How to Apply for a Small Business Credit Card

Many new or established business owners may be in a place where they need a small business credit card to help them continue operations and pay for expenses. Here are a few considerations that you have to keep in mind when apply for a small business credit card.

Business Type

When you are applying for a small business credit card, the company will want to know what type of business you are running. There are three main types of businesses: sole proprietorship, partnership, and corporation. If you are running a sole proprietorship, the business creditor will ask only for your personal social security number during the application process. If you are running a partnership, the creditor will want to know the information for all partners. Finally, if you are a corporation, the credit card company will mostly likely want to know the EIN (employee identification number) of the business and the personal social security number of one of the corporation representatives.

Business Income

The next item that a creditor will want to know when you are applying for a small business credit card is the income of the business and the personal income of the owners. If the business is brand new and the owners of the business do not have any personal income within the past couple of years, a creditor is unlikely to grant the application. The Small Business Association estimates that 56% of small businesses fail in their first five years, so the risk is too high for creditors to take on a customer who has no secondary source of income as the business is getting off the ground.

If the business is established, it is much easier for the creditor to make a positive decision regarding granting a credit account. The owner will simply give the past yearly income of the business and estimate the business' income over the next year. Based on that information, the business credit card company can determine how much credit to extend and how likely it is that they will be paid on time every month.

Credit Report

One of the main factors that a business credit card company will take into account when evaluating your small business credit card application is your credit history. For a corporation, the credit card company will usually check to make sure that there are no unpaid judgments or disputes against the corporation, using the state's records on the business to determine if a new business credit card should be granted. Otherwise, they will check into the personal records of the person who is listed as the representative for the corporation.

Considerations

In the past, business credit card companies were more lenient with their rules regarding small business credit card applications. Even new small businesses with no past history were approved for lines of credit. When the U.S. credit crisis of 2008 hit, creditors began to tighten their requirement substantially. Now, many companies require a very high credit score from the owner and a solid business history before a small business credit card application is approved.

A small business credit card can be a great tool for a new and growing business. It allows you to pay expenses, advertising, and other business needs when your cash flow is light. But when you are applying for a new business credit card, keep in mind that it can be a burden as well as a benefit if you do not manage it well. If you are running a spanking new business and cannot assure that you'll be able to afford to pay off your balance every month in full, it is probably not a good idea to apply for a card. In this case finding a small angel investor may be your best bet. On the other hand, if you are an established business owner with proven good money management skills and a great credit history, a small business card can be a blessing.