It used to be that to get credit for business use, the decision was solely based on the business owner's personal credit score. Often, a business owner would use their home or vehicle as collateral to secure the credit, which was a major liability because if the business should fail, the business owner could lose those personal assets as well. There are now options for obtaining business credit that do not rely on the owner's personal credit history as the only basis for extending credit.
If you are starting a business or expanding a business, there is a good chance you'll need access to additional money. For most businesses, a business credit card will serve the purpose and provide access to the cash flow needed to get up and running or grow. Here are some tips for getting a business credit card:
Set the business up as an official entity. Many small businesses operate as a sole proprietorship. While a sole proprietorship is the easiest type of business to start and operate, it provides no separation between personal and business expenses. You and the business are one in the same. If you set your business up as an LLC or corporation, the business becomes it's own entity, separate from you as a person. A business can then apply for credit on it's own, although a business without any credit rating is similar to an individual without a credit rating in that it has to prove itself worthy of credit before it will be approved for credit. If your LLC or corporation doesn't have a credit score, lenders will probably check the credit report of the owner to determine the level of risk they have lending money to this business.
Increase your personal credit score. Even if your business is a separate entity, it's a good idea to increase your personal credit score if you are looking to obtain business credit. If your FICO score is under 640, you'll definitely want to take steps to increase your score before applying for credit for a new business. Make your own payments on time for three consecutive months and you'll see a credit score increase up to four points.
Get a physical address for your business. For some reason, having a P.O. Box instead of a physical address for your business can make it harder to get approved for a business credit card or loan. If you don't want to use your home address for your business that you operate out of your home, you can get a physical address with a UPS store or Mailboxes Etc. store instead of a P.O. Box.
Get a business phone line. Setting up a separate phone line for your business also plays a role in how lenders classify your risk for business credit.
Get a co-signer. If you still are unable to obtain business credit for your company, you might consider asking someone with a good credit score to co-sign your application with you. In this situation, it may not be possible to apply for a "business" specific credit card, but you could get a credit card in your own name and then designate it only for business use - meaning you don't buy anything else with this credit card. By doing this and making payments on time, you should improve your credit situation and be able to get a business credit card at a later date.
Starting and growing a business requires access to cash. A business credit card is often a viable solution.
