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Small Business Startup Loans

One of the biggest challenges a new small business must face is obtaining the finances necessary to support their initial growth. In order to proudly turn on your physical or metaphorical “open for business” sign, you’ll need to have access to a significant amount of capital in the form of a small business startup loan.

As one might assume from the title, a business start up loan is a loan meant to help with the financial needs of a new business. Small business start up loan proceeds can go towards things like working capital; the purchase of equipment, machinery, supplies, inventory, and furniture; and the purchase or construction of real estate.

Where Do I Get a Small Business Startup Loan?

If you’ve already started your hunt for a loan, you’re well aware that there is a seemingly infinite amount of lenders and financing options out there. Each one will come with their own set of pros and cons, and perhaps you’ve discovered that most of the low-cost options are not available to business owners without a couple years of business under their belts. To help you get started, here is a list of 5 viable options to secure a business startup loan.

Conventional Business Lending

 

Banks are traditionally known for their lending opportunities, and if you have a good relationship with yours, this may be a perfect place to go. When it comes to bank financing for business startup loans and lending, but banks will not typically offer conventional loans to new businesses. Through your bank you may qualify for:

 

Equipment Financing: Specifically designed to pay for the purchase of equipment and machinery, this loan is similar in structure to a conventional loan. However, the proceeds must only be used to purchase equipment or machinery.

 

SBA Microloans

In addition to the SBA 7(a) and 504 loan programs, the SBA also offers microloans which are typically made through development corporations and non-profit organizations. Approved for up to $50,000, a microloan through the SBA can be used for working capital or the purchase of inventory or supplies, machinery or equipment, or fixtures and furniture.

Microlenders

 

The SBA is not the only microlending option. Microlenders are non-profit organizations that offer small businesses the opportunity to secure financing in small increments (less than $35,000).

 

When it comes to microlenders, be sure to check out these two options:

Accion: Available for up to $10,000, this is a great small business startup loan if you’ve been in business for less than six month and have an incubator-based or home-based business. Since the required credit score is 575 or higher, this is also a good option for borrows who may not have stellar credit.

KivaZip: Kiva operates on a largely community-based, trust-driven platform. Businesses can crowdfund business loans from philanthropic-minded individuals up to $5,000. These loans carry a 0% APR and are provided to struggling entrepreneurs who have proven their character, invited their own network of lenders, were unable to access other financial means, and have a business that has a perceived positive social impact.

Small Business Loan Tips

One of the biggest challenges a new small business must face is obtaining the finances necessary to support their initial growth. In order to proudly turn on your physical or metaphorical “open for business” sign, you’ll need to have access to a significant amount of capital in the form of a small business startup loan.

As one might assume from the title, a business start up loan is a loan meant to help with the financial needs of a new business. Small business start up loan proceeds can go towards things like working capital; the purchase of equipment, machinery, supplies, inventory, and furniture; and the purchase or construction of real estate.

Where Do I Get a Small Business Startup Loan?

If you’ve already started your hunt for a loan, you’re well aware that there is a seemingly infinite amount of lenders and financing options out there. Each one will come with their own set of pros and cons, and perhaps you’ve discovered that most of the low-cost options are not available to business owners without a couple years of business under their belts. To help you get started, here is a list of 5 viable options to secure a business startup loan.

Conventional Business Lending

Banks are traditionally known for their lending opportunities, and if you have a good relationship with yours, this may be a perfect place to go. When it comes to bank financing for business startup loans and lending, but banks will not typically offer conventional loans to new businesses. Through your bank you may qualify for:

Equipment Financing: Specifically designed to pay for the purchase of equipment and machinery, this loan is similar in structure to a conventional loan. However, the proceeds must only be used to purchase equipment or machinery.

SBA Microloans

In addition to the SBA 7(a) and 504 loan programs, the SBA also offers microloans which are typically made through development corporations and non-profit organizations. Approved for up to $50,000, a microloan through the SBA can be used for working capital or the purchase of inventory or supplies, machinery or equipment, or fixtures and furniture.

Microlenders

The SBA is not the only microlending option. Microlenders are non-profit organizations that offer small businesses the opportunity to secure financing in small increments (less than $35,000).

