Filling out a small business credit card application usually isn’t all that hard. It starts by asking you to supply your name, address and other contact information, and then there are usually a few questions about the type of company you have, and its size. They will ask to see a business credit report and they will pull a business credit score for your business. But within all of these boilerplate questions is one that often throws you for a loop: What is your annual income?
There’s a good reason why a bank or credit union needs to know your personal income when you apply for a new small business credit card account. Your credit cards, either business or personal, represent a loan that is being extended to you. In fact, a small business credit card account, like a consumer card, requires that you offer your personal guarantee of repayment.
By providing your personal income on an application, the credit card issuer can decide if you are able to repay the loan, and how large of a line of credit it should offer you.
What income should you report?
Most small business credit card applications will ask you for your business’s annual revenue as well as your personal income. When being asked for your personal income, you can include many different sources. Of course you can include your business profits that you report as personal income, even if it’s just a part time job or a “side hustle.” And if you have multiple businesses, you can include your income from all of them.
In addition, you can include your income from any full- or part-time employment that you have. Other eligible sources of income can include alimony, child support, and investment income as government benefits like Social Security and disability. You can even include the income of your spouse or domestic partner, so long as you have a reasonable expectation of access to their income for the purpose of repaying the loan. Add up the total of all of these sources of income, and that’s what you can report on your application. The more income you can report, the better your chances of being approved, and the larger your credit line may be.
What about reporting income from a new business?
When it comes to reporting income from a newly created business, you want to use the same standard you would if you had a new job. For example, if you have a job that pays you $5,000 per month, then you can report $60,000 a year as your annual income, even if you just started.
Likewise, if your new business has been earning $1,000 a month in profit that you report as income, then you can include an additional $12,000 of annual income on your credit card application. The age of your business is not as important as the amount of income that you currently receive from it. However, it would not be accurate to report your annual income based on projections of future earnings. Instead, you should use your most recent month’s income from your new business as the basis of your estimated annual income.
The bottom line.
“What is your personal income?” sounds like a simple question, but it can actually be quite complicated to arrive at the correct answer. By combining your business profits with other sources of personal income, you can provide the most accurate answer possible and receive the small business credit card you deserve.
This article was originally written on November 13, 2017 and updated on October 25, 2019.