FAQ: Business Credit Cards for Startups, Explained

Starting a business is a challenging and exciting journey, and having the right tools and resources can make a big difference in a startup’s success. One such tool is a business credit card, which can help finance the operation and growth of a business.

Corporate cards can:

• Allow business owners and their teams to access additional funds for future expansion
• Empower employees to spend on behalf of the business
• Help the business take advantage of the perks business credit cards offer

Below are answers to questions new business owners typically have, whether they’re adopting their first corporate card or switching to the best card to meet the specific business needs of their organization.

What is a business credit card?

A business credit card is specifically designed for business owners and their employees. These cards are typically on the same credit card networks as personal credit cards — Visa, Mastercard, American Express (Amex), or Discover — but they offer unique benefits suited to businesses.

A business card can:

• Help small business owners keep track of business expenses
• Keep business and personal finances separate
• Provide access to a line of credit and increase cash flow
• Help improve the business’ credit score

As entrepreneurs grow their businesses, the number of transactions is bound to increase alongside the company headcount. With the right partnership in place, companies can issue employee cards, which enables multiple cardholders to spend on behalf of the company.

Who can apply for a business credit card?

Anyone who operates a business can apply for a business credit card. The four common business structures are:

• Sole proprietor (entrepreneurs, freelancers, independent contractors, etc.)
• Partnership
• Corporation
• Limited liability company (LLC)

What are the advantages of a business credit card for a startup?

New business owners often struggle to keep track of business spending and to separate personal finances from business purchases. The main advantage of a small business credit card is to get a handle on a startup business’ cash flow.

But corporate cards come with many other perks:

• Achieve higher spending limits. Corporate cards typically have higher spending limits than personal credit cards, which allow businesses to finance large business purchases.
• Build a better credit score. Businesses have credit scores, and keeping that score healthy is crucial for securing small business loans or financing.
• Distribute cards to employees. Small businesses can issue cards to employees and set individual spending limits tailored to specific business needs.
• Protect purchases. If a criminal gains access to a business bank account or charge card (also called a purchase card), that money is gone and so is a business’ available cash. On the other hand, credit card companies are more likely to act to get issues straightened out.
• Benefit from rewards programs. It pays to put business expenses on a credit card that dishes out rewards points, perks, or bonuses. Rewards are typically earned in specific spending categories and can be burned on everything from airport lounge access to travel rewards.
• Earn cash back on eligible purchases. Some credit card issuers give back a portion of the money the business spends; these rewards are typically distributed as a statement credit.

Other credit card offers are also worth considering, such as:

• Sign-up bonuses (aka welcome bonuses or welcome offers). These offers may include gift cards, bonus points for signing up, increased reward rates for the first year, etc.
• Calendar year bonuses. The cardholder gets these specific benefits every calendar year.

Other competitive perks may include extended warranty policies/purchase protection, insurance offers, and more.

What are the disadvantages of a business credit card for a startup?

It’s not surprising that terms apply to all business credit cards and corporate cards. Make sure you read the fine print and understand exactly what the business is signing up for.

Pay attention to:

• Annual fees
• Balance transfer fees
• Credit limits
• Foreign transaction fees
• Interest rates
• Introductory APR (also called intro APR)
• Variable APR

It’s also important to note that it is ultimately the business owner’s responsibility to pay back the balance on a business credit card.

What is a business credit score?

In the same way that an individual builds personal credit based on their personal finance history, a business builds business credit based on its financial history.

Information on financial activities conducted through your business — opening a bank account, getting a credit card, paying suppliers — becomes part of the business credit history and is reported to credit bureaus that deal specifically with businesses.

Any credit that has been extended to your business — credit cards, loans, lines of credit, etc. — contributes to your business credit score. These scores typically range from 1 to 100, with a higher score indicating that the business is creditworthy.

Business credit is tied to an employer identification number, whereas personal credit is tied to a Social Security number. However, it is important to note that any negative information — such as a missed payment or an overall bad credit score — can damage a business owners’ personal credit score.

Read More: 7 Ways Small Businesses Can Build Strong Credit Scores

What is the fastest way to build business credit?

Building business credit takes time, but a dedicated business credit card can help build excellent credit if the business owner or finance team:

• Pays off the credit card in full each billing cycle
• Keeps the balance low
• Makes regular, on-time payments

Each swipe at a gas station, purchase at an office supply store, or recurring payment for phone services can help a business on its path to a good credit score, provided the business is using the card responsibly.

What are the requirements to get a business credit card for a startup?

Each credit card issuer has its own requirements for the account opening process. Some of the typical requirements providers ask for are listed below.

Business Information

• Business name
• Contact information
• Establishment date/time in business
• Number of employees (not including the business owner)
• Business category/type
• Business structure (corporation, partnership, sole proprietorship, limited liability corporation, or nonprofit)
• Business revenue and expenses
• Federal tax ID (employer identification number or individual tax identification number)

Personal information

• Name
• Contact information
• Date of birth
• Annual income
• Social Security number

According to the U.S. Small Business Administration, poor credit history is one of the main reasons why loan applications for small businesses are often declined.

For businesses that do not have an established credit history, most lenders will look at the business owner’s personal credit history to decide on creditworthiness. 

In addition to qualifying for the card, applicants may be required to provide a personal guarantee that ensures the business owner is personally responsible for paying back any charges to the card.

Which business credit card is best for a startup?

Put simply, the best card for a startup is the one that will offer the business value today and grow with the company.

One of the best business credit cards on the market is Navan, an all-in-one travel, corporate card, and expense management solution.

It saves small businesses time and money by:

• Issuing unlimited employee cards with built-in controls that prevent out-of policy spend before it happens
• Automating expense management from swipe to reconciliation
• Providing real-time dashboards so businesses know exactly where money is being spent
• Allowing employees to book and manage travel with 24/7 support
• Offering unlimited cash back rewards

Navan can help your business grow with quick approvals and no personal credit check. Get started for free in as few as five minutes.

Essential reading:

• 10 Corporate Credit Card Best Practices
• The Easiest Way to Track Small Business Expenses
• Small Business Vs. Corporate Cards: What's The Difference
• 7 Hidden Powers of Corporate Cards