Using a business credit card offers numerous benefits. Small business owners, sole traders, side hustlers, and larger company owners can all leverage it to secure a credit line for effective day-to-day financial management. A business credit card also clearly distinguishes between business and personal expenditures, simplifying tax-related matters.
Numerous add-on benefits make applying for new business credit cards a valuable process. These include enticing sign-up incentives, opportunities to accumulate valuable rewards tailored to business-related categories, and the possibility of accessing account management utilities designed to streamline the life of a small business owner.
Read below to discover the benefits of a business credit card; new businesses and more established company owners can access by applying for a credit card for business.
The Business Platinum Card® from American Express
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Who Can Qualify for a Business Credit Card?
Concerns often arise regarding the eligibility criteria for obtaining a business credit card. Some business owners question whether they need to establish a limited liability company or formal incorporation to access a company credit card.
The good news is that such business formalities are not necessary. Sole proprietors also can open and use a business credit card. Regardless of your occupation—whether you're a part-time ride-share driver, a freelance website designer, or a traditional brick-and-mortar business owner with a team of employees—you can apply for a small business credit card to assist in managing your business operations.
What Are the Different Types of Business Credit Cards?
Before submitting a business credit card application, conducting thorough research is essential to pinpoint the ideal business credit card that suits your needs. The best business card for you will hinge on various factors, such as your credit score, available benefits, and spending patterns. To help you search for the best card for your business, you should have a clear idea of the type of credit card benefits that will be most valuable to your company.
Secured Business Credit Cards
For business owners new to the world of credit or needing to repair their credit scores, obtaining a line of credit for their business can be daunting. A secured business credit card serves as a viable solution.
In contrast to business credit cards designed for those with good or excellent credit, secured business cards are more accessible. But they may also offer fewer advantages and ask for a security deposit.
But, if you use the card to build up a record of responsible credit line behaviors, you can progressively enhance your credit score. And eventually graduate to unsecured business credit cards that offer superior terms and benefits.
Cash-Back Business Credit Cards
Cash-back business credit cards provide incentives for your routine business expenditures. There are two primary types of cash-back structures available:
- Flat-Rate Cash-Back Rewards: Certain business credit cards offer a consistent cash-back reward rate on all purchases. This uncomplicated rewards system is ideal for businesses with relatively balanced spending across various categories.
- Category-Specific Cash-Back Rewards: Some new business credit cards feature elevated cash-back rates in specific business-related categories, accompanied by a standard cash-back rate (typically around 1%) on all other transactions. These cards benefit businesses that make substantial expenditures in particular areas, aligning their rewards with spending patterns.
A Business Credit Card for Travel?
If a significant portion of your business expenditures is dedicated to travel, a business credit card for travel can prove invaluable. Most business travel cards offer points or air miles as rewards for your card transactions. Depending on the specific travel rewards credit card you choose, you can even earn higher rewards for expenses related to travel, such as airfare, lodging, and dining.
For small-business owners who prefer to stick with a single airline or hotel chain during their travels, co-branded travel credit cards provide enhanced benefits to reward your loyalty.
Airline-specific cards like the Delta SkyMiles American Express Card or hotel cards like The Marriott Bonvoy Brilliant American Express Card allow you to accumulate rewards on all your spending, with the bonus of higher rewards for transactions made with their affiliated brands. Additionally, these cards often come with exclusive brand-related perks.
On the other hand, general-purpose travel credit cards offer flexibility, allowing you to avoid commitments to a specific airline or hotel chain. For instance, The Business Platinum Card from Amex provides an impressive 5 points per dollar on flights and prepaid hotel bookings through amextravel.com.
What Credit Score is Necessary to Qualify for a Business Credit Card?
Most business credit cards typically mandate a credit score falling within the good-to-excellent spectrum, corresponding to a FICO credit score ranging from 670 to 850.
If your credit score is below this, options are still available. However, it's worth noting that business credit cards designed for those with poor to fair credit primarily focus on aiding credit building rather than offering the same rewards and features found in other credit card offerings.
How to Find the Best Business Credit Card for Your Company?
Once you've determined the type of business credit card that suits your needs, comparing the available options within that category is essential. Here are vital factors to consider when evaluating small-business credit cards:
Credit Score Requirements
It's advisable to be aware of your credit score before you begin applying for a business credit card to ensure it aligns with the card's eligibility criteria. Most cards require a good-to-excellent credit score. While there are options for small-business owners with fair credit, applying for a card with stricter credit requirements can result in a denial and negatively impact your credit score due to a hard credit inquiry.
