How to Choose a Credit Card for Your Startup When considering the best business credit card for you, take time to weigh the rewards and benefits of each one to determine which card will grow with your business and understand your needs.
By Baruch Mann (Silvermann) Edited by Maria Bailey
Opinions expressed by Entrepreneur contributors are their own.
Even if you've raised a lot of money for your startup and have plenty of cash in your bank account, to fulfill many of the day-to-day bureaucracy of operating your business, you'll need a credit card.
A business credit card is a credit card designed for business use, typically offered to business owners, entrepreneurs and small business owners.
These cards are separate from personal credit cards, and there are several reasons why you might prefer a business credit card over a personal credit card. Using a business credit card can help you keep your business expenses separate from your personal expenses. This makes it easier to track your business expenses for accounting and tax purposes, and can also help you avoid co-mingling funds, which can be a problem if you're audited by the IRS.
Related: Do You Need a Business Checking Account for Your Startup? It Depends on These 8 Factors.
Also, business credit cards often have higher credit limits than personal credit cards, which can be helpful if you need to make large purchases for your business. Lastly, many business credit cards allow you to issue employee cards and set spending limits on those cards. This can help you control your employees' spending and ensure that they only use the card for business-related expenses.
Business credit cards are issued by banks and other financial institutions, and the terms and requirements for obtaining one will vary depending on the issuer. Different business credit cards have different benefits that you'll want to consider before deciding which card is right for you.
Low or no annual fee
Although cards with hefty annual fees tend to provide more benefits, you still need to offset the annual fee with your card rewards.
Fortunately, there are some excellent business cards that have a low or no annual fee. You'll need to assess whether it is worthwhile paying an annual fee for your new card.
Low fees
In addition to an annual fee, you may face transaction fees, interest charges, cash balance fees and other expenses. With the wrong card, any rewards you earn will quickly disappear to cover your fees.
You should be aware of all the potential fees before you sign up for your new business credit card. If the card offers good rewards, you may decide that it is worth paying more in fees, but you need to think about how the card will perform in the long term.
Bookkeeping tools
Many business cards provide account management tools, which can be a massive benefit when you want to remain organized at tax time.
If there are particular features that could simplify your business admin or that are compatible with your existing business software, this can be a great advantage for you.
Credit reporting
One of the priorities of your startup for the long term must be to build its credit history. As credit history is established, it will open new avenues of credit for your business.
So, you need to ensure that your new business credit card will report to the major credit bureaus.
Employee cards
As the owners of a startup, you'll have plenty of things to take care of. This means that you won't want the hassle of needing to handle every business purchase.
If your new card allows employee cards, you can empower your team to pay for items and eliminate the need to deal with expense reimbursements. This will also help you to keep better track of all your business spending.
Responsive support team
As a startup, you are likely to be anticipating fast growth and have unpredictable spending. Whether you need to increase your credit limit or require certain features, you will need to be confident that the support team will be on hand to help.
Travel features
If you need to travel for your business, you should look for a card that has travel features. From no foreign transaction fees to airport perks, there are some excellent card benefits around.
Bear in mind that if you plan on traveling internationally, you may want to choose a card that has broad merchant acceptance, such as Mastercard or Visa. If you're not sure whether to choose cash back or a travel card, calculate expected monthly rewards to understand which is better, or just apply for two cards if it's possible.
Solid dashboard
Finally, to effectively manage your credit card account, you need access to a clean dashboard and a smooth-running app. If you are dealing with time-sensitive issues such as payments, you'll find it frustrating to try to deal with a clunky app or a dashboard that is not intuitive.
It is well worth checking online credit card reviews as well as the reviews for the credit card app to see if there are any red flag issues that could highlight potential problems.
What you'll need to apply for a business credit card
As a startup, you may be unfamiliar with what you need when applying for a business credit card. So, here we'll break down what you will need to have on hand to support your application.
While the requirements for different credit cards can vary from issuer to issuer, the commonly requested information includes:
- Your tax ID number: If you don't have a tax ID for your new business, and many entrepreneurs do not, you can usually use your personal Social Security number.
- Your business name: If you have a legal name for your business, you can use it on your application. If you are a consultant, freelancer or other operation without a business name, you can use your own name.
- Your legal entity: This is part of the application where you will need to identify how the business is organized. Most small businesses and startups in the U.S. don't have a formal legal structure as they operate as sole proprietorships, where the individual owner essentially is the business. You can still apply for a business credit card as a sole proprietor, but if you are a partnership or have another type of legal business structure, use this on the application.
- Business address details: If your business has a separate address, phone number and email address from your personal details, you will need to provide them. If you don't have a separate business line or business location, you can use your personal details.
- The business start date: This is fairly straightforward, but you need to be accurate and use the date that you formed your startup.
- Business revenue: The revenue is the amount of money your startup brings in, which is different from your profit. As a startup, you may not have yet received any revenue, but you can put $0 on the application.
- Type of industry: This is different from the business structure and the bank or credit card issuer needs to know what industry or niche you work in.
- Interested parties: Finally, you need to provide details on any individuals who own 25% or more of your business. If your business does have co-owners or interested parties, you should have their names, addresses, Social Security Numbers and dates of birth as the issuer may request them.
As with a personal credit card, shopping around for the right product is well worth the time. So, before you make a decision about a credit card for your startup, be sure to check all the available options.
How to determine eligibility for a business credit card?
To determine eligibility for a business credit card, the following factors are typically considered:
- Business and personal credit score: Your business credit score is one of the most important factors in determining your eligibility for a business credit card. A higher credit score will generally make it easier to qualify for a card. Although a personal credit score is not the most important factor in determining eligibility for a business credit card, it may be considered if your business does not have a credit history.
- Business income: Your business income is also considered when determining your eligibility for a business credit card. Lenders will typically want to see that your business generates enough income to cover the credit card payments.
- Business history: The length of time your business has been in operation, as well as its financial history, will also be considered when determining your eligibility. A business with a longer history and a positive financial track record will generally have an easier time qualifying for a business credit card.
- Business type: Some credit cards are tailored to specific types of businesses and may require certain qualifications to be met.
It's also important to note that different credit card issuers have different requirements and standards for approving business credit card applications, so it's always best to check with the lender for more specific information.