When it comes to microlenders, be sure to check out these two options:

Accion: Available for up to $10,000, this is a great small business startup loan if you’ve been in business for less than six month and have an incubator-based or home-based business. Since the required credit score is 575 or higher, this is also a good option for borrows who may not have stellar credit.

KivaZip: Kiva operates on a largely community-based, trust-driven platform. Businesses can crowdfund business loans from philanthropic-minded individuals up to $5,000. These loans carry a 0% APR and are provided to struggling entrepreneurs who have proven their character, invited their own network of lenders, were unable to access other financial means, and have a business that has a perceived positive social impact.

Small Business Loan Ideas

You have a vision, a plan, and the motivation to start your own business or take your current one to the next level. Everything is ready to go, all you need is money. For many entrepreneurs, small business loans are the key to fulfilling short and long term goals. So how do you get a small business loan? Is it difficult? Do you need to meet certain requirements? If you’ve asked these same questions, then you’re in luck; that’s exactly what we are going to discuss.

Have a Plan

When it comes to securing a small business loan, half of the battle should be fought with strategy. One of the best ways to get all your financial ducks in a row is to devise a solid, well-thought-out business plan. This will show any potential lenders that you’ve done the research and completed your homework.

Here are a few general things you should keep in mind:

  • What kind of business are you starting and what are your long and short term goals?Before requesting a loan, you’ll need to be able to concisely define your business to a potential small business loan lender. What is your product and who does it serve? What is your projected revenue? What tactics and strategies do you plan to employ in order to reach that revenue mark? You should be able to confidently answer those questions before you step foot in a lender’s office.
  • For what do you need a loan?When it comes to requesting a small business loan, you’ll need to have a detailed list outlining what exactly you need the money for. Working capital costs, equipment and operation costs, or long term development costs all constitute good reasons for requesting a small business loan.
  • However, if you’re seeking a loan to pay down surmounting debt, recoup for poor performance, or fulfill payroll obligations, then you may want to consider alternative means of support.
  • How much money do you really need?Next, you’ll need to determine how much you need. Though this number may not be exact, you should be honest and realistic with your estimates. If you overestimate, lenders may shy away; however, if you underestimate, you may find yourself in tight spot far too early.

You have a vision, a plan, and the motivation to start your own business or take your current one to the next level. Everything is ready to go, all you need is money. For many entrepreneurs, small business loans are the key to fulfilling short and long term goals. So how do you get a small business loan? Is it difficult? Do you need to meet certain requirements? If you’ve asked these same questions, then you’re in luck; that’s exactly what we are going to discuss.

Have a Plan

When it comes to securing a small business loan, half of the battle should be fought with strategy. One of the best ways to get all your financial ducks in a row is to devise a solid, well-thought-out business plan. This will show any potential lenders that you’ve done the research and completed your homework.

Here are a few general things you should keep in mind:

  • What kind of business are you starting and what are your long and short term goals?Before requesting a loan, you’ll need to be able to concisely define your business to a potential small business loan lender. What is your product and who does it serve? What is your projected revenue? What tactics and strategies do you plan to employ in order to reach that revenue mark? You should be able to confidently answer those questions before you step foot in a lender’s office.
  • For what do you need a loan?When it comes to requesting a small business loan, you’ll need to have a detailed list outlining what exactly you need the money for. Working capital costs, equipment and operation costs, or long term development costs all constitute good reasons for requesting a small business loan.
  • However, if you’re seeking a loan to pay down surmounting debt, recoup for poor performance, or fulfill payroll obligations, then you may want to consider alternative means of support.
  • How much money do you really need?Next, you’ll need to determine how much you need. Though this number may not be exact, you should be honest and realistic with your estimates. If you overestimate, lenders may shy away; however, if you underestimate, you may find yourself in tight spot far too early.

 

Research Your Credit History and Know Your Score

While it may seem redundant and overstated, it’s absolutely essential to know your credit scores. Obviously, lenders put a significant amount of weight on your credit history. Knowing where you stand can help you evaluate potential lending opportunities.

Beyond that, knowing your credit history can help you identify and address weaknesses before you even go to a potential lender.

What You Need to Know About Business Loans

Nowhere is the saying “you need money to make money” more true than in the crowded, competitive, fast-moving world of small business. As you seek to establish and grow your enterprise, access to capital (or the lack thereof) will be one of your biggest hurdles.

