Most small businesses qualify for a small business credit card, meaning owners can enjoy elevated rewards programs and cashback perks on business spending, simplified bookkeeping with separated personal and business expenses, and issue employee cards. However, determining whether your business will qualify can be confusing, especially if you're a new business owner.
In this blog post, we'll guide you through the steps to help you understand if you're eligible for a small business credit card. We'll also provide you with useful tips to increase your chances of approval. So, whether you're an established business or just starting, we've got you covered.
Who can qualify for a small business credit card?
Your business doesn’t need to have employees, a huge turnover, or a formal business structure to qualify for a small business credit card.
While the requirements to qualify for a business credit card will vary depending on the card provider, there are four common business types that will generally be approved for a business credit card:
Limited Liability Company (LLC)
In an LLC, the owners are called members, and they are not personally responsible for the debts and liabilities of the company. This means that if the LLC is sued or has debts, the members' personal assets are generally protected, and they are only liable for the amount of their investment in the company.
Corporation
A corporation is a legal entity that is separate from its owners or shareholders. It offers limited liability protection to its shareholders. In a corporation, the shareholders own the company, but the day-to-day operations are managed by a board of directors, who are elected by the shareholders. The board of directors hires officers, such as a CEO and CFO, to manage the company's operations.
Partnership
Sole proprietor
A sole proprietor owns and runs a business as a single person, with no legal distinction between the business and themselves. An example of a sole proprietor is a self-employed freelancer or consultant who operates their business on their own.
Unfortunately, sole proprietors are not eligible for a Capital on Tap Business Credit Card, issued by WebBank.
Even if your business is one of these four structures, it must also be deemed an ‘acceptable' type of business in terms of risk. Many credit card providers may not provide credit to ‘high-risk’ business types such as arms manufacturers, gambling merchants, or online pharmacies.
Business ownership is another factor that affects credit card qualification. To be eligible for a business credit card, you must either own the business or be a majority shareholder. If you do not have ownership, you may not meet the requirements for a business credit card.
For some business credit cards, it is a requirement to provide a personal guarantee. This means that you, as the director, will be financially responsible for any unpaid bills or abandoned balances on the business credit account.
How to qualify for a small business credit card
To qualify for a small business credit card, you’ll likely need to provide some information about yourself. This typically includes your name, date of birth, home address, and email address to name a few. You'll also need info relevant to your business, such as your business’ legal and trading names, monthly turnover, and business address.
But, what else can you do to increase your chances of being approved for a small business credit card?
Check your personal credit score
Some lenders require a personal guarantee when you apply for a business credit card, which means that if your business is unable to make payments, you will be held personally liable for the debt on the card.
As a result, many lenders review your personal credit history to ensure that you are a trustworthy borrower before approving a business credit card application. By checking your credit score and history, lenders look for evidence that you will use your business credit card responsibly and avoid financial risks.
If you have a low personal credit score, it could result in higher interest rates or even rejection of your business credit card application. Therefore, before applying for a business credit card it's wise to check your personal credit score and history to ensure that it's accurate and reflects positively on you. If you find any errors or discrepancies, it's crucial to dispute them promptly to avoid any negative impact on your creditworthiness.
Make your business profitable
Lenders want to see that your business has a positive cash flow and is capable of repaying any credit card debt. So, if your business is not profitable, it may be challenging to obtain a business credit card, or you may receive unfavorable terms and conditions.
Therefore, it's crucial to ensure that your business has a solid financial foundation before applying for a business credit card. By doing so, you'll increase your chances of approval and have access to credit that can help your business grow.
Compare business credit cards to find the best option for you
Not all business credit cards are created equal, and they may offer different benefits, interest rates, fees, and rewards programs.
By comparing different options, you can find a business credit card that aligns with your business goals and financial situation. Moreover, you can save money on interest and fees and take advantage of rewards programs that benefit your business. Therefore, it's essential to research and compare various business credit cards to find the best option for your business before applying.
Qualifying for a Capital on Tap Business Credit Card
You may qualify for a Capital on Tap Business Credit Card, issued by WebBank, if:
- Your business is a corporation or LLC
- You are an active business that has been running for more than 6 months
- Your business has a minimum monthly turnover of $2,500
- Your business makes money from selling goods and/or providing services
Still unsure whether your business will qualify for the Capital on Tap Business Credit Card? We only conduct a soft check, meaning you can apply today without affecting your credit score.
Ready to apply for your business credit card? Apply for the Capital on Tap Business Credit Card in under two minutes without impacting your credit score.
