A business credit card can be helpful for new businesses just starting to build credit. The best card for your startup will depend on your business needs and objectives.
We’ve broken down everything you need to know about startup business cards to help you make the best choice for your company.
Advantages of business credit cards for startups
There are several benefits of having a business credit card if you’re just getting started with your small business:
1. Build business credit
A business credit card for startups can build business credit if payments are paid on time and handled responsibly. Having business credit can widen your loan options and allow for better interest rates in the future.
2. Keep business and personal finances separate
It can be beneficial to keep your business and personal finances separate to make managing your expenses easier. With business credit cards, typically multiple members of your staff can have sub-accounts on the card, so you can track individual usage or set individual limits.
3. Manage cash flow
Cash flow is especially important to a new business. A startup business credit card can offer a low rate if you need to carry a balance and help even out your cash flow if you’re having a less-than-ideal month.
What is the best business credit card for startups?
Unfortunately, there isn’t one “best” business credit card for startups. The best startup card for you may be totally wrong for someone else. It’s all dependent on your type of small business, your business goals, and how you plan to use the card.
Here are a few features to consider when determining the best startup credit card for you:
- Annual fee – this is the yearly cost of the credit card. Whether you use it or not, annual fees are required payments if the card has them, so it’s important to factor into the overall cost of the card.
- Multiple cards – some cards charge you for adding additional employees onto the account. Be sure to check that if you’re planning on sharing the card.
- Interest rate – think of this rate as the cost of borrowing money with a credit card. Interest rate is important to consider because if you don’t make your payments on time, your startup is responsible for paying the extra interest.
- Rewards – these are additional benefits you get for using the card. If a startup plans to spend a good amount on a card, rewards can be a great bonus to look out for.
- Intro offers – some cards will offer benefits for signing up as a new cardholder. For startups getting their first credit card, this could be a great bonus benefit.
To see more options, check out our guide to business credit cards in the UK.
Is my startup eligible for a credit card?
Your business eligibility will depend on your specific circumstances. It’s a good idea to check your eligibility before you apply for a credit card so you don’t hurt your credit score with denied applications. Eligibility checkers will only run a soft search on your credit report, so it shouldn’t impact your credit score.
Do new businesses have credit scores?
New businesses will likely not have much of a credit history if they’re just getting off the ground. Therefore, in order to have a credit score, a business would need to build business credit over time.
In the meantime, it’s possible for credit card issuers to use a personal credit score to determine creditworthiness of a startup. They may also ask to see your estimated turnover, business plans, and bank statements before they determine you’re a reliable borrower.
Be cautious about personal guarantees, which mean that if your business can’t repay the debt it’s accrued, you’ll be personally responsible for paying it. It is possible to get a business credit card without one, but it’s less likely if you have a new business.
How to get a business credit card for a new business
Here are 5 steps to apply for a startup credit card:
1. Think about how your business will use the card
As discussed above, it’s best to spend some time thinking about how you’ll use the card in order to pick the best one for you.
For example, if your employees will travel often, a card with hotel or flight rewards might be the best card for your small business. However, if you’ll use your card like a startup business loan, a card with a longer 0% introductory offer may make the most sense for you.
However you’ll use the credit card, it’s best to know ahead of time so you can find the best match for your business.
2. Choose the right card for you
This is where you’ll want to start comparing! After determining how you’ll use the card and what features your startup should prioritize, you’re ready to pick the best startup business credit card for you.
Remember to pay attention to the fees, interest rates, and bonus offerings.
3. Check your eligibility
As mentioned above, checking your eligibility ahead of time can save you time and the potential of hurting your credit score by being rejected.
4. Gather your application materials
To apply for a startup business credit card, you’ll need to provide some basic information like:
- Your name
- The business’s name
- The legal structure or entity type
- Revenue (if you’re just getting started, this might be £0)
Some issuers may also require a Social Security number and an employer identification number.
5. Apply for the card
Finally, you’re ready to apply for the card. Most sites allow you to do this online by inputting your application materials. If you get approved, you’re ready to start spending responsibly.
If you sign a personal guarantee, you are personally responsible for the debt. However, there are some business credit cards that don’t require a personal guarantee, so you can be intentional about choosing a card without one if you choose.
It will depend on what startup business credit card you apply for, however, most cards allow online applications these days.
One of the best ways to build business credit is simply to make monthly payments on time and stay within your credit limit. Doing this consistently over time will build your business’s record of responsible borrowing.