For small business owners facing expenses that just can’t wait, traditional approaches—SBA loans from banks, for example—can be burdensome, inconvenient, and ultimately disappointing. On the other hand, while the APR for a bank loan is usually around 6 or 7%, the APR for an online loan can climb above 30%!

It’s a simple fact that the faster you need a loan, the more you’re going to pay for it. That doesn’t necessarily mean you’re going to regret it, though—if it grows your business, keeps you afloat at a crucial stage of development, and ultimately carries you forward, the cost will have been more than worth it. Let’s take a closer look at a few lenders and see what they have to offer by way of fast business loans.

Kabbage

Kabbage isn’t a “business loan” product, rather they are offer a business line of credit. They are worth mentioning here because business owners can receive funds from Kabbage the same day they apply.

Minimum requirements: At least 1 year in business, with a minimum of $50,000 in annual business revenue

Time for approval and funding: Kabbage’s online application process usually takes around 7 minutes to complete, and you can get funds the same day.

Required paperwork: Along with basic information—business address, tax ID, credit scores, and SSN—Kabbage looks at the online systems used by your business. It takes data about your business from online systems like Amazon, PayPal, QuickBooks, Etsy, etc., in order to evaluate your creditworthiness.

How much can you borrow: $2K to $100K. Kabbage will give you a maximum credit limit that you can borrow against, always keeping in mind that you only need to draw on the credit line as needed, without ever having to use the full amount. You only pay interest on the funds you use.

How long can you borrow it: either 6 or 12 months, with payments automatically deducted from your bank account on a monthly basis.

APRS and fees: The APR for Kabbage loans ranges from 30% to 100%. Most of these fees are charged in the first two months, although you can save money by paying the loan off early.

Personal guarantee and collateral: While Kabbage doesn’t require a personal guarantee, it does place a lien on your general business assets for loans over $20K. Your business assets can be seized if you don’t repay the loan, but your personal assets can’t.

OnDeck

OnDeck’s short-term business loan product exists as a way for business owners to quickly take advantage of opportunities or handle obstacles that they encounter. Unlike OnDeck’s merchant cash advance, an OnDeck short-term small business loan reports payment history to business credit bureaus, thus helping you build your business credit.

Minimum requirements: A personal credit score of 500 or higher, at least 1 year in business, with a minimum of $100,000 in annual business revenue

Time for approval and funding: OnDeck’s loan application process takes approximately 10 minutes. By applying online or over the phone, you can receive funding as quickly as within 1 business day after you’re approved. Being prepared—providing thorough information and having any necessary documents ready to go beforehand—can help speed up the process.

Required paperwork: Business tax ID, bank statements for the last three months, the SSN of business owner(s), merchant and credit card processing statements for the last three months (if applicable)

How much can you borrow: $5k to $500k. You will typically qualify for a loan that is 10% to 15% of your business’s annual gross revenues.

How long can you borrow it: 3 to 36 months, with payment automatically deducted from your bank account on a daily or weekly basis.

APRs and Fees: OnDeck loans range from around 20% to 40% APR, and the APR on their cash flow loans can be up to 100% APR.

Personal guarantee and collateral: OnDeck requires a personal guarantee and places a lien on general business assets.

Other financing options

Finally, let’s take a quick look at a few more affordable options for fast business loans. While these approaches may not be as fast as going to a lender like OnDeck or Kabbage, the extra effort might be worth it in the long run, given the amount of money you stand to save.

Credit Cards

Credit cards don’t always seem an obvious choice for people looking for fast business loans, but if used right they can be a quick and convenient source of business capital. If you have good credit, you might want to consider getting a business credit card or personal credit card to be used strictly for business expenses. The ideal way to use these cards is to pay the full balance every month. As you do so, you’ll keep that money available and build your business credit score at the same time. The average APR for a credit card is 16%, a significantly lower number than you’d get with Kabbage or OnDeck. And while it’s true that you’re limited to your credit line regarding what you can and can’t purchase, another advantage of credit cards is that many of them offer introductory 0% interest rates as well as rewards such as cash back with purchases, frequent flier miles, hotel stays, etc.

