What are Business Credit Cards and how to get one?

Business credit cards have become an essential tool for entrepreneurs and small business owners. They offer a convenient way to manage expenses, build credit, and access a range of benefits tailored to business needs. Understanding what business credit cards are and how to obtain one is crucial for any business looking to optimise its financial management.

Just want a credit card that gives you multiple discounts and is big on savings? Just get the Airtel Axis Bank Credit Card from Airtel Finance and enjoy maximum rewards! Low joining fees, low interest rates, relaxed eligibility criteria and much more. Apply from the Airtel Thanks app today!

Understanding Business Credit Cards

Business credit cards are specifically designed for business-related expenses. Unlike personal credit cards, these cards provide features and benefits that cater to the needs of businesses, such as higher credit limits, expense tracking tools, and rewards programs that align with common business purchases. They are issued to businesses, and the company is responsible for the debt, although the business owner may need to provide a personal guarantee.

Read more: What is a lifetime free credit card?

Benefits of Business Credit Cards

One of the primary advantages of business credit cards is the separation of personal and business expenses. This distinction simplifies accounting and tax preparation, making it easier to track deductible expenses. Additionally, many business credit cards offer rewards programs that can significantly benefit a business. These rewards might include cash back on office supplies, travel points, or discounts on business services.

Business credit cards also help in building a business credit history. A strong credit profile or credit score can lead to better financing options and lower interest rates in the future. Moreover, these cards often come with valuable perks such as purchase protection, extended warranties, and travel insurance, providing an added layer of security for business purchases.

Read more: What are the various types of credit card charges?

Eligibility Criteria for Business Credit Cards

Obtaining a business credit card typically requires meeting certain eligibility criteria. The issuing bank will assess the creditworthiness of both the business and the owner. Here are some common requirements:

1. Business Structure: You need to have a legally registered business. This could be a sole proprietorship, partnership, corporation, or limited liability company (LLC).
2. Credit Score: Both the business and personal credit scores play a crucial role. A good personal credit score is often necessary, especially for new businesses without an established credit history.
3. Revenue and Time in Business: Banks may require a minimum amount of revenue and a certain period of operation. Startups might find it challenging to meet these requirements, but some cards are designed for new businesses.
4. Documentation: You will need to provide various documents, such as your Employer Identification Number (EIN), business financial statements, tax returns, and personal identification.

Read more: How to avoid interest charges on a credit card?

How to Apply for a Business Credit Card

Applying for a business credit card involves several steps:

1. Research: Start by researching different business credit cards. Look for ones that offer benefits aligning with your business needs, such as rewards for office supplies or travel perks. Consider the interest rates, fees, and credit limit as well.
2. Check Your Credit: Before applying, check both your personal and business credit scores. Address any issues that might affect your eligibility, such as paying down debt or correcting errors on your credit report.
3. Gather Documentation: Prepare the necessary documentation. This includes your EIN, business licence, financial statements, and personal identification. Having these documents ready will streamline the application process.
4. Complete the Application: Most applications can be completed online. Be prepared to provide detailed information about your business, including its structure, revenue, and time in operation. You will also need to provide your personal information and consent to a credit check.
5. Review Terms and Conditions: Carefully review the terms and conditions of the card. Understand the interest rates, fees, and rewards programs to ensure they meet your business needs.
6. Submit Your Application: After reviewing the information, submit your application. The approval process can take a few days to a few weeks, depending on the card issuer.

Read more: How many credit cards should you have?

Managing Your Business Credit Card

Once you have your business credit card, managing it responsibly is essential. Here are some tips:

• Pay on Time: Always make your payments on time to avoid late fees and damage to your credit score.
• Monitor Spending: Keep track of your expenses to stay within your budget and make the most of your rewards program.
• Review Statements: Regularly review your statements for any errors or fraudulent charges.
• Utilise Rewards: Take full advantage of the rewards and benefits offered by your card to maximise value.

Frequently Asked Questions (FAQs)

Q: Can I use a personal credit card for my business?

A: While you can use a personal credit card for business expenses, it’s not recommended. Mixing personal and business expenses complicates accounting and can lead to issues with tax reporting.

Q: Do I need to have a business credit score to get a business credit card?

A: Not necessarily. Many card issuers consider your personal credit score, especially if your business is new and doesn’t have an established credit history.

Q: Are there business credit cards for startups?

A: Yes, some business credit cards are designed for startups and may have more lenient requirements regarding revenue and time in operation.

Q: What happens if I can’t pay my business credit card bill?

A: If you can’t pay your bill, you might incur late fees, higher interest rates, and a negative impact on both your business and personal credit scores.

Q: Can I get a business credit card with bad personal credit?

A: It may be challenging, but some issuers offer secured business credit cards that require a cash deposit as collateral. This can be a way to build or rebuild your credit.

In conclusion, business credit cards are a powerful tool for managing business finances, offering a range of benefits from rewards to building credit. By understanding the requirements and managing your card responsibly, you can leverage these advantages to support and grow your business.