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Small Business Credit Cards: SMB Financing Tips and Tricks

by iTHINK Financial | Jun 08, 2020

Small Business Credit Cards
Starting and growing a small business is no simple task. Managing that business’s finances follows suit. From overseeing cash flow to evaluating working capital and building your business’s credit, staying on top of your finances takes a watchful eye. And on the subject of credit, using a business credit card can also contribute to the growth of your business, if used wisely.

If you are a small business owner, here’s your guide to business credit cards, what to consider when selecting the right card for you, and how to apply for a card for your business.

Benefits of a Business Credit Card

Keep your business and personal finances separate

Rule number one of starting a small business is to separate your personal and business spending and income, starting by opening a business checking account. This not only makes it easier to keep track of your business’s finances, debts and cash on hand, but also works to protect your personal assets and credit score. That’s because you, as the business owner, would be personally liable for any debt generated covering business expenses if you were to use a personal credit card to pay for those expenses. A business credit card keeps your personal credit apart from your business’s while helping build your business’s credit history.

Handle business expenses with more flexibility

Running a small business comes with many expenses, some of which may be unexpected. A business credit card gives you added flexibility to cover the cost of your operations, supplies and materials, maintenance fees and other business needs as they arise. However, just like any other type of debt, credit card debt must be paid off on time in order to avoid racking up an unmanageable balance.

Earn cash back, points or rewards

Many business credit cards offer rewards and cardholder perks, which can benefit your business in a number of ways. From cash back to add to your cash on hand to points you can use to cover business travel, these rewards may be small or significant depending on how much you use your credit card. Either way, you can earn a little something extra to put in your pocket or invest towards growing your business just by using your card. 

Finding the Best Credit Cards for Small Businesses

Consider your credit score

Before you start your credit applications, it’s important to consider your business’s credit history and score. If this is your first credit card, you may not be able to qualify for a low-rate, high-reward credit card right off the bat. A secured credit card may be a better option to build your credit history and improve your score. On the other hand, if you have worked on your small business’s credit, look for a credit card with better perks and lower rates.

Look for low or no annual fees to start

Not all credit cards are the same when it comes to rates and fees. Credit card interest rates are inherently higher than those offered with longer-term loans or lines of credit, however some credit cards offer extended introductory periods at zero percent interest. At the same time, certain cards require steep annual fees to access cardholder-exclusive benefits or fast-accruing rewards. Further, some credit cards have high foreign transaction fees, so if your business deals with international vendors or customers often, these fees might add up.

When determining which card is best for your business, particularly if your business is still in the early stages of growth, look for credit cards with no annual fees, low interest rates and special offers.

Choose credit cards that offer rewards

A business credit card can help build your business’s credit while giving you more flexibility when covering expenses, but the benefits don’t have to end there. When comparing credit cards, take any rewards being offered into consideration in your decision. Do you need to travel often for your business? A credit card that lets you earn miles or airline points might be the best option for you.

What You Need to Apply for a Business Credit Card

Your business’s legal name

Whether you are a sole proprietor, LLC, C-corp or S-corp, you can apply for a business credit card. If you are a sole proprietor or freelance worker, you can use your name to apply. For LLCs, C-corps and S-corps, you’ll need your full, legal business name.

Your Federal Tax Identification Number (if applicable)

If you are applying for a business credit card as an LLC, C-corp or S-corp, you’ll need your Federal Tax ID, otherwise known as your Employer Identification Number (EIN). If you’re a sole proprietor, you’ll enter your Social Security Number.

Your business contact information (address, phone number)

For many small businesses, your business’s contact information will be your home address and personal phone number. If you have a physical business location or office headquarters, enter that address instead.

Cardholder’s role in the business

Are you applying for a credit card as the business owner or will the card be managed by an employee? You’ll need to enter the cardholder’s role in the business when applying.

Type of business

Whether you run an online store with physical products or provide digital services, your credit card lender needs to know what your business does in order to approve your application.

Your business’s annual revenue and estimated monthly spend

Credit issuers want to know you’ll be able to repay any debt you incur while using your credit card. You’ll need to provide an estimate of your business’s annual income and how much you will be spending on the card each month. This way, the issuer can determine how much credit to approve you for.

Your personal credit history and guarantee

Although you are applying for a business credit card, your personal credit history plays an important role in whether you are approved and for how much, especially as a small or new business. Issuers will take a look at your history paying back debts to determine if you are a reliable borrower and, in many cases, will require a personal guarantee that holds you financially responsible for your business’s debt. There are, however, ways to avoid agreeing to a personal guarantee, including applying for a credit card from your bank or credit union to leverage an existing relationship.

Still have questions about business credit and finding the right credit card for your small business? iTHINK Financial’s Business Services Advisors can help offer guidance. Contact a Business Services Advisor at 800.873.5100, ext. 8799, businessloans@ithinkfi.org, or visit a branch near you.

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