It’s crucial to keep your personal and business finances separate. Not only does it make tracking business expenses easier, but it also helps maintain the legal protections offered by certain business structures. A simple way to do this is by getting a small-business credit card for business-related purchases only.
If you’re just starting a business or haven’t yet gotten a business credit card, here’s what you need to know:
Step 1: Check Your Business Eligibility
First off, you need to ensure your business is eligible for a credit card. The good news is that almost all types of businesses, from formal ones like LLCs or corporations to unincorporated sole proprietorships, can get a business credit card. You can check with card issuers about your business’s eligibility. Some might require you to have been in business for a certain period or have a minimum revenue. If you’re a startup without a formal business structure, you can use your personal Social Security number instead of an Employer Identification Number. Remember, the card offers you qualify for will depend on your business type.
Step 2: Secure Your Business Credit & Identity
If your business is formally incorporated, you should secure its identity and start building business credit. Apply for a D-U-N-S® Number from Dun & Bradstreet, a unique nine-digit business identifier that lends your business legitimacy. Register for Dun & Bradstreet’s CreditSignal to track and improve your business credit.
Step 3: Check Your Personal Credit
Don’t forget about your personal credit score. It can affect your ability to qualify for a business loan or credit card. Many card issuers consider both your personal credit history and your business credit score when reviewing your application. If you have poor credit, try to improve it before you apply.
Step 4: Improve Your Business Cash Flow
After boosting your personal credit score, ensure you can demonstrate good cash flow to make your business credit card application more attractive. Lenders want to see that you have reliable income before giving you a line of credit. You can improve your company’s cash flow by increasing sales or reducing expenses.
Step 5: Research Your Business Credit Card Options
When you’re ready to apply for a business credit card, start comparing your options. Look at the cost of the card, account opening bonus, ongoing rewards, and business management features. Different lenders have different reward partnerships and programs, so take the time to compare your options.
Step 6: Apply for a Business Credit Card
Once you’ve chosen the small-business card you want, you’re ready to apply. You’ll need to provide both personal and business information. This helps the card issuer check your personal credit and learn more about your business finances to make a lending decision.
In conclusion, a business credit card makes it easier to separate your business and personal finances. Plus, if you get a rewards card, you can earn rewards for your company’s spending. Just remember that business credit cards, like personal ones, have high interest rates, and you’ll need to be ready to repay the money you borrow.
