When your company is just getting started, it seems like a good idea to charge business expenses to your personal credit card. You already have great terms and a high credit limit, so why not take advantage of them?
Unfortunately, using your personal card for your startup can get messy. Failing to separate personal and business accounts can lead to financial confusion, accounting issues, and legal problems.
That's where a business credit card comes in. Getting a business credit card for your startup comes with a number of benefits to help protect, organize, and build your company's finances.
Below, we'll discuss why your startup needs a business credit card and how to apply for the best one to meet your needs.
Why Your Startup Needs A Business Credit Card
You need a business credit card to separate and organize finances, build a business credit score, and access business financing.
Separation Of Personal And Business Finances
There are a few reasons why you should separate your personal and startup finances. When you put business debt on a personal credit or loan account, it will affect your personal debt-to-income (DTI) ratio.
Lenders often use this ratio when evaluating you for a loan. Adding business debt to a personal account can raise your DTI and negatively affect your eligibility and rates for things like mortgages and debt refinancing.
Second, if anything goes wrong with your startup company's financial stability, you'll want to protect your personal credit history from the effects of your company's bad credit.
For instance, bankruptcies remain on your credit report for seven to 10 years, making it difficult to access credit products during that time frame. By separating your personal and business borrowing, you can prevent bad business luck from affecting your personal finances.
Building A Business Credit Score
Credit scores aren't just for people — your business can build one, too. Building a business credit score requires you to utilize credit responsibly to show creditworthiness. A good business credit score can establish credibility with creditors, partners, and investors.
You can use a business credit card to maintain a positive payment history as you finance purchases for your business, especially during growth periods.
Access To Business Financing
Once you establish and build a business credit score, you can access business loans and financing. Most businesses need financing at some point, often during times of expansion. A high business credit score can help you get some of the best rates and terms for small business investments.
How To Apply For A Business Credit Card For A Startup
Applying for business credit cards as a startup is simple. Use the following steps to submit your application and get approved.
Determine Your Business Needs
Different business credit cards come with various terms and perks. To choose a card that has features aligned with your startup's needs, consider the following:
- Cashback or rewards points: Are you looking for a way to maximize what you get out of your business spending? If so, seek out cards that have attractive rewards or cash-back rates.
- Travel rewards: If your business requires you and your employees to regularly hop across the country or globe, consider a travel rewards card. This may earn you airline miles, hotel stays, or rental car perks. Some cards offer travel scheduling portals that allow you to earn a higher rate of cash back on any travel expenses you purchase.
- Low interest rates: If you're using your business credit card as a financing option to purchase business supplies and pay them off over time, watch for low-interest card offers. Low-interest credit cards allow you to save money on unpaid credit balances in the long run.
- 0% introductory period: When you're getting ready to make a big business purchase, consider a card with a 0% interest introductory period. Some credit card companies may extend the introductory period for over a year. Time to pay off initial business expenses without interest could make or break solvency in the early days of a new business.
- High limits: Some business credit cards have higher spending limits than you would typically find on a personal card — this enables larger or more frequent purchases. For example, SaaS startups often spend a lot on technology and infrastructure when first starting out, and high-limit credit card options. can help them get what they need, when they need it.
Check Your Credit Score
Knowing your credit score tells you what kind of business credit cards you may qualify for. Credit reporting agencies provide business credit scores, which are similar to personal credit scores.
Three of the biggest business credit reporting agencies to pull your report and score from are Dun & Bradstreet, Experian, and Equifax. You'll likely be charged a fee for each credit check.
Research And Compare Business Credit Card Options
Before applying, research and compare different small business credit cards for startup businesses. Note that each time you apply for credit, it can affect your credit score. You'll want to only apply to cards that you actually want and that you confidently qualify for.
Make use of online card comparison aggregators sites to compare a few options side-by-side. Using these tools can help you find the best business credit card for your startup.
Choose The Best Corporate Credit Card For Your Startup
If you're interested in higher spending limits and rewards, you may want to consider a corporate credit card instead of a business credit card.
Corporate credit cards are typically managed and paid for by the company and given to authorized employees. They can use corporate cards to finance purchases such as business travel and client meals.
Choosing the best corporate credit cards can be a strategic move to maximize your available funding, as they typically have higher limits than business credit cards.
They may also offer negotiated perks that can give you even more rewards for your business expenses. For example, Divvy's corporate card gives you credits and discounts for Amazon Web Services, Adobe products, and Carta subscriptions.
Gather Required Documentation
Before submitting your business credit card application, gather required information and documentation, including:
- Your startup's legal business name
- Your name as it should appear on the card
- Business address, email, and phone number
- Type of business and structure documentation, such as LLC paperwork
- Age of business
- Federal tax ID number
- Monthly payments and expenses
- Annual revenue
Submit Your Application
Once you've gathered the required documentation, enter this into an online card application form and submit your application. Many credit card companies will give you approval results in a matter of minutes, but you may need to wait up to 10 days in some instances.
Track Your Credit Card Expenses On A Financial Dashboard
Your startup needs a business credit card to keep your personal finances separated, build your business credit score, and access financing.
You can apply for a business card once you know which one is best for your startup's needs, business habits, and credit score.
Once you're approved for a business credit card, make sure to have a financial platform where you can track your credit card spending and ensure credit card reconciliation.
Staying organized will help you make good financial decisions and promote the long-term health of your startup. See what kind of platforms can best support your business spending today.