When David Batchelor needed funding to run advertising campaigns for his business, DialMyCalls.com, a mass notification system used by schools, churches, nonprofits, and other organizations to send phone calls or text messages to a list of phone numbers, he was turned down for traditional financing. His local banks wouldn’t give him a business credit card, either, so he turned to personal credit cards.
Business credit cards can be a source of fast and flexible financing for small businesses, but how hard is it to get one? And is it possible to qualify if your business is new?
One blogger’s experience offers some helpful insights into those questions.
Noah and his wife love to travel. But they are also aggressively saving for an early retirement. About two and a half years ago, he discovered a way to travel without spending a lot of money: credit cards. He learned he could apply for credit cards with significant sign up bonuses and use that to help fund travel.
He did, and it worked. “We’ve taken some amazing trips,” he says, including a $14,000 honeymoon for under $400.
It worked so well, in fact, that he wanted to share his secrets with friends and family so they could join him. His blog MoneyMetagame.com was born.
In order to take advantage of some of the best offers, he needed to take advantage of the best personal and business credit cards. He was already running a business on the side buying and reselling gift cards, so he used that business as the basis for applying for business cards.
Noah’s business was only six months old when he got his first business credit card. He had previously been denied twice for a business credit card, but three times apparently is a charm.
One thing he thinks helped is the fact that he registered his business with the state and obtained a tax identification number for his business, which he was able to then list on his application.
Overall, he’s applied for forty different credit cards in the past two and a half years. A meticulous tracker, he says his approval rate for personal cards has been 97%, while his approval rate for business cards has been about 50%.
That would seem to indicate that business credit cards tend to be harder to get than personal cards overall, but he’s applied for significantly more personal cards than business cards, however, so the comparison isn’t entirely apples to apples.
Don’t Be Scared Away
Don’t let the fear of rejection stop you from considering business credit cards. These cards can offer a number of advantages:
- Lucrative rewards
- Higher credit limits
- Ability to separate business and personal credit
- Help build business credit
- Protect your personal credit
- Possible tax deductions for annual fees and interest
However, you do want to maximize your chances of getting approved, so consider the following:
- Consider setting up a business structure (i.e. LLC, S Corp) and registering it with your state. If you aren’t ready to take that step, at least register your business with your state and/or get a business license as well as an Employer Identification Number (EIN) for your business from the IRS. This is not a hard and fast requirement, but some issuers do try to verify that a business exists so you may want to be on the safe side.
- Make sure you are familiar with your personal credit scores before you apply. Fix any mistakes that may negatively impact your credit. Small business card issuers will almost certainly review your personal credit scores. Requirements vary, but minimum personal credit scores of 680 or higher are common.
- Check your business credit scores. Not all issuers check business credit, but if they do, they may reject an application due to negative business credit information such as business tax liens.
Getting a business credit card is not only possible, it may be preferable to a personal card if you are starting or have a business. With a little extra planning and research you can increase your chances of getting the cards you want and need.
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This article was originally written on May 5, 2017 and updated on November 12, 2020.