Your first business credit card application process is different than the personal application process. There’s more paperwork, more questions, and to be honest, more of an uncertainty that you’ll be approved. Most people applying for the first time aren’t sure what to expect and this ambiguity causes stress. It shouldn’t.
The application process isn’t so bad, but there are a few things you should know before you apply, especially if you have a new business or are unclear as to what the card issuer is looking for.
What Card Issuers Want to Know About Your Business
The goal of any credit card application is to learn whether the applicant can pay back the lender. Business credit cards are no different. But the main question that credit card issuers want to be certain is that you’re a real business.
This means you’ll be asked for your legal business name, your EIN (or social security number if you’re a sole proprietorship), how long you’ve been in business and your annual revenue.
With a new business, you might feel as if this information is overly intrusive. However, across most platforms, these are general questions asked of anyone looking at how to apply for a business credit card.
Where people get confused is that they feel that they need years worth of revenue and experience to get approved. But that’s not always true. Plenty of credit issuers will approve newer businesses (some that have only existed for several months). All they care about is whether or not you have money coming in and whether you’ll use the card.
The Personal Guarantee Reality
This is where things get blurry—and should be crystal clear going in. When you apply for a business credit card, you’ll almost certainly have to sign a personal guarantee.
A personal guarantee means that the credit issuer wants to know that if your business fails or cannot pay its bill, that they’ll still be able to collect from you.
This is especially true for new businesses because, as a lender, the issuer doesn’t know you yet. They have no pattern of payment history for the business so they check your credit score instead. If your business has failed and you’ve run up debt, they want to make sure that there’s accountability.
This sometimes rubs people the wrong way because they feel as if this personal component defeats the purpose of separating business from personal finances. But this is how most small business cards operate—especially in the beginning.
Documents You’ll Actually Need
The application process isn’t bad once you’re prepared with all your information. If you know what you’re getting into with an application, most of them take 10 or 15 minutes max to complete online.
Learning how to apply for a business credit card beforehand helps you gather your information so that you’re not stuck mid-application wishing you had something else or needing to scramble to find it later.
At a minimum you’ll need your EIN or social security number, your home address (if applicable), your estimated annual revenue and what industry you’re in. Some agencies ask for additional documentation like bank statements or tax returns but this is uncommon unless you’re applying for a high limit card.
A lot of people get confused about the revenue question. If you’re a new business, how could you have revenue? The answer: you don’t yet but you can estimate how much you’re going to make. Be realistic! If the credit issuers find out you’ve been dishonest by inflating numbers elsewhere (after receiving documentation), they’ll deny you and it won’t matter anyway.
How Long the Process Takes
You will either receive an answer for approval or denial quickly after submission of your new business credit application. While some decisions are instant (like right there on your screen), other applications take a few days while others review or need additional follow-ups.
If someone needs additional paperwork or they want to verify any information, it could take a week or two but that’s rarely the case.
If the approval is instant it usually means you’ve checked off boxes indicating a good credit history (personal score); good information with no red flags; reasonable explanations; all in all — everything checks out—and you’re just starting with small approvals for your first card.
If your application gets flagged, it doesn’t mean you’re being denied; it just means someone needs to take another look for clarification.
What Actually Affects Your Approval Odds
Your first business card application will rely heavily on your personal credit score. Most companies seek an applicant with at least a 670 score (some will approve lower). The better your personal credit score, the better your odds and the high limits they might grant you.
The only other significant thing is how long you’ve been in business. Yes, it’s better if you’ve been around for two or three years; however, plenty of cards are granted for businesses that have been around for only a few months—or even newly operating ones—as long as there’s an influx of revenue and there’s responsibility involved.
The Credit Limit Question
When you get approved, don’t be surprised when the credit limit is nowhere near what you expected (especially on your first business card). The limits tend to be small when you’re new.
Expect either a $5,000 or $10,000 limit at most even if you’re requesting $25,000 because lenders need to see how you’ll manage it first before giving you more down the road.
Not all hope is lost, however. Once issuers see responsible spending habits and increased growth on their end from your successful business endeavor, limits increase over time.
Some issuers automatically take it upon themselves quarterly or biannually while others allow requests after you’ve had a card open for some time.
But starting with lower limits isn’t a bad idea anyway; it keeps your expenses tempered so you don’t rack up more debt than your new company can handle.
What Happens After You Apply
Once you’re approved and receive your card, activation is required but it shouldn’t take much longer before you can start using it immediately thereafter.
Most agencies provide online access to check balances, pay bills associated with the card and take care of relevant features as needed.
What’s crucial about this experience is taking responsibility from the start because you’re building your history right here! Your company now has an established business credit history.
That means paying on time, keeping reasonable balances relative to limits and using the card regularly (but without maxing it out) all contribute to building this history and it’ll make it easier down the road when established cards offer better terms and increases as rewards.
Some people view their first card as a starter attempt; they use it for a year or two to establish their business credit history and when it’s time to get a better one with lower fees and better rewards (after they’ve built that history), they make the move. That’s smart if using their first credit cards doesn’t meet their expectations of their second one attempt.
Making the Process Smoother
The easiest way to go through the first time application experience is by being prepared at all times.
Know what documents you’re going in with; use prepared numbers; don’t guess based on what you’d think would help you get approved—instead be honest from the start whether it’s good or bad news.
If you’re still in an infancy stage or feel your personal credit isn’t so hot, consider applying for secured business credit cards or ones meant for start-ups/newer businesses in general that are easier to get approved on.
You can always secure cards after establishing them for one year if you’ve proven responsible spending habits—and get upgraded cards down the line!
Once you’ve got an approved first business credit card, use it wisely! It’s no longer part of your personal credit history; this is a new account for you!
However, due to the personal guarantee clause for now until further notice, it’s part of your responsibility—but over time, that personal guarantee becomes valuable when looking into loans (higher amounts granted) once the company has an independent credit profile.
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