A business credit card is a revolving line of credit intended solely for use by a business. Any business owner, including independent contractors and sole proprietors, can apply for one. They’re often contrasted with personal credit cards, which are revolving lines of credit intended for personal expenses.
What is a business credit card for startups?
Companies in the early stages of business, particularly if they've received funding from investors, are often called startups. These startups must handle expenses just like any other business, and they may choose to do so with a revolving line of credit like a business credit card.
The banking needs of startups and other businesses are typically quite similar. A startup would use the same type of business credit card that other businesses would use, but they may want to find a business credit card that offers reward points or miles for their common expenses such as food, travel or gas.
How do business credit cards work?
Business credit cards work similarly to personal credit cards. As with personal credit cards, you're given access to a revolving line of credit with a set limit. If your statement balance is not paid in full within the billing cycle, you typically will be charged interest for the unpaid amount and new purchases.
Business credit cards are a great way to ensure that you keep your personal finances separate from your business finances and make it easier to differentiate the two when it's time to do your taxes.
A business credit card can also help build a business credit score that may improve your chances of gaining access to more credit in the future.
Increased capital
Small business credit cards can help provide you with the credit line you need to head in the right direction. A credit card can give you a credit line to purchase the items your business needs in its beginning stages.
You can use a business credit card for any expenses related to your startup, including:
- Licenses
- Permits
- Insurance
- Research expenses
- Marketing costs
- Technology
- Taxes
- Utilities
- Office supplies
You can also add employees to your account as authorized users and provide them with credit cards to use and easily track their day-to-day spending. This eliminates the need to reimburse your employees for business costs on their personal credit or debit cards. It can also be beneficial to track any fraudulent charges and pinpoint more precisely where they came from.
How to choose a business credit card for your new business
The business credit card you choose will depend largely on your business’s financial needs. Consider how much your business spends monthly or annually and what benefits would suit your needs best.
Business expenses
View your business expenses over the past few months to see what you spend the most on. This will help you decide what business credit card and benefits will work best for your startup.
If you travel often for work, you may be more interested in a business credit card that offers miles or points in exchange for robust travel rewards. If you spend more on office supplies and equipment, entertain clients at restaurants, or spend regularly on fuel costs, you may want to consider a card that offers additional points for these spending categories.
Bonus offer
You may want to consider the business credit card that offers the best bonus offer. A bonus offer for a new credit card is when the lender provides a specific amount of cash back, points or miles for spending a certain amount with the card over a particular period.
Ideally, if a business credit card you’re considering applying for has a bonus offer, it reflects how much you typically spend on your business within the offer period. Keep in mind, however, that bonus offers are subject to change, so you should always confirm the credit card you’re interested in still has an offer. If it does, check the terms and conditions of the offer before applying for the card.
Rewards
Some business credit cards offer rewards in cash back, points or miles in return for the money you spend using the card. Keep in mind the type of rewards you'd like to earn with your business credit card and if any of the cards offer more points or miles for the types of purchases you frequently make.
Fees and Rates
As you narrow down your decision, it's best to consider the interest rates and fees associated with your business credit card. Research the interest rates that apply to the card and any fees that may be associated with the card, like fees for late or returned payments, annual fees and foreign transaction fees.
How to get a business credit card for startups in 3 steps
Research your options
Take the time necessary to research your options for your business credit card. Consider each card's benefits, like bonus offers or rewards.
Check your personal credit
Although you're applying for a business credit card for your startup, the lender may still require your Social Security number to check your personal credit file. Depending on the type of credit card, you may be personally liable for your business credit card and any employee transactions. So, your potential lender must see you as a reliable borrower.
Credit card companies look at your credit report for factors such as timely repayment and low credit utilization. If your credit score is higher, you may be eligible for more credit cards, a higher credit limit and lower interest rates.
Apply for your business credit card:
Once you've decided which credit card is right for your startup business, you can gather the information needed to apply.
The information you'll need includes the following:
- Business legal name
- Business address
- Business phone number
- Type of business/Industry type
- Business entity/legal structure
- Federal tax identification number/social security number
- Number of employees
- Annual business revenue
Avoid applying for multiple credit cards at the same time. It may be more beneficial to apply for one credit card that you're most interested in and that you're most likely to qualify for rather than applying for multiple cards at once. When applying for a credit card, lenders make a hard inquiry on your personal credit file, which can negatively impact your credit score.
How to make the most of your business credit card for your new business
You can do a few things to get the most value from your business credit card as a startup.
Take advantage of bonus offers
Don't overlook any introductory bonus offers. With these offers, you can often get a considerable reward bonus for spending a specified amount using your new business credit card within a certain amount of time after opening the account. So, if you think your business expenses will add up during that period to be enough to qualify for the bonus, consider swiping your card to receive this incentive.
Redeem your reward miles for travel rewards
If your business credit card earns miles on purchases and you travel often for business-related trips, consider redeeming your miles for future flights and hotel stays.
Pay your balance on time
Paying your credit card’s entire statement balance by the payment due date each month is a great way to make the most of your business credit card. No one likes to pay late fees or interest charges. Be sure not to overspend and set aside the funds to make on-time payments each month.
What credit score do you need to get a business credit card?
Credit card lenders will consider your personal credit file when deciding if you’re approved. It’s a good idea to have the best credit you can when applying for a business credit card.
If you have poorer credit, you may receive a lower credit limit and higher interest rates to start off. There is potential to earn a credit limit increase over time as you show yourself as a dependable borrower with consistent on-time payments.
Business credit card for startups FAQs
Small business credit card requirements
To get approved for a business credit card, you'll likely need:
- Good or excellent credit score
- Personal or business income that reflects the ability to pay your credit card bill
Use your business credit card for business expenses only
Can I get a small business credit card with no revenue?
If you have a startup company, you may have little to no revenue coming in. Fortunately, if your personal credit is good, you may still be able to get approved for a credit card despite your startup company being pre-revenue. If you have no revenue yet, simply place $0 where your application requests business revenue when you initially apply.
Explore business credit cards for your business
The CitiBusiness®/AAdvantage® Platinum Select® Mastercard® allows you to earn miles on your business purchases. The Costco Anywhere Visa® Business Card by Citi is designed for Costco members and enables you to earn cash back rewards on purchases for your business wherever Visa is accepted.
Apply for one of Citi's business credit cards today to start earning rewards for your startup business.
Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
