How to Qualify for a Business Credit Card

Qualifying for a business credit card can be a little different from a regular credit card depending on the route you take. Here’s what you need to know.

Who Qualifies for a Business Card?

So, you do not actually have to have a formal business entity formed or published LLC in order to qualify for a business credit card. Anyone that is self-employed, runs a sole proprietorship or is an independent contractor can actually apply for a business credit card. This means that the door for using a business credit card is open to nearly all individuals that work for themselves. This definition is quite broad so anyone that operates a business with the goal of making a profit (whether it is a side hustle or major operation is irrelevant) can technically qualify for a business credit card. However, a majority of business credit cards may require you to have an established business bank account and legal business entity.

What Parameters Are Used to Qualify and Why Might You Get Rejected?

The main determining factor for qualifying for a business credit card is your business credit score (business credit scores are determined by Equifax, Experian, and Dun & Bradstreet). However, if you are talking about a new business and you don’t have much of a business credit score, lenders will need something to gauge the likelihood of repayment in order to qualify you for a business credit card. So, lenders will use your personal credit in order to check if you qualify for a business credit card. If you have “bad payment history” or “bad credit” this could actually prevent you from qualifying for a business credit card. Otherwise you will usually need business related information: employee count, monthly expenditures/overhead, EIN, years in operation, annual revenue, etc. Failing to provide any of these, or an unfavorable revenue to expense ratio could also lead to disqualification.

Key Differences

There are a few key differences between a business credit card and personal/consumer credit card. One of the main differences is who the responsibility of repayment falls on. With a personal credit card, the responsibility of debt obligations will fall on the individual, while with a business credit card the responsibility will fall on the business. So, for example, if your business files for Chapter 11, the responsibility of the business-related debt will technically not be yours. This can help you protect yourself if your business were to fail. It’s also important to note that some business cards can still fall under the liability of the individual and not the LLC or business entity. The best way to find out is if a business card is tied to your EIN or Social Security Number. If the business credit card is tied to your social and appears on your consumer credit report it is technically your “personal responsibility” and not the business’. This is typically the key distinguishing factor between the two types of credit cards.

Why Should You Use a Business Credit Card?

There are a few reasons you’d want to use a business credit card as opposed to a regular consumer credit card. One of the main reasons is that doing so will allow you to better establish your “business credit” and “company credit” in the longer term. This can help set you and your business up for better funding opportunities in the long run and can help you expand during periods of business growth. You will be protecting yourself from business related debt were something to happen to your business, similar to the way a LLC protects you from business related liabilities. Otherwise, you can also add additional credit cards for employees so that you can more easily deduct expenses and write them off of your taxes. Moreover, you will typically benefit from better business APRs, perks, and terms than a consumer card, and more easily categorize your spending for tax related and book keeping purposes.