Small Business Credit Card FAQs

/ BY / Small Businesses

Operating a small business can be both costly and complicated, especially at first. For this reason, most small business owners will open up a business credit card early on in their business.

In addition to providing a cushion to draw money from, opening up a business credit card is advantageous for a number of reasons. It keeps business and personal finances separate, makes taxes and accounting easier, and allows you to earn cash back or rewards on your business purchases.

However, the application process, billing, and payments of small business credit cards are different from consumer credit cards. The following frequently asked questions will help you better understand small business credit cards.

Can a brand new business get a small business credit card?

Many new business owners mistakenly believe they must have established a proven record of sales or have a certain amount of working capital in order to open up a line of credit. Most credit card companies will open small business credit cards to new companies, provided the business owner(s) meet the credit requirements set forth by the credit card company.

Whose credit is used when applying for a small business credit card?

If your business has an established history and you can prove through tax documents that it generates consistent income, you can apply for a business line of credit in the name of the business. If you have a new business or haven't generated consistent income, the business owner or authorized officer of the business will need to apply.

What are the requirements for opening a business credit card?

When applying for a business credit card as a business owner or officer, credit card companies will generally look for the following:

  • Excellent credit score of business owners/applicant
  • Legally recognized business name
  • Business license and business tax ID
  • Personal household income information
  • List of assets/liabilities

Are my personal assets protected?

When you apply for a business credit card as a small business owner, banks and credit card companies use your personal assets as collateral or you default on your credit card payments. This ensures that they will be repaid even if your business goes under or files bankruptcy.

For this reason, it's very important to monitor your business credit card spending, especially if you have multiple people using the business credit card. If you have a balance on your business credit card, pay it off as soon as possible and aim to pay off the balance each month.

Can I use my business credit card for personal expenses?

As a small business owner, it can be tempting or convenient to use your business credit card for personal expenses. However, keeping your personal and business charges separate is important for tax purposes and general accounting.

If you were able to open up a business credit card or line of credit without a personal guarantor, this becomes even more important. Using your personal card for even minor personal expenses means you can be held personally liable for charges incurred if the business defaults, even if you did not open the card under your name and personal credit account.

How do I choose a business credit card?

There are many small business credit cards on the market today. Before deciding on one, carefully research the different options. Ultimately, you will want a card that will pay you back. Many cards offer rewards related specifically to business use, such as free postage or shipping, discounted office products, or travel perks.

A business credit card can be extremely helpful when starting up and operating a business. Knowing card requirements and what to expect before you apply can help you better choose and manage your business credit card.

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Please note your financial situation is unique and our tips & advice presented here may not be appropriate for your situation. CreditCardXpo.com recommends that you seek different advice & opinions from your own accountant or financial adviser who understands your individual circumstances before making any important decisions or implementing any financial strategy.