Obtaining a business credit card can be complex depending on the type of business, credit history, and other factors. It’s a really important financial tool that can allow you to cover everything from day-to-day business costs to deferring some payments. In addition, it may also be subject to certain reward programs.
Business Credit Cards
There are many differences between a business credit card and a personal credit card. One of the most noticeable is the difference in credit limits. Usually, a business credit card will always have higher limits. However, remember that this also means higher standards from the lender.
In other words, you will not be able to get a business card unless you have a company or business. If you have a personal credit card and want to increase your credit limit, you need to contact your lender and request a credit extension.
In this article, we will assess some of the factors you should consider before applying for a business credit card. Mainly, to know whether or not you will be able to receive approval.
Are you eligible for a business credit card?
Not all lenders have the same eligibility criteria. It is important to assess this as, in some cases, criteria may be more or less unpredictable. However, there are a few things you can know in advance that virtually all lenders will ask for.
First is the verification of your personal credit history. It should be no surprise that providers value the applicant’s personal credit history even if you apply for a business card. That is especially true for small businesses or start-ups where there is not yet a proven credit history.
Even for relatively stable businesses with a good credit history, business credit cards with high credit limits may require some additional collateral.
Other factors that the lender will take into account are the following:
- Income balance sheet: assessing the economic results of the business.
- Commercial credit score: analyzing the credit history of the company or business.
- Business documentation and financial statements
Once you’ve determined that you are eligible for a business credit card, the second step is assessing which offer is the most suitable.
How to choose a business credit card?
The choice of a business credit card should always start with a comparison between different offers. Remember that the differences in applying conditions and interest rates can be significant between lenders.
However, we often resort to the most immediate alternative, to continue working with those lenders or financial entities we know. That may have some advantages, and if we have more financial products with the entity, we may get some benefits. If not, we should make a comparison assessing aspects such as:
- If there are contracting costs and if so how they are applied.
- If there is a 0% APR period and how long it lasts.
- If it allows having more than one associated card and the cost.
- If there is an annual fee and how much it is.
- The rewards and benefits it can offer.
This last aspect is especially relevant. In recent years, with cards becoming increasingly similar in interest rates and terms, the main factors that diferenciate them are their benefits and rewards.
Business credit cards can even offer some interesting rewards programs. In fact, these programs can make the difference between one offer and another.
Why choose business credit cards?
There are several reasons why choosing a business credit card may be a good idea for your company.
The first of these reasons is fairly obvious: you need to be able to separate your personal finances from your business finances. Although this is taken for granted in large companies, sometimes, in small businesses, the concepts get mixed up, so separating your own finances from those made by and for your business is not easy. Business credit cards allow this precise separation.
Another important aspect is that you can generate a commercial credit history. Previously, we pointed out that when granting this type of card, especially for new businesses, your personal credit history will be considered of high importance. If you have been using your business card for some time, what will happen is that little by little, a business credit history will be built up. In the future, when you have to make financial transactions with the company, this business credit history can also be used.
On the other hand, the business credit card is enough to lead to the construction of small working capital. In other words, when applying for or qualifying for other financial products, you have a pre-approved credit capital base. In other words, you can practically count on a monthly line of credit.