When Should I Apply for a Business Credit Card?

When Should I Apply for a Business Credit Card?

When Should I Apply for a Business Credit Card?

A business credit card can be an incredible asset for your business. Many offer rewards and business-specific perks. Some offer introductory 0% APR promotions, which can help you save on interest. And most will also help you build business credit.

But you might be wondering when it’s the right time to get one, especially if you’re just starting out. Here are some signs that can answer the question, “When should I apply for a business credit card?”

1. You Have Business Expenses

One of the most important things a business owner can do is to separate their business expenses from their personal expenses. If you’re using the same credit card for both, it can make your life overly complicated when it comes to your accounting and tax return.

You may also have a hard time getting financing later on if creditors see that you’re mixing expenses — they may view this as irresponsible, which could affect their approval decision.

You don’t necessarily need a business credit card to separate your business and personal expenses. You can also use a personal credit card or a debit card. But business credit cards provide access to features and benefits that can make it a little easier to run your business.

2. Your Personal Credit Score Is in Decent Shape

Most of the best business credit cards on the market require that you have good or excellent credit. According to FICO, that means having a credit score of at least 670. (Note that major small business credit card issuers typically check the applicant’s personal credit.)

If your credit score is below that but above 580, which is considered fair credit, you will have trouble qualifying for many small business credit cards. With bad credit, your only option may be secured business credit cards, which require an upfront security deposit.

That’s not the worst thing in the world, especially if you want to start building a business credit history as soon as possible. But if you can take the time to work on building your credit first, you may have an improved chance of getting a better credit card.

3. You Need to Finance a Large Expense

If you’re purchasing a lot of inventory or need to buy some relatively inexpensive equipment, getting a business loan isn’t always easy. Some business credit cards offer an introductory 0% APR promotion that allows you to finance a large expense — or several regular expenses — for up to a year or more entirely interest-free.

You may even get the same benefit for balance transfers, which can help you move a balance over from another business credit card and pay it down without interest.

Depending on the length of the promotion you qualify for and how much you finance, you could save hundreds, if not thousands, of dollars in interest.

4. You Want Extra Rewards on Your Purchases

Some rewards business credit cards offer bonus rewards or bonus points to cardholders for eligible purchases in certain categories of purchases. These categories on business cards often target business owners, like office supply stores, cable, internet, and phone services, advertising, shipping, and more.

If you spend a lot in any one area, consider doing some research to see if you can get more back in the form of cash back, points, or miles on every purchase you make. Some cards offer flat rewards instead, giving you a single rewards rate on every purchase.

And depending on the card, you could qualify for a sign-up bonus (also called a welcome bonus) worth hundreds of dollars, which you can use however you want. You can also get an intro APR that charges 0% interest for a specific number of months after account opening.

If you get a cash back credit card, for instance, you can drive the rewards you earn back into your business or use them for personal expenses.

5. You Want to Start Building Your Business Credit History

Having a strong business credit history is essential as you expand your business. Getting a business loan with favorable terms isn’t easy when you’re just starting out, and it may not get easier if you don’t take the time to focus on building business credit. The easiest way to build business credit history is to establish business accounts that report your payment history to the major business credit bureaus. (Learn more about how to establish business credit here).

This process can take time, so the sooner you start, the better. Just be sure to use the card responsibly, pay your bill on time every month, and try to keep the balance low relative to the card’s credit limit.

Developing these positive credit habits can help you build an excellent credit history, giving you more financing options in the future when you need them.

6. There Is Regular Revenue Coming Into the Business 

Once you start making money, you have proven that your business plan could work. That’s a great time to nab a business credit card because you’ll also have expenses that you’ll need to pay for. It allows small business owners to manage cash flow efficiently by covering immediate expenses, such as purchasing inventory, equipment, or covering operational costs. 

A business credit card will also simplify your business accounting and help you keep track of what you’re spending. That way, you’ll make sure your revenues are put to the best possible use.

7. Business Bank Accounts Are Opened and Managed Responsibly 

Managing a business bank account responsibly is crucial for the overall financial health and success of a company. A well-maintained business bank account ensures accurate and transparent financial records, which means it’s easier to track income, expenses, and overall cash flow. 

