Running a small business means making strategic decisions about your finances. Frequently, this initially means opening a business checking account, but for many small business owners, a business credit card represents the next logical, if not necessary, step.
A business credit card can help you further delineate your business and personal spending habits (a must), and it can also act as a safety net should you need to purchase equipment, buy supplies, or make other purchases that wouldn’t typically fit into your monthly cash flow. Additionally, a credit card for your small business can help you build business credit, something that will be essential should you need a loan in the future.
If you’re considering opening a credit card for your business, there are a few questions you’ll need to be able to answer in order to increase the likelihood of approval.
1. What’s your credit score?
You won’t find this question on an application, but you can rest assured that it will come into play. As such, before you apply, you should know both your business and personal credit score. Both of these scores can factor into your overall eligibility, and they can also impact the interest rate you receive as well as your maximum credit score.
Furthermore, knowing your credit score can help you determine what business credit card to apply for, as some are designed for applicants with excellent credit, while others may be geared towards and therefore more accessible to those with average or thin credit.
If you’re a new business with non-existent or thin business credit, there’s no need to panic. Your personal score will be used to determine eligibility. Conversely, it’s exceedingly rare that you’ll find a small business credit card that does not require a personal guarantee and therefore a personal credit score, so keep that in mind as you apply.
2. What’s your business’s legal name & contact info?
As with a personal credit card, a business credit card application will include fields for your legal business name, the applicant’s name, and the address and phone number of the business.
If you are applying as sole proprietor or part of a general partnership, you can use your name as the legal name; however, LLCs, S-Corps, etc. will be required to list the legal name of the entity.
3. How is your business structured?
Early in the application – not that credit card applications are lengthy – you’ll be required to select the business entity type that appropriately describes your business, e.g., single member LLC, multi-member LLC, sole proprietor, etc. This information is important and will often determine how you complete some of the remaining portions of your application. For examples, applicants who share at least 25% of ownership with a partner will be required to provide additional information about those with vested interests.
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4. What is Your Federal Tax ID?
Your federal tax ID is often the gatekeeper to credit decisions as it helps the credit card company match your application to your credit history and profile. In most cases, you’ll need to provide both your SSN as well as the EIN associated with your business. If you operate your business as a sole proprietor, you’ll be able to complete the application with your SSN.
5. What type of industry is your business considered?
Most business credit card applications will require you to disclose your business type. It’s likely that you’ll need to choose from predefined options. In some cases, like Capital One Spark Classic for Business, you may even need to further refine based on your initial industry selection. Keep in mind that these aren’t perfect or all-encompassing, so select the one that most closely resembles your industry.
6. How long have you been in business?
This question is pretty straightforward; you’ll need to either enter or select the approximate amount of time you’ve been in business.
7. What’s your annual revenue and anticipated spend?
Eligibility is based on a variety of factors, and through your credit score and history are important, they’re not the only ones. Typically, you will need to provide your annual revenue in order to complete and be approved for a credit card. The number you provide should be as accurate as possible; this is not the time to stretch the truth.
If your business is new, then you may feel that the answer to this question alone could leave you with a credit card denial, but that’s not the case. Lenders, particularly credit card companies, understand the needs of small business owners, and therefore a new business with minimal income won’t be penalized, particularly if the applicant has strong personal credit. Instead, your revenue is likely to be used to determine your credit limit.
In addition to how much revenue your business brings in, it’s likely you’ll also need to give an estimate of how much you’ll spend. This number is usually paired with your revenue to help determine your credit limit.
8. What is your annual income?
Much like a personal credit card, a business credit card application will require you to include your estimated annual income. Don’t confuse this question with your annual revenue, which is specifically what the business brings in. This could be the income from your business as well as additional work you do (full- or part-time work, gig work, etc.). Your annual income can also include your spouse’s income as long you consider that accessible for debt payments.
Applying for a business credit card is often an essential and organic part of owning your own business. And while credit card applications are typically as simple as they are short, knowing the answers to these eight questions can help you accurately complete your application and increase your odds at approval.
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This article was originally written on November 30, 2018 and updated on February 8, 2023.
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