Obtaining A Business Credit Card: Know Your Options

4 min read • Jul 26, 2016 • Tyler Heaps

Whether you have an established business or are in the startup phase, obtaining a business credit card can prove to be a huge advantage. A business credit card is defined as a credit card that you use to meet the short term and long term expenses of your business. You’ll get access to a revolving line of credit, but with a fixed limit. You can use this credit to make purchases for your business and even withdraw cash when you need it. Interest is payable on the balances that are not cleared at the end of the billing cycle. Here’s why obtaining a credit card for your enterprise is a viable financing strategy.

Business Credit Cards vs. Traditional Lines of Credit

Should you opt for traditional credit lines from your bank, it might choose to convert your credit line into a term loan. Every two years, banks review your financial activity and depending on certain conditions, they can make this conversion. However, with business credit cards, there is no possibility of such conversions. In fact, you can expect that the issuing bank might raise your credit limit.

While traditional bank lines of credit can offer you a larger amount and lower interest rates, they also typically require you to present some collateral. In the case of business credit cards, you’ll have to show your personal credit score to qualify. If you have a score of 650+, you can get a higher credit limit.

Positives of Obtaining a Business Credit Card

Establishing a Distinct Identity

Obtaining a business credit card can help you establish your business as a separate entity. As you make transactions using the credit card, you can develop a credit score for the enterprise. Over time, you could project it as a successful, dependable venture with a solid credit score of its own. In addition, you can also protect your personal scores. However, at the time of applying for the credit card, the issuer is likely to request that you offer a personal guarantee. Do keep in mind that if you fall behind making payments on your business credit card, your personal assets can be attached towards recovering the dues.

0% Interest for the First 12 Months

In case you opt for a traditional line of credit, you can expect to pay 1.5% to 2% of the monthly balance along with 3% to 5% interest on the amount you’ve used. Some issuers might also charge you a maintenance fee. On the other hand, with a business credit card, you’ll pay 1.5% – 3% of the balances per month, but no interest for the first 0 to 12 months depending on the individual credit card issuer. This introductory APR makes it possible for you to clear other dues that may be incurring higher rates of interest. However, you must understand the interest rates, terms and conditions of the post-introductory period carefully before you commit.

High Credit Limits

If you qualify for high credit limits, you can make large purchases on your business credit card without incurring any interest. This factor is especially advantageous if you’re just establishing your enterprise and need to pay for expensive equipment and are incurring other substantial startup costs. Another positive is that the high credit limits might make it easy for you keep your expenses within the maximum level.

Rewards and Points

Typically, business credit card issuers have points or rewards system in place. You can accrue points and redeem them for cash back or other rewards. Some credit cards also offer additional benefits such as discounts on airline tickets, hotels, renting cars, and even purchasing office supplies. When shopping around for the best credit card, check for the rewards and other perks offered. Match them to the particular needs of your company and use the benefits the issuers provide.

Establishing Creditworthiness

Most business credit card issuers report your financial activity to consumer credit reporting companies so it’s included your companies credit report. As you make payments on time, you will build-up the creditworthiness of your enterprise. Higher credit limits can help keep expenses down and establish a higher credit score.

Applying for and Getting a Business Credit Card

Here are the typical procedures you can expect when applying for a business credit card.

  1. Have your company registered in your state. You’ll soon receive offers of business credit cards from issuing companies. Choose the one that matches your needs best. Check for the rewards offered.
  2. Provide the Employer Identification Number or EIN of your company. They’ll also want to see your personal credit scores by way of representation for your business. Minimum scores may vary from each credit card company. Higher credit scores can improve your chances of getting approved with higher credit limits. 
  3. The credit card company needs you to submit both, personal and business information. For instance, your name, date of birth, business EIN, and social security number. Information requested will vary depending on the issuer.
  4. Identify the type of business structure (LLC, sole proprietor, corporation etc.) 
  5. In some cases, the credit card issuer may also request additional information, such as business financials, income earned in the past 12 months, the industry of your business etc.

Looking for the ideal business credit card can be confusing given the terms, conditions, and other factors you need to keep in mind. Rely on the expertise of the funding managers at Lendio to help you make the perfect choice that has the maximum positives for your business.


Tyler Heaps

Tyler is a member of the Lendio marketing team. He is passionate about digital marketing, small business, and helping small business owners succeed. Tyler is an outdoorsman and loves spending time with his family.