A business credit card keeps your business and personal money separate, can help you earn bonus rewards, usually comes with higher credit limits, and can position you to more easily qualify for a business loan. Some business owners keep asking, when is the best time to apply for a business credit card? Others ask whether it’s too late once the business has already started. The ideal time is when you have a good personal credit score, your business plan is set, and before you actually start spending any of your business funds.
Most issuers are much more likely to approve applications for business credit cards if your personal credit score is at least “good,” and getting it is a lot easier if it is excellent. “Good” is usually considered 670 to 739, and most banks will work with you in that range. When your credit score is below 670, you may run into some trouble getting approved. But it’s worth checking with your local bank or credit union. While you’re waiting to apply, try to improve that score: pay down some credit card debt, ask for a higher credit limit, or wait a few months.
Register Your Business
Next, register your business, whether that’s an LLC, a sole proprietorship or an S corporation. The process will be different depending on what type of business you’re forming and the state where you’re doing it, but generally you’ll need a business name, an operating agreement and a filing fee. Once you’ve registered your business, you’ll want to set up a business checking account. It might make sense to work with a bank that you already use, and you might also consider looking at some of the online banks that have small business accounts.
What about if you already started the business? If your credit score is good, then you should be able to apply after you’ve established your business and registered it. But again, timing matters. If you can, apply for the business card a few weeks before the first business expense you have planned, especially if it’s a big one. That gives you time to get approved and have your credit line ready. Charging expenses to the business card also earns you those sweet rewards, and builds your business credit. If you have to start making purchases before you get the card, use your business checking account. Using a personal checking account for a business expense can be a more complicated process and might make a bank take a closer look at you.
Shop for the Best Small Business Card
Once you’ve decided to apply for a credit card, shop for the best small business card you can. Then go to the company’s website and apply directly. The best cards generally come with some kind of signup perk. It might be a big chunk of points, or a limited-time 0% APR, or maybe no annual fee. APR stands for annual percentage rate, and with a 0% offer, you don’t accrue interest on a big purchase you make during that signup window.
One application at a time is the rule for new business credit cards. If you knock on several doors in quick succession, your credit score will take a hit because most credit card companies pull a hard inquiry (sometimes called a hard pull) on your personal credit. This is different than a soft inquiry like an insurance company or apartment lease request. A few hard pulls in a row can make lenders suspicious, and if your first choice denies your application, wait at least a few months before trying again.
Once you’ve applied, you don’t have to worry if your credit card company doesn’t tell you about the status of your application right away. It can take a few days. Some issuers reply instantly, especially if you have great credit. My advice is to wait patiently and don’t apply for additional cards while you’re waiting to hear back. If you are denied, you can usually call the company and ask why. If that happens, I recommend waiting a few months to apply again.
Using a Credit Card Responsibly
Once a credit card for your business is approved, in most cases you can use it immediately to spend money. In fact, you should receive your card number as soon as it’s approved, even if the actual card itself hasn’t arrived yet. You’re issued a credit limit, which you should never go over because not only does it hurt your credit score, but you’re also subject to some pretty hefty fees. It’s also important to make sure that you keep track of all your expenses and pay on time, because in the long term using a credit card responsibly can build up your business’ credit and make it easier to get a small business loan.
Big-name credit card companies, like Chase, will often run a personal credit check on you for a business card application. If you have a score of 670 or higher, you should be good to go. You can qualify for a business card as soon as you register an LLC; business registration rules are based in your local area. You can use your EIN (employer identification number) on the application, too. The fastest way to build business credit? Get a business card, pay your bills on time, and don’t go over your limit.
I also get a lot of calls from business owners who aren’t in that great of a spot with their cash flow. My advice for that is not to run out and apply for a new card because you think it will fix everything. The same timing rules apply. Go take a look at where your personal credit score is right now, and don’t apply for more than one new card in a short amount of time. Give yourself a chance to do one credit card well - pay on time, and don’t go over the credit limit.
So the best time to apply for a business credit card is when your personal credit is good, you have established an LLC, and you haven’t made any major purchases for the business yet. Use that time to find the best signup bonuses and rewards programs. One at a time, of course. And expect that there will be a waiting period of a few days while it is approved. Then get going!
