The Ultimate Guide to Business Credit Cards

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When you’re starting a small business, you already know that you’ll need finances to facilitate the first stages of growth. Getting business credit cards helps you to establish a good business credit that can open paths for loans. Business credit cards make loan applications and any financial aids easy to get.

According to a survey, up to 46% of small business owners use business credit cards, and 7% of those who don’t have the cards plan on getting them in the coming year. Those businesses benefit from generous spending limits, low-interest rates, and significant rewards programs.

A business credit card offers you an opportunity to grow your business’s financial history. You find an easy time keeping business finances separate from personal, thus mitigating cash flow issues. 

If you’re starting a business and want to learn everything about business credit cards, you’re in the right place. Keep reading to learn.

What Is a Business Credit Card?

Before we go to a business credit card’s nitty-gritty details, you must start by understanding the basics.  What’s a business credit card, and how does it differ from a personal one?

Business credit cards have nothing big that differentiates them from regular credit cards. However, unlike regular cards, business credit cards are designed for business purposes and not for personal use. You’ll use these cards to carry out business purchases.

Benefits of Getting Business Credit Cards

So, why do you need a business credit card when you can still use the regular one? There are many benefits that small businesses get from credit cards that they won’t get from regular ones. 

Here are the benefits of having a business credit card.

Helps Separate Personal Finances From Business Finances

With a small business credit card, you have an easy time separating your business spending from personal expenditures. You won’t use the money meant for your business to pay for a vacation and won’t use your personal finances to buy office equipment. 

With all the finances kept separate and used separately, you can have an easy time tracking your expenses on both sides. Things can get messy when you mix business expenses with personal expenses, especially when you need to file taxes.

Having your personal finances kept separate from your business finances is also an excellent way to have a ‘corporate veil.’ This way, you’ll protect yourself and your assets in the event of a legal issue that affects your business. You won’t be personally liable for any debts that your business accrues or any lawsuit issues.

You Can Build Credit

When you’re starting a business, one of the things to think of is building your business line of credit to help you acquire financing in the future. Unfortunately, up to 72% of small business owners don’t know their credit scores. Some don’t even know they have a business credit score.

Good business credit scores help you get loans with lower interest rates. You need a business credit card to help you establish good credit for your business and improve your scores.

Having your business card report on your personal credit account will affect your credit utilization ratio. You may find yourself using more than 30% of your credit limit, which in turn drives your personal score down. 

Since business spending is usually large, you won’t want them reflecting on your personal credit and affecting your debt-to-income-ratio.

Improve Your Purchasing Power

Since you’re going to spend huge amounts on business expenses and transactions, you’ll improve your credit limits. With time, you’ll manage to grow high credit limits which in turn increase your purchasing power. Some credit card issuers may set a credit limit based on your business revenue, while others give you leeway.

If your business card has a generous credit limit, you’ll manage to improve your spending power. This is essential, especially when you have high expenses. You can buy expensive business equipment and skyrocket your business operations.

Unlock Bonuses and Rewards

If you get a business credit card, you’ll unlock a lucrative sign-up bonus you can redeem for free flights and hotel bookings. You won’t get such rewards with your personal credit cards. If you’re going to travel a lot for business trips and events, these rewards can come in handy.

Business cards also earn you a higher number of reward points than a personal card. You’ll redeem these points for either cash back or travel expenses. The cards also unlock special perks such as insurance and purchase protection.

You not only get rewards for your business spending but might also unlock tax deductibles. The card is an excellent way to get some return on your business investment. Make sure you carry out your credit card payments on time to earn these rewards.

Fast and Easy Access to Business Financing

If you’re running a small business, you’re going to need a lot of money to purchase equipment, expand your business, and other expenses.  

A business credit card helps small business owners qualify for financing and pay lower interest rates. You’ll not undergo a complicated loan application process or high-interest rates with your credit card.

What’s more, you can eliminate monthly interest if you pay your credit card balance on time. Go through the straightforward path of getting your business credit card and unlock your chances of getting instant credit. 

With readily available cash, nothing will stop you from growing your business.

Requirements for Getting Business Credit Cards

The application requirements for a business credit card are not different from that of a regular credit card. So, if you have a personal credit card already, you’ll find everything simple and straightforward. The only difference here is that the questions will be more focused on your business and not you.