This helps you to identify discrepancies, avoid overdrafts, and prevent errors. Ultimately, a responsibly managed business bank account is the foundation for sound financial decision-making, providing the necessary information and stability for sustainable growth and success. It’s typically a good idea to wait until you have your business checking account under control before you apply for a business credit card. 

8. Business Expenses and Income Are Tracked Separately from Personal 

A business credit card will help you separate your personal and business finances. This is essential for both accounting and tax purposes — and often for compliance as well. If you’re an LLC or corporation, you’ll need to keep your personal and business expenses apart to keep your liability protection in place. Otherwise, you risk “piercing the corporate veil” and opening your personal assets up to liability. 

Even as a sole proprietor, it makes financial sense to separate your two types of income and expenses to avoid pricey mistakes on taxes.

9. There Is a Clear Need for a Dedicated Business Credit Card 

There are many reasons a small business owner might need a business credit card, like:

  • You need to control employee spending easily with employee cards.
  • You need to track your business expenses and monitor spending better.
  • You’re ready to sign up for a business-specific rewards program or rewards points for your expenses.
  • You need to improve cash flow quickly and with an easier application process.
  • You need emergency funding.
  • You have a large purchase coming up.
  • You can’t qualify for a line of credit yet.
  • You need to manage travel expenses or get better travel rewards.

If one or more of these business needs fit your circumstances, it might be time to get a business credit card.

10. The Business Owner Has a Personal Credit Score Above 650 

Having good credit means you’re more likely to qualify for the best business cards. During the business credit card application process, credit card companies will usually check your personal credit report (also called your consumer credit report) to determine eligibility using your Social Security number. Your interest rate will also probably be impacted by your credit score — the better the score, the lower your interest rate usually is.

The good news: Being denied for a business credit card isn’t the end of the world, but it’s best to avoid it if you can. 

11. The Business Can Cover the Costs Associated With the Credit Card 

There are a variety of costs that might come from using a business credit card, like an annual fee, late payment fees, foreign transaction fees for business travel, and balance transfer fees. Additionally, you’ll have to pay interest on any balance that rolls over — meaning any balance you don’t pay off in full every month. 

However, many business credit cards waive the annual fee if you meet the criteria. Some cards also give you a welcome offer after account opening if you qualify.

If your business can’t pay off the expenses and your business credit card requires a personal guarantee (and there are only a few cards that don’t require that), you’ll be on the hook to pay off the debt with your personal assets. It’s important to read the fine print before signing up for any business card.

12. Financial Record-Keeping Is Organized for Easy Tax and Credit Reporting 

It’s a good idea to get your financial records in order before you introduce a new aspect to your business like a business credit card. Maintaining organized finances has a huge impact on compliance, transparency, and your business’s overall financial health. Streamlined record-keeping ensures that your business can accurately fulfill its tax obligations, reducing the risk of penalties and audits. 

Also, organized financial records provide a clear snapshot of a company’s financial history, making it easier to assess creditworthiness when seeking business financing of any sort, including business credit cards. 

13. Future Revenue and Growth Are Projected for the Business

Unless you’re a brand new business, you should be able to predict an estimate of your future income. If it looks like you’ll make a profit now and in the future, it might be a good idea to get a business credit card in place before your finances get too complicated. This is true whether you’re a freelancer, sole proprietorship, an LLC, or a corporation.

That way, you’ll be able to use the card to supplement cash flow as needed going forward.

14. Anytime You Want

Your business doesn’t have to be a certain size to qualify for many business credit cards. You don’t even need to have an employer identification number (EIN). Even if you’re not doing your business full time, you can still qualify for a business credit card, assuming you’re creditworthy.

So as you consider when the best time is to apply, think about when you want to start taking advantage of the features business credit cards offer. Maybe it’s when you open a business checking account or before your first expenses, or it’s later on when you feel like you’re well organized and feel comfortable adding one.

The Bottom Line

Business credit cards can provide a lot of value to all types of business owners, and getting one can help you build your business. But there’s no one-size-fits-all answer to the question of when you should get one.

As a result, it’s important for you to consider the needs of your business and your own preferences regarding credit. Also, consider your goals as a business owner, as well as how and when a business credit card might be able to help you achieve them.

Whenever you decide is the right time, make sure to take some time to compare top credit cards to ensure you get the most bang for your buck.

This article was originally written on April 19, 2019 and updated on February 2, 2024.

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