4 min
Business Credit Card Basics for Entrepreneurs
Getting a business credit card for a new business, startup, or side hustle is easier than many people think. You don’t need a business plan or even existing business income. If you have a good personal credit score (690+), you can qualify for most business credit cards. Here’s how you can get started.
Summary
Getting a business credit card for a new business, startup, or side hustle is easier than many people think. You don’t need a business plan or even existing business income. If you have a good personal credit score (690+), you can qualify for most business credit cards. Here’s how you can get started.
💳 Research and Choose a Business Credit Card
The best business credit cards for startups offer flexibility along with perks and bonuses. When choosing a card, consider your business spending habits. If you anticipate high upfront costs, a business credit card with a 0% introductory APR can help with financing. For those planning business travel, a travel rewards card can provide miles, hotel points, and perks like lounge access. If you're unsure about your expenses, a no-annual-fee cash-back business card with a welcome offer can be a good option. Most business credit cards require a minimum FICO score of 690. If your score is lower, secured business cards or those designed for fair credit may be your best options.
Takeaways:
• Choose a card that matches your business expenses, whether it's for travel, big purchases, or flexible rewards.
• A FICO score of at least 690 is required for most business credit cards.
• Secured business cards are available for those with lower credit scores.
Key Terms
• 0% Intro APR: A promotional period where no interest is charged on purchases.
• Cash-Back Business Card: A card that offers a percentage of purchases back as a rebate.
• FICO Score: A credit score used to determine creditworthiness, typically ranging from 300 to 850.
📄 Gather Your Application Information
Applying for a business credit card requires both personal and business details. You'll need to provide a tax ID number (or use your Social Security number if you don't have one), your business name, and its legal structure (sole proprietorship, LLC, corporation, or partnership). Additionally, the application asks for your business address, phone number, industry type, and total annual revenue. If your business is new and has no revenue, you can list $0 on the application. You must also provide personal details such as your name, date of birth, and Social Security number for yourself and any major business owners (owning 25% or more).
Takeaways:
• You can apply for a business credit card using your Social Security number if you don’t have a business tax ID.
• If your business has no revenue yet, you can list $0 on the application.
• You must disclose ownership details if anyone owns 25% or more of the business.
Key Terms
• Tax ID Number: A number assigned to businesses for tax purposes; often the EIN (Employer Identification Number).
• LLC (Limited Liability Company): A business structure that offers personal liability protection.
• Annual Revenue: The total income generated by a business before expenses.
⚖️ Understand the Personal Guarantee
Most business credit cards require a personal guarantee, meaning you're personally responsible for any debt if the business cannot pay. This liability applies even if your business is legally structured to limit personal responsibility, such as an LLC or corporation. If you're uncomfortable with this requirement, you may consider corporate cards like Ramp or Brex, which base approvals on business financials rather than personal credit. However, these corporate cards typically require a minimum of $50,000 in a business bank account and are not available to sole proprietors.
Takeaways:
• A personal guarantee means you’re personally liable for any unpaid balance.
• Corporate cards (such as Ramp and Brex) may be an option for businesses with strong financial backing.
• Sole proprietors cannot apply for corporate cards.
Key Terms
• Personal Guarantee: A legal agreement making an individual personally responsible for a business's debt.
• Corporate Credit Card: A credit card designed for established businesses that qualify based on financial health.
• Liability: The legal responsibility to repay a debt.
🏦 Start Building Business Credit
Opening a small-business credit card helps establish a business credit history. Similar to personal credit, a strong business credit score can result in better loan terms, improved supplier relationships, and better business insurance rates. Most business credit cards report activity to business credit bureaus like Dun & Bradstreet. Making on-time payments will strengthen your business credit, while missed payments can negatively impact both business and personal credit scores.
Takeaways:
• Business credit is essential for better financing opportunities and supplier relationships.
• Most business credit cards report to business credit bureaus.
• Late payments can negatively impact both business and personal credit scores.
Key Terms
• Business Credit Score: A numerical representation of a business's creditworthiness.
• Dun & Bradstreet: A major business credit reporting bureau.
• Supplier Credit: A business-to-business agreement where goods or services are provided upfront with payment due later.
Conclusion
Getting a business credit card for a new business is simpler than many expect. By choosing the right card based on spending needs, gathering the necessary application details, understanding personal guarantees, and making responsible payments, entrepreneurs can successfully build business credit. This foundation can lead to better financial opportunities and a more stable business future.
