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

August 5, 2014, Written By Lynn Oldshue
small business owner in front of store

When you operate a small business, it is important to use all your available capital and lines of credit to avoid cash flow problems. Frequently, new businesses don’t have a lot of cash on hand, making it beneficial to obtain a credit card. Since businesses generally have large expenses, a small business owner does not want to be personally liable for the legalities of the business world. So it is not a good idea to use your personal credit card to fund your business. That is why a small business credit card is the preferred option for your company.

Getting a credit card for your small business can sound like a daunting task, but it may not be that difficult. It will simplify your business, help you track your business expenses and can bring some additional perks. Here are some tips for getting a small business credit card for your company.

Check Your Personal Credit Rating

The first step is to check your personal credit score. This might seem irrelevant since your new business is applying for a line of credit, but it is actually an important factor in the application process. Your potential creditors will check your personal credit score and use this as a factor in deciding whether you can successfully run a company and pay back your business debts on time. You will need a person to represent your company’s credit card account, even though your business will have its own corporate entity. Getting approved for a small business credit card account will generally mean you have sound credit in your personal life—typically a credit score of at least 700.

Register Your Business With The State

The next step is registering your business with the state. You’ll have to fill out the proper paperwork for your specific state to make sure your company is officially recognized. Then, you can start interacting with credit card companies on behalf of your business. Registering your business is not time consuming or costly.

Submit Your Business Credit Card Application

Once you have registered the business with your home state, you can begin the process of submitting the business credit card application. You will be including things such as the owner’s name, business address, employer identification number and type of business—sole proprietorship, partnership or a corporation. You’ll likely need to provide your personal household information since your company is new and will not have any prior income information. That means your personal income and credit score will play a part in your ability to get a small business credit card. As time goes by and your business accumulates a financial history, your company may be able to access various lines of credit. This is similar to building a credit score for an individual—after you prove you can handle paying back your debts, your credit score will rise and you’ll be able to access a greater number of financial options.

Avoid Mixing Business And Personal Transactions

This might seem obvious, but it is not. It’s also important. Even though you might have to list your personal credit and financial history in your credit card application, you should never mix personal and business transactions, as it is a recipe for disaster. This can cause nightmares when filing your taxes, and it does not help with money management. Do not go out to lunch on the company’s dime, or pay your personal bills with the company credit card. Make sure to keep your personal and business financials separate, so you avoid getting in trouble with the IRS.

Get Additional Cards For Your Employees Only If Necessary

Some employers get additional cards for their employees—but that can be risky. If you have multiple credit cards, you may get frivolous or unnecessary charges from employees who aren’t always making the best use of the company’s money. You’ll also have to manage multiple cards, which can be stressful and time consuming. Some owners keep just one credit card for this reason. That allows you to easily manage the account without worrying what several employees can or might do. There are cases when it makes sense to provide certain employees with an additional cards. That should be approached on a case by case basis.

Getting a small business credit card for your new company will help manage your money and may give you some additional flexibility in overcoming cash flow problems. As with a personal credit card, keep an eye on the card’s fees and interest rates. Always pay off the total balance on time each month to avoid interest penalties. This will help you build a solid credit score.



The information contained within this article was accurate as of August 5, 2014. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.