If you're launching a startup or managing a business that only recently got up and running, you may be thinking that a business credit card is out of reach. After all, you have little to no business credit history to show a lender. Don't worry. With a good personal credit record, you can qualify for business credit card.
Here's what you need to know to meet the requirements.
What types of businesses qualify for credit cards?
All kinds of small businesses, including corporations, LLCs, and sole proprietorships, qualify for business credit cards. That means everyone from artists and dog walkers to heads of accounting firms and digital marketing agencies can apply. You don't even need an office or a formal business setup – home-based businesses and freelancers count too.
How will lenders evaluate me without a business credit history?
If your business is brand new or still young, banks won't be able to rely on a record of past bill payments to determine creditworthiness. Instead, they will look at your personal credit history, since you are the owner of the business. Be sure to review your personal credit report and correct any errors before you apply for a business credit card.
The credit card application will ask for your personal income and the type of business you run, as well as the revenue and expense figures of your business, if it's already begun operating.
Be sure to review your personal credit report and correct any errors before you apply for a business credit card.
What are my financial obligations as a credit card holder?
Obtaining a business credit card usually means accepting personal liability for all charges and debts on the card. As Nerdwallet points out, you'd be on the hook even if your business fails.1 That's a financial risk you should be aware of when you apply for a card. The risk is balanced by the opportunity to build a good business credit history by managing your spending well and paying your credit card bills on time. This can help you later on if you want to apply for a small business loan or line of credit.
Generally, banks will only accept business credit card applications from someone who qualifies as an authorized officer of the business. An authorized officer has the legal right to borrow from financial institutions on behalf of the business, as noted in CardRatings.2 Owners of the business automatically qualify as authorized officers, and some lenders may also accept card applications from key board members, such as the treasurer or vice president.
The application review and approval process can take anywhere from a few minutes to several weeks, depending on the card issuer's policy.
A business credit card can help you track and manage your business spending, as well as build a credit record that may help you qualify for a loan when it's time to grow your small business.
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
Sara Rathner, “Who Can Apply for a Small-Business Credit Card?" Nerd Wallet, published February 8, 2019. Accessed August 5, 2019.
Cardratings.com, “Small business credit cards 101," published May 2, 2019. Accessed August 5, 2019.
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