The Ultimate Guide on How to Get a Business Credit Card
One of the most important parts of setting up a business for long-term success is securing your finances. Your business needs funds to operate, and the best businesses have multiple resource streams.
One of those options should be business credit.
But applying for business credit isn’t always the most intuitive process in the world.
That’s why this article is going to break down how to apply for business credit and ultimately how to get a business credit card. We’ll break down the process to make it as simple as possible to follow. But first, let’s quickly review why it’s important to know how to get business credit.
Why You Should Get a Business Credit Card
Because using a personal credit card for business is never a good idea.
No matter what size or kind of business you run, it’s important to keep your personal finances separate. The point of establishing business credit rather than being a sole proprietor is to protect you and your family’s assets from any issues resulting from your professional endeavors as a business owner. If you don’t separate the two, a business dispute could have personal consequences to your credit.
Insulating your finances remains possible if you make business purchases with a personal card, but there are potential risks and areas that could be scrutinized should a dispute occur. A business card makes every transaction and purchase clean, legitimate, and completely separate from your personal assets.
The separation not only makes it easier to track your spending patterns, but it also simplifies accounting and taxes. Business expenses are accounted for and then automatically drawn from your business bank account.
In addition, a business card comes with a higher limit than a personal card, meaning that you have greater spending power.
To make sure you never dip into personal cash or credit, you need a business card!
Application, Qualification, Credit: How it Works
As noted above, the process of how to apply for business credit isn’t always obvious. In most cases, applying and getting approved for business credit can take longer than a personal card. The process goes as follows:
- Establish your business
- Research types of corporate cards
- Compare individual creditors
- Apply for business credit
Step 1: Be (or Have) a Business
The first step toward applying for business credit? Have a business that needs credit.
It sounds obvious, but the biggest and most important business credit card requirements involve the various procedures you need to go through to get your business up and running.
In practice, that means a level of organization and professionalism. It means as a business owner, choosing a business organization and registering at the state and federal levels.
The most common business structures to choose from include:
- Sole Proprietorship
- Limited liability company (LLC)
- Corporation (C, S, B, Nonprofit, etc.)
Once you’re officially registered as one of these (or other) kinds of business, you need to set up your business finances.
First and foremost, that means registering with the IRS and obtaining an employer identification number (EIN). Your EIN is like a Social Security Number, but for a business rather than a person.
It enables you to create a business bank account.
Then, you can start thinking about business credit.
Step 2: Research Kinds of Credit
Once you have your business 100% set up, you’re fully ready to explore options for funding, including business lines of credit. And the most important part of this process is doing your due diligence and finding the card and creditor that’s perfect for you.
The first substep is learning about what kind of card you need.
The choices include:
- Credit cards – Cards that enable you to spend up to a specific credit limit defined by your line of credit. The amount must be paid back in full, plus interest. Balances carried will accrue compounding interest rate over time, called the annual percentage rate (APR): Interest applied to a balance equals a certain percentage of that balance scaled down to a monthly portion of the whole year’s interest on that sum. Interest is added each month and counts toward the next month’s balance, compounding and increasing the principal for the next pay period.
- Charge cards – Cards that enable you to spend up to a certain limit each month, like regular credit cards. But the big difference between credit cards vs charge cards is that your balance must be paid in full by the end of the payment period: Balance cannot be carried over month-to-month. Failure to pay could result in significant penalties and even cancellation. No regular APR accrues, but the penalty interest that may be applied to a negligent balance can be significantly higher than APR on credit cards. Avoiding accruing interest comes down to cash management and timely payments.
- Virtual options – What is a virtual credit card? A digital alternative to the physical card. Historically, physical, plastic (or metal) cards have worked as a sort of key granting access to the accounts associated with them. But now, virtual credit cards offer increased flexibility and security, lessening the threat of physical theft or burglary. You also have an easier way to manage your card payment methods if you specify that certain virtual cards are meant for specific use cases such as your marketing ads or SaaS.
Besides the kind of card you choose, there are also significant considerations within each category. For example, no two creditors offer the same individual costs and benefits.
Step 3: Compare Individual Creditors
Every individual creditor has their own special offer for business credit. Some banks and other financial institutions offer numerous different tiers and deals. Wading through the sea of available options can be a hassle, so it’s important to know what kinds of benefits to look for.
The biggest point of comparison between different creditors today? Cost, credit limit and payment terms.
