Why should you learn how to get a business credit card? Well, because it's an important part of running a company—and it functions a little differently than personal or store-specific credit cards. Personal credit cards are typically used for convenience and the ability to pay for a purchase later. Business credit cards are a tool to manage the expenses in your company.
1. Evaluate your business needs.
Every owner should separate out their personal and business expenses. This is critical to do from the very beginning so any financial issues that affect your business do not leak into your personal checking account. It also makes it easier to keep track of your expenses when preparing your annual business tax return to ensure you're getting the maximum deductions.
Make sure that you find the right business credit card with benefits you'll actually use.
Having access to additional credit can also help small businesses expand since growing companies require access to more cash. There are many times that business expenses must be paid before customer revenue is collected. Securing a business credit card can give you the extra capital that you need so you have more time to pay your expenses.
Finally, a business credit card will centralize all your expenses all in one place and help you analyze your monthly expenses.
2. Review your personal credit.
If your company has just been started, it may not have a separate business credit rating yet. At this point, many business credit card issuers will rely on your personal credit history so you can still get a business credit card.
Most issuers believe that past results reflect what will happen in the future. The lower the credit score, the higher the perceived risk by the issuer. Good personal credit scores are above 750. You can find out your personal credit reports at no charge once a year at AnnualCreditReport.com and dispute any inaccuracies you find through any of the credit bureaus' websites. Over time, you can improve your personal credit score by paying all your bills on time and having a low personal debt-to-credit ratio.
3. Choose the best credit card for your business.
One of the advantages of a business credit card are the benefits that come with being a member. Perks vary with each card, but they can include:
- cash back on every purchase
- extra days to pay
- reward points redeemable for travel benefits
- access to airport travel lounges
- access to unique experiences and events
- flexible working capital loans
The cost of the card's perks is built into its annual fees and any other interest that the company may have to pay. Make sure that you find the right business credit card with benefits you'll actually use. For example, don't get one that provides travel benefits like free flights or membership to an airline lounge if your employees never travel for business.
If you are unsure of which benefits your company will use, consider starting with cash-back cards that provide 2 percent or more back on every purchase.
4. Complete your application.
I believe every business owner should apply for a business credit card as soon as they start their company to help keep their expenses separate from their personal accounts. As soon as you incorporate and get an Employee Identification Number (EIN), you may want to start filling out the application for a separate business credit card to charge expenses.
Credit card issuers will check your business credit score with one of the three business credit bureaus: Experian, Equifax and Dun & Bradstreet. Excellent scores are above 80 for companies. Companies can improve their scores by keeping their data current and adding more vendor relationships to their active credit record, which can help them get a business credit card sooner.
To get a business credit card, you can apply online. You will need the following information to complete the many applications:
- legal business name and any “Doing Business As" (DBA)
- business address, phone number, website and email address
- industry type
- company structure (C, S, LLC, or sole proprietor)
- number of years in business
- number of employees
- annual business revenue
- estimated credit card monthly spend
- Employee Identification Number (EIN)
If your company has not been in business very long, you may be asked for personal information so the credit card issuer can check your personal credit history. This can include:
- full name and date of birth
- home address
- social security number
- email address and phone number
- annual income and source of income (if different from the business)
A company credit card is an essential financial tool for every business. Make sure you get a business credit card to benefit your company.
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