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To qualify for a small business credit card, you need to run a business while also having the personal credit history necessary to be approved for a new line of credit. Why apply for one of these cards? They offer business owners rewards and features you won't find with consumer-focused cards—and which can help you run a more efficient company.
A wide range of business entities qualify for small business cards. They include sole proprietorships, limited liability corporations (LLCs) and other types of business entities. In fact, you can qualify for a small business credit card without incorporating your company in any way. For example, you can receive a small business credit card even if you're just "doing business as" (DBA), which is operating under an unincorporated name. This opens up the possibility of obtaining a small business credit card for part-time activities such as driving for a ride-sharing company or performing freelance work from home.
How Small Business Credit Cards Work
A small business credit card works much like other cards marketed to consumers, but with a few key differences. First, small business cards offer features designed to assist companies in managing their finances. For example, many small business cards provide reporting features that allow companies to categorize and track expenses, produce reports and prepare their taxes. And while consumer cards may have rewards programs focused on household expenses, small business credit cards typically offer rewards that give cardholders the most value for common business purchases such as office supplies, advertising and telecommunications services. Likewise, many small business credit cards provide benefits targeted at business needs, such as discounts and fee credits for business purchases.
Small business credit cards are also exempt from several consumer protection provisions of the Credit CARD Act of 2009. However, most card issuers voluntarily choose to have their small business cards comply with nearly all of the same laws that regulate consumer cards.
Otherwise, a small business card works just like a consumer card. Lenders evaluate applicants using their personal credit history and credit score. Once the lender approves the business owner, he or she becomes the primary cardholder and is personally responsible for repayment of all charges, including any made by employee-authorized cardholders. As with consumer credit cards, the primary cardholder can also earn rewards for spending in the form of points, miles or cash back. But while some small business card issuers report account and payment information each month to consumer credit bureaus, others do not.
What Do I Need for a Small Business Credit Card?
Another difference between small business credit cards and those marketed to consumers is the application process. When you apply for a small business credit card, you'll need to provide both your personal information and information about your business. For example, the lender will ask you to supply an employer identification number (EIN), although you can submit your Social Security Number (SSN) if you are a sole proprietor and don't have an EIN. They'll also ask what your title is with the company, such as owner, president or partner, and possibly questions about the nature of your business, such as how long it's been operating, what its revenue is, and how many employees it has.
There's no need to worry about whether you have a business credit score before you apply. On the other hand, corporate cards made for medium and large companies, nonprofit organizations, and government institutions will rely on the credit history of the organization that applies for the card. And as with consumer credit cards, you'll be asked to provide your personal guarantee of repayment when you sign the application.
How Do I Get a Business Credit Card?
Follow these steps to find a small business credit card that works for you:
1. Check your credit
The first step to applying for a small business card is to check your personal credit history and credit score so you can estimate whether you may be approved for a new account. You can get a free credit report and FICO® Score* from Experian if you don't already know where you stand.
2. Research the market for small business credit cards
While there aren't nearly as many small business cards as there are consumer cards, numerous products available offer a wide variety of features, benefits and rewards. Most small business credit cards are designed for business owners with good or excellent credit, although some cards are available for applicants who have had credit problems. Many premium rewards cards offered to small business owners require an annual fee, but most small business card issuers also offer no-fee alternatives, often without rewards.
Once you've found one or more cards that appear to have the features and benefits you need, take the time to examine the card's terms and conditions. As with consumer cards, small business credit cards display each card's key rates and fees in a standardized format that's easy to read on your bill.
3. Complete the application
Once you choose a card, you can complete and submit your application, and you may receive instant approval. If you aren't quickly approved for a new account, you can contact the card issuer to request a decision, or wait for the card issuer to inform you of its decision, usually by mail. The card issuer may approve you for a new account, deny your application or ask for additional information before making its decision. For example, they may ask you for documentation proving your business address is legitimate, such as a lease agreement.
The good news is it's not difficult to qualify for a small business card if you have your own business and good personal credit. By understanding how small business cards work, you can choose the best card for your company's needs.