fits your business’s needs and can be used efficiently by your employees. Be aware of the interest rate, penalties, and any other fees that come with the card though. 

So how do you get a business credit card?

Research the Cards

Different companies offer different interest rates, perks, and credit limits. Look for a credit card that fits the needs of your business and consider how you’ll use the card to help it grow. If perks like free flights or hotels will go unused or need to be given away at the office Christmas party, you may be better off applying for a card without all those bells and whistles.

Determine Your Eligibility

Applying for a business credit results in a hard credit check, which temporarily lowers your credit score. That’s not something you want to do a few times a year only to receive a rejection letter. Don’t apply for benefit-heavy cards unless your business has the income statements and high credit score to ensure approval.

So how long should I wait between applying for credit cards? A good rule of thumb is 90 days, but to play it safe and keep your credit score up, waiting six months is a better plan.

Business Credit Card Requirements

Unlike with a personal credit card, applying for a business card isn’t as simple as writing down your social security number and annual income. The card issuing company will want to know where your business is located, how many employees you have, your annual revenue, and your annual spending; they’ll want to verify all of this information before approving you.

Why Business Credit Cards Aren’t for Everyone

While business credit cards have numerous advantages, they’re not a cure-all for all of your financing needs. If used for big purchases, they can saddle you with high-interest payments that can take months or years to pay off. Employees can misuse company credit cards and, as the owner, you can be held personally responsible for those debts. For substantial financing, traditional loans still have a role to play.

LendThrive offers fixed-rate loans of up to $150,000, which can be used to expand your business or finance a growth opportunity. You can be approved in as little as 24 hours and have the money in your company bank account the following business day. To learn more about how LendThrive can help your business grow, contact us or fill out a loan application on our website today!