But most business credit cards have become commoditized. The real differentiators to look out for go beyond that, including:
- Ability to issue cards to employees easily – Many teams are forced to share a single physical card or pass around the card details in order to pay for anything from vendors to SaaS to a simple coffee. It’s much easier to manage expenses when different cards are used for different purposes.
Look for a corporate card program where you can order an unlimited number of physical or virtual cards that can be used for a one-time purchase or recurring expense. This enforces your company’s expense policy while empowering your team to have greater visibility over spending habits.
- Unlimited virtual cards – Virtual cards work the same exact way as a regular physical card, minus the physical card itself. They’re easier to issue than physical cards, allowing you to dole out as many as needed. For example, one employee can have multiple virtual cards, one for their personal per diem, one for their marketing budget, and one they use for a third-party vendor they partner with. This gives the employee and management greater control over spend, heightened security, and improved ease of use.
- Automatic receipt capture – Tracking down receipts is a hassle for both employees and your accounting team. Find a corporate card that instantly notifies you the moment you’re charged, requesting a picture of the receipt. Once given, the receipt will automatically be matched to the proper transaction. This saves your team countless hours when it comes time to reconcile the month’s end book.
- Advanced reporting – Advanced reporting functionality gives you real-time feedback on your current finances, instead of waiting to assess the company trajectory at the end of the month. Find a corporate card that lets you view your financial data through various dimensions (time, vendor, team, department, etc.).
- Automatic syncing with accounting solutions – Seamless integration with the top accounting providers makes it simple to one-click sync or export all of your financial data to any one of the dozens of top accounting providers.
- Savings mechanisms – Beyond cash back incentives, some cards also offer savings irrespective of money spent. That is, savings programs that don’t require you to spend money to save money. Certain spend management platforms can analyze your spending habits and actively seek out cheaper alternatives to save you money on any and all kinds of business expenses.
- Special promotions and partner rewards – Finally, many credit cards offer special promotions and a signup bonus linked to brand partnerships. These promotions include deals, such as specialized savings and cash back incentives for individual companies.
- Spending incentives – The core of many creditors’ benefits are special promotions that encourage cardholders to spend money by baking in special savings on money spent, which incentivize spending in certain areas (e.g., travel, SaaS, etc.).
One of the most common promotions is a points system. But this often creates more hassle than savings since you can only redeem rewards on certain things or receive points for specific purchases. Plus, when you break down the points to see their real cash value, you’ll often realize the points system is just a game. When you’re looking at your next corporate card, find one that offers direct cash back instead.
Finally, one last area of comparison between potential credit cards is what it takes to actually sign up. A simple benefit of Ramp, relative to our competitors, is it’s extremely easy to see if you qualify for our card. Plus, all of the above benefits are included in our spend management platform.
Which brings us to the last step...
Step 4: Apply for Your Business Card
Once you’ve decided on a kind of card and a specific provider, it’s time to apply for a business credit card.
This last step should be the simplest, and some companies make it as easy as can be.
Applications for business credit cards often take longer to process than applications for personal credit cards. To speed up the process, you need to have all the relevant information on hand. The required information can vary by company.
Here at Ramp, we’ve distilled the application process down to a bare minimum. We only require you to provide:
- Your company’s EIN (see above)
- Linked access to the company’s bank accounts
- Identification for at least one for one corporate officer:
- Name and position in company
- Social security number (SSN)
- Date and place of birth
You may be wondering, when applying, does a company card affect credit scores. Don’t worry. With Ramp’s corporate charge card, even if you’re the person whose personal information is processed, your personal credit score isn’t affected at all and you have no founder’s liability. We offer the money-management tools to leave you and your personal credit score unaffected.
Once this information is processed, you’re ready to start spending—and saving—with Ramp.
Ramp: The Ultimate Corporate Card
As you can see, the benefits of business cards far outweigh any difficulty of applying for it. Ramp is the best corporate card on the market because it has built-in spend management tools designed to strengthen your finances.
Plus, it takes just five minutes to find out if you qualify.
You’ll never worry about any kinds of fees, and you’ll save a ton of money with our:
- Unlimited 1.5% cash back
- Robust savings program
- Exclusive partner rewards
Now that you know how to apply for a business credit card—and you’ve met us, the corporate charge card—it’s time to get started!
Apply today and see what Ramp can do for your business!
NerdWallet. How to Get a Business Credit Card. https://www.nerdwallet.com/article/credit-cards/get-business-credit-card
SBA. Choose a Business Structure. https://www.sba.gov/business-guide/launch-your-business/choose-business-structure
SBA. Manage Your Finances. https://www.sba.gov/business-guide/manage-your-business/manage-your-finances