Invoice Financing

Do you have irregular cash flow because you’re often waiting for your customers to pay you for services or products you’ve provided? Invoice financing can be a good option for B2B businesses with long invoice cycles. Invoice financing allows you to get paid immediately rather than waiting for your customers to pay you. BlueVine is one such option B2B businesses may want to consider.

SBA 7(a) Express Loan

If your credit is solid, and you can wait a week or two for the loan, SmartBiz is specializing in issuing SBA loans in under 7 days. This only applies to SBA loans under $150K (larger loans still take 4 to 6 weeks on average). The nice thing about an SBA loan is that it will offer some of the lowest interest rates for which your business can qualify.

Credit Explained ABout Business Line

There are a number of ways to deal with the inconsistent revenue and costs associated with running your small business, and one of the best options is a business line of credit. A business line of credit is a flexible, often low-cost way to cover short-term financing needs such as purchasing inventory and making on-time payroll.

How does a business line of credit work?

A line of credit, or revolving line of credit, is a flexible loan option for businesses. Businesses are allocated a specified maximum amount of capital available to them through a lender based off certain factors such as current cash flow and business credit rating.

The business then decides when, if, and how they would like to use that capital. Interest will be charged only when you decide to pull money from the line. You will have a specified repayment period, but, like a credit card, there is no penalty for paying early (in fact, it is encouraged).

Although interest is only charged once you use the line, there may be a monthly maintenance fee for letting your line of credit sit unused. Check with your bank or lender to see if that is the case for any line of credit you are considering.

What is a secured vs. unsecured line?

A secured line of credit is a line in which the borrower puts up collateral as a security deposit on the line of credit. An unsecured line does not require any collateral assets.

Secured lines are often preferred over unsecured lines by both lenders and borrowers. The lender is taking on less risk, so they will usually grant a higher credit maximum at a lower rate for secured lines. New businesses or businesses with poor business credit might only qualify for a secured line of credit because of the inherently higher risk.

Unsecured lines of credit are more expensive because the lender assumes higher risk. Credit cards are a type of unsecured line of credit. Businesses with many years under their belts and stellar business credit are more likely to qualify for unsecured lines at reasonable rates.

What are lines of credit typically used for (and not used for)?

Lines of credit are great for many situations. Here are a few examples:

  • Your business has seasonal fluctuations — perhaps your sales take a dip in the summer. A line of credit will help during the periods of low sales.
  • Your clients take 30 days or longer to pay you for products or services you provide. You might need a line of credit to cover the interim time until you are paid.
  • Your product requires expensive materials — you may need a line of credit to cover the expenses while you build and sell your product.
  • You have the opportunity to receive a discount if you pay a particular bill early — if the resulting discount is significant, you can cover the bill with your line of credit while you wait for cash flow to catch up.

The uses of a business line of credit really can extend far beyond these to touch all businesses. A line of credit, however, is a form of short-term financing, so avoid using your line of credit for long-term expenses.

Separate Your Personal and Business Finances

You’ve been warned about mixing business and pleasure, but what about personal finances and business finances? At times, it may seem tempting to utilize your personal finances to help out when your business needs a boost, but it’s not always the best solution in the long run. Implementing a financial division between your personal and business finances can help you treat your business like the independent entity it is while safeguarding your personal finances.

Why is separating your finances so important?

Though there are many benefits to keeping your personal and business finances separate, two of the main reasons you should draw a line in the sands of finance are based on taxes and personal protection.

Taxes

Do taxes ever really seem cut and dry?  If you’re in the majority, the answer is no.  If you’re not, then rest assured that many of us are incredibly envious of your taxation acumen.  One of the main reasons you’ll want to split your business finances from your personal finances is taxes.It is much easier to keep track of business expenses if you use a separate business account.

Once you have your shiny new business checking account, keeping track of things like expenses is essential to properly filing taxes.  From office expenditures to operational and inventory purchases, every receipt counts.  When it comes time to file your taxes (or hand everything over to your accountant), a thorough collection of business-only information is going to save you a lot time and a significant amount of stress.

Personal Liability

Separating your personal and business finances is important for tax reasons, but perhaps equally, if not more important is a separation of your personal finances for the sake of your personal security. Using your personal finances to back any entrepreneurial venture can be risky business, but not just because of the initial financial gamble.