Here is a list of things you’ll need to prepare before starting the application process for a small business credit card.

  • Your business’s legal name
  • The type of business you’re running
  • Your business category
  • Employer identification number
  • Years you’ve been running the business
  • The address of your business
  • The number of employees you have at the application time
  • Your full name and home address
  • Both your personal and business revenue annually
  • Outstanding business and personal debt
  • Estimated business expenditure monthly

Make sure you gather all this information and the required documentation before you start the application. You won’t have to take breaks in the middle of the application to find something you forgot to include. Also, make sure the information you provide here is accurate.

How Can a Small Business Get a Business Card?

You should start by understanding all the requirements of a business card before you start your application. Once you’re done with that, the whole application process will be simple. Here is a step-by-step guide for any small business that’s eyeing a credit card.

Choose an Appropriate Business Card

Business credit cards are not a one-fit-all since different options in the market fit different business needs. 

You must figure out the right one for your business needs before you start the application. If you’re clueless about this, get matched at NAV to help you find what suits your business.

Keep the following features in mind when choosing your business card.

  • The reward structure of the credit card and how they can benefit your business
  • Consider the annual fees you’ll have to pay for the card (if any)
  • Consider cards that come with a 0% intro APR period
  • What are the foreign transaction fees that come with your card?
  • Determine the card’s credit reporting as it determines your score

Consider both short and long-term business goals when weighing options for your business credit card. Consider the cards you qualify for and the rewards that come with them. 

Consider Your Credit Score

It’s important to know where your credit score stands when applying for a credit card. Your personal credit score will play a crucial role during the application process for your business credit card. Your personal credit score will determine whether you’ll qualify for the card you’re interested in getting or not.

Based on your score, make sure you only apply for cards that are within your range. This way, you minimize the chances of rejection and save time in the process.

Start the Application Process

Some credit card issuers make this process easy by allowing you to apply online. Whether you’re applying online or in person, you’ll need to provide the same set of information. Consider all the credit card application requirements outlined above and all the needed documents when making your application.

Make sure all the details you provide during the application time are genuine and accurate. Any mistake will come back to haunt you when you apply for a loan, as the lenders may fail to pull out your credit information. 

Fill out your personal and business address correctly, as well as your revenue calculation.

Check the Personal Guarantee

A personal guarantee is necessary when applying for a business credit card. It acts as an assurance that you’ll still honor your business debts even if it fails. This doesn’t insinuate that your business will fail, but you can’t close your mind to the possibilities of your business not succeeding. 

Remember, credit card companies also need to protect their business. The only confidence they’ll have in you is through a personal guarantee. 

Always go through this guarantee on the credit card company’s website or request customer care to give you one. Clarify anything you don’t understand to avoid any misunderstanding in the future.

Wait for Response

Once you’ve filled the application and followed all the protocols, relax and wait for a response. Your wait time will depend on several factors like how the company works and your credit score. It will also look at the number of credit cards you’ve applied for in the past six months.

You can wait for 10 to 14 days for the processing time to complete. If you make an online application, you may get a response immediately if you qualify. The company will email you the exact day to pick your business credit card.

If they deny you the card, they’ll notify you before this time elapses. They’ll also tell you the reason for denial so you can know what to change in your next application. This way, you can improve your chances of future approval or know what to do when applying to a different company.

Start Using Your Card

With all the benefits that come with credit cards for businesses, theirs is no denying that you can’t wait to start using one. 

Once you receive your card, you should activate it and start enjoying your business purchases. However, don’t get too excited to the point that you don’t watch how you use the card.

Even if you get a huge credit limit, make sure you manage your business credit card properly. Don’t spend on personal things and avoid buying what you don’t need.  Also, pay your balances on time and start growing your business credit card score.

Now You’re Ready to Get a Business Credit Card

If you were clueless about business credit cards, now you have something to get you started. Many businesses are reaping big with their credit cards, and you don’t want to remain behind. Before you decide, consider the benefits and drawbacks of having a business credit card and choose wisely.

If you think the information here is still not enough to increase your understanding of business credit cards, don’t worry. You can still find all the information you need concerning credit cards in other articles on this site.

You can also educate yourself with essential tips for running and growing a small business. Check out more of our content for additional information.

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