How to Get a Business Credit Card for a Startup
When it comes to getting a business credit card for a startup or new business, you must first know your company’s needs inside and out. This guide is here to help you collect all the facts and figures you need to apply for your ideal corporate card.
Step 1: Understand Startup Credit Card Terms and Benefits
No two businesses are quite the same. That’s why you’ll want to choose a business credit card that meets your needs and goals. It’s critical that you understand what your primary purpose is for using the card.
Is it another method to finance the company?
A way to easily spend instead of relying on old-school methods like checks and invoices?
The extra rewards or points?
Whatever the reason, to make the best decision for your new enterprise, consider the following factors:
- Personal Guarantee – While many business credit card issuers expect a personal guarantee, some don’t. In fact, there are some issuers that only look at your startup’s financial health to determine if you qualify. Getting a card through one of these companies might be your best bet if you’re worried about your personal credit score.
- Card Limit – If you plan on spending a lot, it’s important that your credit card has high limits. Card limits and utilization are also a key factor in credit scores. A part of your credit score is determined by how much of your total credit you use. As a result, you need to carefully estimate how much you think you’ll need to put on the card.
- Fees and APR – Most corporate card issuers charge annual fees, late fees, or hefty interest rates for remaining balances each month. If you’re going with a traditional credit card, you’ll have to worry about those interest rates and factor them into your budget. With a charge card, you might have to pay an annual fee or setup fees instead. Though there are charge cards with no fees for small businesses.
- Balance Carry-over – On a similar note, traditional credit cards allow you to carry-over your balance each month, with interest. On the other hand, charge cards expect you to pay your balance in full each month. This lack of carry-over means you pay zero APR, which can be very enticing for small businesses or startups. However, if you’re unable to pay your balance in full each month, you may be at risk of getting charged late fees, or having your card terminated.
- Cash Back or Rewards – Depending on your business needs, you may be interested in collecting points through purchases and redeeming them for useful rewards throughout the year. Other card issuers may offer cash back rewards on many or all purchases. Some even offer a combination of both. Rewards points often disguise their true value. When you gain 70,000 points on a purchase, the real question to ask is, “what is the equivalent monetary value?” With cash back, this is always clear.
- Bookkeeping and Integration – This is often overlooked. Managing receipts, invoices, and expense reports can be a huge time suck, especially for a small company or burgeoning startup. If you want to mitigate some of your bookkeeping and financial tracking, consider a card issuer that does some of that for you. Some companies will integrate with popular accounting software services, or even perform analyses on how you can save more money.
Step 2: Consider Corporate Card vs. Charge Card
With all this talk of credit cards, you might think that it’s the only option for you as a small business owner. However, charge cards are also an excellent option for any startup. As briefly mentioned before, the fundamental difference between a credit card and a charge card is that you must pay your balance in full each month for a charge card.
The benefit of this system is that you pay zero interest while still reaping the benefits of a line of credit.
Some other differences include:
- Credit Limits – Most credit card companies set spending caps on accounts called credit limits. Charge cards offer no preset spending limits and instead change these caps over time, depending on your startup’s income, credit history, and spending patterns.
- Additional Qualifications – Because charge cards require you to pay your bill in full every month, they typically look at your business’s finances, meaning you should already have proof of revenue and projected growth.
Step 3: Fill Out the Application
After you’ve compared the pros and cons of the business credit cards you’re considering and made your choice, it’s time to apply. Fill out the credit card application with information on both your personal finances and that of your startup, including:
- Business Name – If you’ve registered with your state, place your startup’s legal and DBA name here.
- Industry – What industry category does your startup business belong to? This answer is typically general, like “healthcare,” “tech,” or “education.”
- Your Startup’s Business Structure – This section describes how your startup business is organized and how it is legally recognized. For example, your startup’s structure might be an LLC, a corporation, or a sole proprietorship.
- Tax ID Number – If your business is registered to the state, you may already have a Tax ID number.
- EIN Number – Your Employer Identification Number is like a Social Security Number, but for a business rather than a person.
- Startup Start Date – The start date is when the company was officially registered with the state as an LLC, partnership, or corporation.
- Business Contact Information – You’ll want to write down your business’s phone number, physical address, and email address on your application. If you don’t have those yet, your personal contact information should suffice.
- Total Annual Revenue – Input the money your startup makes annually, not accounting for expenses. If you have yet to accrue any revenue, make that clear. For most corporate card issuers, this shouldn’t be a problem.
- Large Shareholder Information – Provide basic contact and identification information on any stakeholder who owns more than 25% of your business, including their Social Security number.
- Historical financial statements – Many creditors will require greater detail about your overall financial standing. By viewing your historical financial performance, they can get a better idea of your credit-worthiness.
Ramp: Built for Growing Startups
When searching for the best credit card for a small business, you might find yourself at a crossroads: you want a card with excellent benefits, insights, and integration, without all the burdensome fees and interest that come with credit cards.
Ramp is a charge card with a built-in spend-management platform. It’s one of the best corporate cards for startups because it has all the benefits of a business card without the fees and personal scrutiny that make them intimidating.
Here’s why you might want to consider this innovative corporate card as a business owner:
- Get 1.5% cash back on everything
- You don’t need a personal guarantee
- Receive advanced spending insights and accounting software integration
- Issue unlimited virtual and physical cards with dynamic controls for each
- Credit limits are 10-20x higher than those of other corporate cards
- No fees for startups and small businesses
If you’re interested in running your expenses through a corporate card that wants you to save more money and earn cash back on all your purchases, check out Ramp and see if you qualify today!
Merchant Maverick. Ramp Corporate Card Review. https://www.merchantmaverick.com/reviews/ramp-corporate-card-review/
NerdWallet. Getting a Credit Card for a New Business or Startup. https://www.nerdwallet.com/article/credit-cards/getting-a-credit-card-for-a-new-business-or-startup
Tech Crunch. Ramp is a corporate card focused on helping you spend less. https://techcrunch.com/2020/02/12/ramp-is-a-corporate-card-focused-on-helping-you-spend-less/