Entrepreneurs often wind up signing personal guarantees for leases, loans and lines of credit. Sometimes that’s necessary–especially when your business is young and hasn’t established a strong business credit rating. But your goal should eventually be to avoid personal guarantees as much as possible.  The way you do that is by building strong business credit, so lenders can be confident that your business can and will repay its debts

Tips for Separating Your Personal & Business Finances

Now that we’ve distinguished two of the more significant reasons to keep your business and personal finances separate, let’s take a look at a few of the ways that you can proactively put this division in place.

  1. Consider incorporating. incorporating your venture as a C Corp, S Corp or limited liability corporation (LLC) can provide tax benefits, but more importantly help protect your personal assets, provided you set it up properly and maintain it correctly.  By maintaining a corporate structure, you can protect your personal assets from business debts, losses and lawsuits. (Keep in mind, though, that if you sign a personal guarantee, creditors can try to collect from your personal assets if you default on a debt.) If you’re serious about creating a business, incorporating is a smart first step.
  2. Open a Business Checking Account. Once you’ve made the decision to start your own business, one of the very first things you should do is head to the bank and open a business checking account. There are multiple reasons why this is a healthy step for a business.  For starters, it will streamline cash flow and making record keeping much more efficient.
    Additionally, a business account lends itself to easy finance tracking – something that you or your accountant will vastly appreciate come tax time. As mentioned before, a separate business account can help signify to the IRS that your venture is a business and not just a side project or hobby, making more of your expenses tax deductible.
  3. Apply for Business Credit Card. Business credit is a big deal, and one quick and easy way to start to build it is by obtaining a business credit card. In addition to fantastic perks like building a credit history for your company, a business credit card will help you eliminate the need for personal credit cards for businesses purposes. Opening one of these cards will also help streamline business finances, and some cards reduce the risk of having your business transactions impact your personal credit. In addition, you may be able to deduct card costs (an annual fee and interest, for example), if you use it exclusively for business purchases. That may not be the case if you mix personal and business expenses on the same card.
  4. Set a Budget. Being armed with a business credit card and a business bank account is a terrific start, but there is another step that really can help you keep things in check – a budget. It doesn’t seem like setting a budget for your business would do a whole lot in terms of separating personal and business finances, but it can really come in handy.
    Preparing (and sticking to) a budget for your business can prevent you from delving into personal finances due to poor planning. Of course, emergency situations can happen and even the best planned budgets may not always work out as intended. However, by creating a clear cut budget, you’ll be able to reduce the risk of running into avoidable costs that would otherwise leave you turning to your personal finances for rescue.

Business Credit Card in 4 Steps

More and more small businesses are turning to business credit cards as a way of having back up financing and improving their business credit scores at the same time. Many business credit cards offer perks just for using them, including frequent flyer miles and cash rewards. Business credit cards are great for business owners who need back up credit for emergency situations or to offset irregular cash flow. Additionally, making on time or early payments on a business credit card will help your business build its credit so that your business can secure better terms with vendors and suppliers, government and high profile private contracts, and the right business financing at the right price.

But how does one go about getting a business credit card? While the process is relatively painless there are many choices to take into consideration. Let’s take a look at some of the steps you’ll need to take in order to obtain a business credit card.

  • 1 Close your eyes, take a deep breath, and look up your credit scores.

The people to whom you’re applying for a business credit card will want to know how responsibility you behaved with your credit. A low credit score will not automatically keep you out of the running for all cards, but if you find yourself getting denied, you can check out this list of business credit cards with lower credit standards.

  • 2 Choose the right business credit card.

Spend some time thinking about how you plan to use your card so you can pick one that meets your needs. Do you want rewards? If so, cash back or miles (or something else)? Do you pay in full or plan to carry balances from time to time? If the latter, a low interest rate will be important. You’ll also want to understand whether the cards you are interested in are available based on your credit scores.

Time Saving Tip: Check out Nav’s business credit card marketplace if you need help choosing a business credit card or signup for a free Nav account and get matched to credit card and financing offers based on your credit.

  • 3 Apply for your new business credit card!

These applications usually ask for basic business and personal information such as your name and date of birth, the name of your business, its address, and your EIN (or SSN if you don’t have an EIN). If you’re the company owner, you will likely be required to give your personal social security number as well. You’ll also need to provide information regarding the type of business you’ve started—the options being sole proprietorship, partnership, and corporation—along with the number of years you’ve been in business and a little bit about your industry.

