5 Tips For Getting A Small Business Credit Card For A New Business

by | Jul 21, 2022 | Billsaver, Understanding Credit Cards

If you are starting a small business, it is important to have available capital and credit lines to avoid cash flow problems as you grow. Often, new businesses do not have much cash on hand, so it is a good idea to get a business credit card. It is not wise to use your personal credit card for your business, as you will not want to be personally liable for any business expenses.

Obtaining a credit card for your business may sound difficult, but it is not that challenging, and it will help you simplify your business, track your business expenses and provide some additional benefits. These tips will help you get a small business credit card.

Check Your Personal Credit

The first thing you need to do is check your personal credit rating. Even though the line of credit is for your business and not your personal finances, you still need to know your personal credit score, as potential creditors will be using it as a factor in deciding whether you can run a business and pay back your debts on time. Also, even though your business will have its own corporate entity, you will need a person to represent the company’s credit card account. You will typically need a credit score of at least 700 to get a credit card for your small business.

Register Your Business

Next, you need to register your business with your state. You will want to fill out the paperwork your specific state provides so your business is official. At that point, you will be able to apply for credit cards on behalf of your company. It is neither costly nor time consuming to register your business.

Apply for a Small Business Credit Card

As soon as your business is registered with your state, you can submit business credit card applications. You will need to include the owner’s name, business address, employer identification number (EIN) and the type of business, such as sole proprietorship, partnership or corporation. Since your business is new, you will also need to include your personal household information because your company will not have an income history. Your personal income and credit score will play a large role in whether you can get a credit card for your business. As your business accumulates a financial and credit history, the company may be able to obtain lines of credit. The process is similar to building your personal credit score. Once you have proved you can pay back your debt on time, your credit score will go up, and you will be given more credit options.

Do Not Mix Personal and Business Transactions

It is imperative that you do not mix your personal and business transactions, even though you may have to list your personal information when applying for a small business credit card. If you do mix transactions, it can cause a major headache when you file taxes, and will create money management issues. Thus, do not buy your lunch with your company account or pay for personal items with your company credit card. Keeping your personal and business expenses separate will help you avoid issues with the IRS.

Employee Credit Cards

You should only get additional cards for your employees if it is absolutely necessary. It can be risky to get additional cards for your employees, as you may have to deal with unnecessary or even frivolous charges if an employee does not properly manage the company’s money. You will also have to manage multiple credit cards, which can be time consuming and stressful. Thus, many owners have one credit card, as it allows them to easily manage accounts without worrying about what employees are doing. However, there are times when it may be logical to give an employee an additional card, but this should be handled on a case-by-case basis.

Getting a credit card for your small business will help you manage money and give you some options when dealing with cash flow issues. Just as you would with your personal credit card, examine each card’s interest rates and fees before applying. Also strive to pay off the total balance every month to avoid interest costs. This will help you stay out of debit and build a better business credit score.