Welcome Offer or Sign-Up Bonus
Credit card issuers often entice potential cardholders with valuable sign-up bonuses or welcome offers. Typically, once you meet a specified spending threshold on eligible purchases within a predetermined timeframe, the card issuer rewards you with this bonus.
Annual Fee
While business credit cards are available with no annual fee, others may come with more substantial rewards and features, such as complimentary airport lounge access and anniversary credits, but at the cost of a yearly fee. Assess whether the rewards and benefits offered by the card align with your spending habits and whether they justify the annual fee.
Rewards Program
Business credit card rewards programs can be straightforward, particularly when utilizing a card offering a flat rate. However, for those seeking to maximize their cash back, points, or miles earnings, it's crucial to consider the intricacies of reward structures.
This entails remembering which spending categories yield the highest rewards and being mindful of associated terms and conditions. Additionally, some programs have expiration policies and limitations on how rewards can be redeemed, affecting the card's overall value.
Annual Percentage Rate (APR)
A credit card APR represents the interest rate applied to outstanding balances that aren't paid in full by the due date. Paying your card balance in full by the due date each month prevents you from accruing interest charges on your purchases.
Introductory 0% APR Offer
Certain business credit cards extend an introductory 0% APR offer to new cardholders, enabling them to make interest-free payments for a specified duration, often ranging from 12 months or more.
Business Card Benefits
Examine the card perks that align with your business needs. You may receive a limited or unlimited number of free employee cards, depending on the card. Top small-business credit cards often allow individual spending limits to be set for each employee and provide expense management tools to streamline the tracking of expenses.
Are There Any Other Credit Card Fees?
Before committing to a business credit card, familiarize yourself with any additional fees. These may include charges for late payments, cash advances, foreign transactions, balance transfers, and penalty APRs for late payments. Understanding these fees helps you make informed decisions about card usage and potential costs.
Comparing business credit cards with a thorough evaluation can assist you in selecting the one that best complements your financial goals and business needs.
How to Apply for a Business Credit Card?
Once you have identified the specific business credit card for travel or cash back you wish to apply for, you're nearly prepared to begin the application process.
However, it's beneficial to have essential information readily available to streamline the process. Below, you'll find a list of information you may be required to provide during the application:
- Business Name & Address: Not everyone may possess an official business name. If you are a sole proprietor, you can use your name instead of a formal "doing business as" (DBA) company name. You also need to specify the physical location of your business, which can include your residential address if you operate your business from home.
- Annual Business Revenue: Report the total annual income generated by your business.
- The Type of Business: Specify your business's legal structure, which commonly includes options like a sole proprietorship, Limited Liability Company, or a corporation.
- Tax Identification Number: Depending on your business type, you must provide your Social Security Number (SSN) or your [Employer Identification Number (EIN).](https://www.irs.gov/businesses/small-businesses-self-employed/employer-id-numbers#:~:text=An Employer Identification Number (EIN,Generally%2C businesses need an EIN.)
- Number of Employees: When completing a credit card application, consider yourself an employee, even if your business consists solely of yourself.
With this information at your fingertips, you can expedite the application process for your chosen business credit card, making the experience smoother and more efficient.
What Happens After You Apply for a Business Credit Card?
Upon submitting your application for a business credit card, the card company will initiate a review of your credit report to assess your creditworthiness in terms of your ability to repay any potential debt. This assessment triggers a hard credit inquiry that is reported to the three major credit bureaus, leading to a temporary decrease in your credit score.
The decision-making process can be swift, sometimes concluding in less than a minute, especially when your provided information is readily verifiable. In the event of a denial, there is no need for concern, as you can take steps to address a rejected credit card application. Additionally, you can apply for an alternative card that better aligns with your credit profile.
If your application for a business credit card is approved, then you can expect your new credit card to arrive by mail within 10-12 business days. Some issuers may offer expedited shipping for premium cards, ensuring a faster delivery.
By effectively managing your credit card, maintaining a low credit utilization rate, and making your payments on time, you'll be on the path to enjoying the numerous advantages of a new business credit card. You'll also take proactive steps toward establishing and strengthening your business credit profile.