If you’re a startup wondering how to get a business credit card, know that business credit card applications are going to require your personal household income information. Usually when you’re filling out your application, you’re asked to enter your business income for the previous year. Since you didn’t have a business income last year, your creditor will have to look to your personal household income when making their decision.

  • 4 Sign the business credit card application.

This should be done by of one of the decision-making parties of your company. If you’re the only decision-making party of your company, so much the better. Keep in mind that most of these cards will require a personal guarantee on the part of the applicant. That means if your business does not pay the debt, you will be personally responsible.

A final note: The name “business credit card” is somewhat misleading. It’s more accurate to think of it as a small business credit card, because you can apply for one even if you don’t own an established business. Small businesses take many forms: the successful mom-and-pop bakery down the street qualifies as a small business, but so does the YouTube channel whose owner reviews video games as a hobby and charges a small subscription fee to her viewers. In the case that the YouTuber is a sole proprietor without an EIN, she would use her SSN to apply.

Credit Cards for Bad Credit Solution

Credit mishaps happen for a number of reasons, and perhaps one has happened to you. The good news is that there are a few business credit cards for bad credit which will give you the chance to build your business credit so that you can qualify for credit increases or new cards without having your personal credit called into question. (Solid business credit scores can open a number of other doors as well).

To save you time, we’ve put together a list of what we think are the best business credit cards for bad credit available to business owners.

Secured Business Credit Cards

For business owners looking to build their business credit, another option is a secured business credit card. A secured card requires a security deposit that can be used to pay your debt if you default. This is a way for credit card companies to minimize the risk of a bad credit borrower. Secured cards usually allow borrowers to charge up to the amount of their security deposit (below you’ll see a case where that isn’t quite true).

Our Top Picks:

1. Wells Fargo Business Secured Credit Card

Pros:

  • Rewards: 1% cash back or 1 point for every dollar spent: your choice. $50 annual fee after the first year to enroll in rewards program
  • Low interest: Prime rate + 9.90% APR
  • 21-day grace period on purchases

Cons:

  • Annual fee: $25
  • $50 annual fee after first year to enroll in rewards program

The Wells Fargo Business Secured Credit Card allows cardholders to secure a credit line between $500 – $25,000, depending on how much you are willing to deposit. With this card, the amount of your credit line is equal to the amount you deposit. This card has a very low interest rate and the annual fee is low at $25. The only big drawback is that cardholders who wish to earn rewards points on their purchases will have to pay an annual enrollment fee of $50.

2. BBVA Compass Business Secured Visa Credit Card

Pros:

  • Low interest: 16.49% (or WSJ Prime + 12.99%)
  • Rewards: 1 point for every dollar you spend. Choose your own categories in which you’d like to earn double or triple points.
  • No rewards enrollment fee

Cons:

  • Annual fee: $40
  • Only 90% of your deposit will be available as a credit line

The BBVA Compass Business Secured Credit Card works similar to the Wells Fargo Secured Credit Card, however your credit line will only be equal to 90% of your deposit amount. There is a higher annual fee at $40 per year, but there is no fee to enroll in the rewards program. Additionally, the annual fee for the first year is waived. The rewards for this card include double or triple points in the category of your choice, which is a great perk for business owners who spend a large portion of their credit on one category, such as gas or groceries.

Keep In Mind…

Secured business credit cards or business credit cards for bad credit can be good options for business owners with poor or fair credit who need a small amount of capital now. Even with a low credit limit, these cards can help you build business credit Before you apply, here are couple things you’ll want to do:

  • Know and monitor your credit score. You can monitor your personal and business credit score with a free Nav account.
  • Make sure a business credit card is the best option for you, and look into business loans if you think a loan might be a better financing option for your business.

Know More About Credit Card FAQs

Smart business owners can use credit cards to their advantage, whether it’s to amass valuable rewards or to access funds to take advantage of a potentially lucrative opportunity.

In this short webinar, you’ll learn how to make the most of your credit cards, as well as avoid pitfalls. Then peruse the questions below from business owners like yourself to learn more.

What is required to get a business credit card?

