As a small business owner, credit cards can be essential to running your business. You may need high credit limits to cover employee spending, a large purchase, or just to pay for myriad everyday expenses.
If your business credit card limit isn’t high enough to meet your needs, you have two options:
- Get a new card with its own credit limit, or
- Ask for a credit limit increase on a current card
Here we’ll focus on the second approach: getting a credit limit increase. But if that doesn’t work, or if you prefer to get a new business credit card, Nav can help you find your next business credit card.
Note that some business credit card issuers don’t have stated credit limits. Instead they will advertise cards with “no preset spending limit.” That does not mean you can spend any amount you choose. The issuer will still limit the amount you can charge based on their assessment of your businesses’ ability to pay back whatever you charge.
Pros And Cons Of Getting A Business Credit Card Limit Increase
- Access to larger credit lines
- Ability to finance large purchases
- Facilitate employee spending
- Can be easy to overspend
- Greater potential for debt
- Higher exposure to employee fraud
Is This The Right Time To Ask For A Credit Limit Increase?
If you need a credit limit increase for a specific reason; a large purchase, for example, you may wonder when the best time is to request it.
There’s no formula that dictates when to ask for a credit limit increase, but usually you’ll want to wait until you’ve had the card long enough to demonstrate a history of on-time payments. That usually means waiting until you’ve had the card at least six months, and perhaps even a year, if necessary.
Other good times to ask for a credit limit increase on a small business credit card is when your financial circumstances have improved (in particular, when income is higher), or when your credit scores have improved by at least 20 points or more.
However, some cardholders have success asking for a credit limit increase when they first receive a card. If you get a card and the limit seems small, you may be able to request a higher limit provided your qualifications are strong. We’ll discuss those in a moment.
If you decide to ask for a credit line increase right away, be sure you ask the issuer whether there will be a hard inquiry on your personal credit report. Hard inquiries affect your credit scores, while soft inquiries don’t. While the average inquiry takes only a few points off your scores, if there has already been a hard inquiry when you applied, you may want to hold off.
4 Factors That May Increase The Chances Of A Small Business Credit Limit Increase
There are several factors that can work in your favor when it comes to requesting a small business credit limit increase.
1. High Credit Scores
Excellent credit scores can help you qualify for higher credit limits. Most conventional small business credit cards issuers check personal credit so your personal credit scores should be at least 680—700 or higher. A few issuers will check business credit history, and some corporate credit cards don’t check personal credit but generally good credit is required to qualify and to get higher limits.
Payment history is the most important factor in calculating credit scores.
Another factor that can quickly impact your creditworthiness is “credit utilization” or “debt usage” This factor compares your credit limit to your balance to see how much of your available credit you’re using. There’s no specific percentage you must stay below but it’s usually a good idea to use 20—25% or less of your available credit.
With business credit cards this factor may be less important, at least in terms of personal credit scores. Many small business credit cards don’t report to personal credit unless you default so utilization on a business card may not affect your personal credit scores. Instead, utilization on personal credit cards may be a key factor.
High utilization may impact your business credit scores though, and if you’re trying to establish good business credit, keeping balances low on these cards may help.
It’s smart to check your personal credit with all three consumer credit bureaus, and your business credit before you apply.
2. High Income/Revenue
Higher income also helps when it comes to qualifying for a higher credit limit. Small business owners may not realize that with business cards issued through major issuers, you can qualify based on income from all sources, not just business income. That means if you have a side gig or you’re just starting a business, you may be able to qualify based on other income sources such as a day job or even household income, if it could be used to pay the credit card account.
If your income increases, let your issuer know. Most credit card companies make it easy to update your income on your account profile.
For corporate cards, business revenues will be key. You may need to supply business bank statements or connect your business bank account so the issuer can analyze cash flow to help you qualify.
Another option available through some corporate card issuers is to prepay a business credit card or to allow the issuer to debit your business bank account to pay off your balance, usually on a daily or weekly basis. Depositing funds with the issuer or paying off the balance quickly may help you qualify for a larger credit line based on your business bank account deposits.
3. High Usage
Once you get the card, using it for frequent purchases may help qualify you for a higher limit. Issuers make money when you swipe your credit card, and they specifically target business owners because they know they tend to charge more. The fact that you charge a lot on the card may work in your favor.
4. Moderate Debt
While using your credit card frequently can be positive in terms of getting higher limits and earning rewards, make sure you keep any balances you don’t pay off in full at a reasonable level. Issuers want to earn money from the interest cardholders pay, but they also carefully monitor risk. The US economy is in an uncertain position and issuers are doing their best to avoid unnecessary risk in the event of a downturn. High balances may indicate higher risk to the issuer.
Also, as a business owner, you want to make sure your balances are affordable in comparison to your income so you don’t wind up with unmanageable debt if your business slows down.
4 Circumstances That May Prevent A Credit Limit Increase
Sometimes entrepreneurs ask for high credit limits because the business is experiencing a financial crisis and they need access to funds quickly. This may backfire, either if the issuer detects the business is in financial stress, or if the business runs up debt it can’t pay back. These red flags may result in a denial of your request for more credit:
1. Credit Problems
Late payments that appear on personal credit, and/or business credit, or late payments with the issuer itself, can result in a denial. A track record of high balances and only making the minimum payment can also hurt your chances of getting your limit raised.
Similarly, high utilization on the card you’re targeting for an increase may trigger a decline based on the issuer’s policy.
2. Declining Income/ Revenue
With many small business credit cards, the issuer relies on the income stated on the application, so it may not know your income has decreased. However, the issuer will likely ask you about your income if you request a credit line increase and it’s important to be truthful. In cases where the issuer has access to your business bank account statements, lower income will hurt your chances of getting approved for more credit.
3. Low Usage
If you don’t use the card often, and pay it in full, you’re probably not a profitable customer and the issuer may not be as likely to offer you a credit line increase.
Keep in mind that card issuers make money in two main ways:
- Interest on balances paid by the cardholder
- Swipe fees paid by merchants
Each time you swipe your card the merchant pays an interchange fee and part of that goes back to the card issuer. (It’s that interchange income that allows them to pay you, the cardholder, cash back or reward points.)
If you’re not using the card much and not paying interest, you’re probably not a profitable customer and that may work against you when asking for an increase.
4. Issuer Policies
Certain issuers and certain cards aren’t likely to offer generous credit limits. Most issuers don’t share those policies or guidelines with the public, so you probably won’t know what their internal rules dictate.
How To Request A Business Credit Card Limit Increase
Some issuers make it easy to request a higher credit limit. Log into your account online or in the issuer’s mobile app and look for an option to request a credit line increase. The issuer may ask you to update income information to help evaluate your request. Often you will get an answer quickly, especially if you’ve held the card for a while.
You may also try calling the issuer’s customer service phone number on the back of your card to request a credit line increase. Again, they may ask you information about your income to help process your request.
Another option may be to transfer a credit limit from a card you no longer want to one you do, if you hold multiple cards from the same issuer. This can allow you to get a higher credit limit on one card, while keeping your overall credit limits the same. You may also be able to eliminate an annual fee this way.
Nav’s Verdict: Business Credit Card Credit Limit Increases
Businesses often need higher credit limits than consumers, especially as the business grows. Higher credit limits can give your business access to the funds it needs without having to manage a large number of credit cards.
While it may sound counterintuitive, the best time to ask for a credit limit increase is when you don’t need it, and your finances are strong. Line up credit before you need it and you won’t scramble to get it when you do.
If you can’t get higher credit limits on cards you already have, consider getting a new business credit card. If you need access to more financing, Nav can help your business find lines of credit and small business loans.
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