Who Can Apply for a Business Credit Card?
It’s often thought that business credit cards are for corporations. But there are different types of credit cards designed for small businesses.
You can apply through online forms for most business credit cards.
What Information Do You Need to Apply for a Business Credit Card?
Prepare to apply for a business credit card by having the right information. Your prospective credit card issuer is likely to ask for the following:
· Legal name of your business. If your business is registered, this would be the name that you registered with your provincial government. If you’re a sole proprietor and unregistered with the government, this is [1] your own name.
· The business’ number. You may be asked to share your business number which you obtain after registering with the Canada Revenue Agency.
· Legal structure of the business. Are you a sole proprietor or in a business partnership or corporation?
· Industry in which your business operates. When making the credit card application, there’s typically a list of industries for you to choose from. If your business doesn’t appear to fit into any of them well, just choose the closest match.
· Your role in the business. For example, owner, president, or general manager.
· Business mailing address. If you’re running your business from home, this is your home address. You’ll probably also need to provide a business telephone number and business email address.
· Age. How many years the business has been operating?
· Number of employees. How many employees the business has. If you’re a sole proprietor, it’s 1.
· Annual revenue. If your business is just starting up, it’s fine to put “zero.” However, the card issuer might ask for a forecast showing your expected future revenue. It will be important for you to understand your business’ cash flow and expenses. Read “Annual Income: Gross vs. Net Income” for further information on calculating revenue.
· Expense estimate. Your expected monthly expenditure on your business credit card.
Card issuers may also ask you for personal information such as your date of birth, your household income, your home address and telephone number, your Social Insurance Number.
How to Qualify for Business Credit Card?
Whether you qualify for a business credit card depends in part on your credit score. Most business credit card issuers want a good to excellent credit score. Fortunately, for new businesses, the credit score does not have to be from your business alone. Your personal credit score can also be considered. For more credit score information, read “How Long Does It Take to Build Your Credit Score?”
The card issuer will check your business’ credit score first. There are several bureaus that record business credit information, but the issuer may do their own credit scoring using information that you provide, such as your business plan and cash flow forecast.
If your business doesn’t meet the issuer’s credit criteria, then the issuer will check your personal credit score. If you have a good to excellent score (670-850 points) your application for a business card may be accepted even if your business credit score is low or non-existent. The credit limit and interest rate on the card will then be based on your personal credit score. Credit limits on business credit cards are typically higher than on personal credit cards, which can be a boon for a new business – and some business cards have no pre-set spending limit – see “What Is a Credit Card Limit and How Is It Determined”
You may additionally be asked to sign a personal guarantee. This means that if the business fails to make payments in accordance with the terms and conditions, the card issuer can recover the balance directly from you.
Some card issuers will accept applications from people with low credit scores, but the interest rate on the card is likely to be high and they may require a security deposit.
The Takeaway
Getting a business credit card is a relatively simple process, typically requiring information you have readily in hand and the process being online. Even very small businesses and sole proprietors can get business cards, and this can give them more flexibility than relying on personal credit cards, especially for startup expenses or stocking up for holiday sales. However, a business credit card may affect your personal credit score, and you can be personally liable for the balance on the card. So, it’s wise to keep careful control of your business credit card expenditure and only spend what you’re sure the business can afford.
This article is intended for general informational purposes only and does not constitute legal advice or an opinion on any issue. It should not be regarded as comprehensive or a substitute for professional advice.