Business credit card issuers usually are most interested in the owner’s personal credit scores, income and credit qualifications. Nav’s MatchFactor can help you understand which cards you are most likely to qualify for. It uses a proprietary algorithm to help you understand your likelihood of qualifying for specific cards. It’s free with a Nav account.

How do business credit cards impact my personal credit scores?

Most issuers don’t report business credit card activity to the owner’s personal credit cards unless they default. (This chart shows how major credit card issuers report to personal credit.) However, since issuers check the owner’s personal credit reports when evaluating these applications, there will be an inquiry on one of the owner’s personal credit reports. Inquiries shave just a few points off credit scores, and after a year they generally don’t count.

Can a new startup qualify?

Generally, you can get a business credit card as soon as your business is established, as long as you meet the issuer’s credit and income requirements. Again, most issuers will look at the owner’s personal credit qualifications when evaluating an application.

Does my business have to have a certain amount of revenue to qualify?

Typically, no, as long as your personal income is sufficient to qualify. And if you aren’t drawing a paycheck in your business, you may use income that’s available to you to pay the debt, such as a spouse or partner’s income.

How can I get higher limits?

Issuers are often eager to extend higher credit limits to customers who qualify and may consider your request in as little as six months after you get the card. When you request a larger credit line the issuer may review your past activity on the account to create an internal score. For example, they may look at factors such as: How much do you charge? Do you pay on time? Do you always carry a balance or do you sometimes pay the card off? They may request updated information about your income as well. Keep in mind that issuers may review your credit and that may create a hard inquiry.

Should I spread expenses over several cards or use one to the max?

There can be a number of advantages to spreading your purchases over several credit cards.
The first is that you’ll keep accounts active, so your issuers are less likely to close the account. (Tuck a credit card in the back of the drawer and your issuer may decide to close the account for lack of activity.) Even a small regular purchase on a card may be enough to keep your account open.

Next, you may be able to maximize rewards. For example, let’s say you have one card that earns 3x points for purchases in a certain category, such as office supplies, so you use that card for all purchases you make at office supply stores. You have another card that earns a higher level of cash-back rewards at gas stations so you use that card when fueling up. And perhaps you have a cobranded airline card that gets you free checked bags when you fly, so you use that card for travel. By using multiple cards, you are able to make the most of your rewards.

Finally, your credit scores are less likely to get penalized for high debt usage. High balances in comparison to credit limits can hurt your scores. If you “max out” a card, your scores are likely to suffer. Business credit scores tend to be more forgiving for this factor than personal scores.

However, if you do use multiple cards, make sure you set up a system to track due dates so you don’t accidentally pay late.

Is it a good idea to use credit cards to establish business credit and should you pay the balance when the statement comes?

Yes, business credit cards can often help establish business credit. Most issuers report these cards to at least one commercial credit reporting agencies, so they can provide a valuable credit reference, provided they are paid on time.

Paying the balance early can help you avoid running up debt and can help reduce the balance reported to the credit reporting agencies, since most issuers report balances around the statement closing date.

Business Credit Card Guide

Business credit cards offer a quick and secure way for business owners to get the funds they need to run their business smoothly, take advantage of growth opportunities, provide breathing room when business is slow, safeguard personal finances from actions of the business, and more.

We created this guide to set you on a path to make the most out of business credit cards. Here’s a taste of what’s inside:

  • The incredible advantages of business credit cards
  • How business credit cards affect both your business AND personal credit
  • How to find our your approval odds before you apply
  • The type of business card you should avoid
  • Hacks to earn rewards and flights from your business credit card

Why wouldn’t I just use my personal credit card?

Well, glad you asked. Here are three serious advantages to using a business credit card for business purchases:

  1. Having a business credit card allows you to keep your personal and business expenses separate. You’ll be able to track business expenses more easily, making tax time, as well as maintaining a company budget, much less of a headache.
  2. By getting a card in the name of your business you’ll start to establish a business credit scoreseparate from your personal one. That means that if you have to make a late payment, your business credit will take the hit instead of your personal credit (there are exceptions—read about which business credit cards report to personal credit bureaus here).
  3. As you start to establish a business credit profile, you’ll build your business’s credibility. When it comes time to apply for other business financing, solid business credit scores can help you qualify for more financing at better rates.