What to Know Before Using a Credit Card to Fund Your Startup Business

Credit cards are popular tools to finance startup businesses. It is a top source of capital for those businesses that are just starting out. It is important to understand how to get credit approval and use the credit cards the correct way. Some people have only credit cards as an option for funding when they are just starting out. By educating yourself on credit approval and the proper use of a credit card can help you get the most out of using it to fund your business.

To get approved for a credit card you need to understand what credit score and credit history you need to have. If you use the credit card correctly, you will know how to get the biggest benefits for your startup business as a result of using your card. Here we will discuss how to get approved for a credit card and how to use it to get the most benefit out for your business.

The Best Credit Cards for a Startup Business

You should know what type of credit card works best for a startup business before you apply. It is recommended that you separate your personal credit from your business credit. The main problem about not separating these two is that your personal credit can be negatively impacted and cause a decrease in your credit score if you are maxing out on business expenses.

Your personal score and credit history are the key to getting approved for a business credit card. To determine if you qualify, banks will check your FICO score first. You need to know your FICO score before the banks see it and you can do this by obtaining a copy of your credit report.

What a Credit Card Issuer Looks for On Your Credit Report

There are certain things a credit card issuer looks at when they pull your credit report. When applying for a business credit card, they will see how you manage your personal credit cards. Personal credit cards show banks how you manage revolving debt. Banks also look at the amount of credit card debt you have if any. They look at the credit limit you have in your name and look at your credit utilization.

Your application for a credit card can be denied for the following reasons:

  • Bankruptcy
  • Over 2 unpaid collections
  • Over 4 late payments in the last 24 months
  • Less than a 4-year age of file
  • Less than 5k in available credit limits
  • Less than 3k on a revolving account
  • Less than 1 revolving credit account
  • More than 7 inquiries on any one bureau in 6 months

By determining your creditworthiness, credit card issuers will feel secure approving you for a card. Your personal credit history gives them a good idea of what type of cardholder you will be. They want to make sure you have made timely payments consistently and that you have not reached the credit limit on your personal credit cards.

How to Use a Business Credit Card

When using a business credit card, you can use it to pay for business expenses and then write them off on your taxes. Writing things off on your taxes can help you save money. There are also other ways to fund your startup business. Many credit cards have a cash back rewards program where you get cash back when you make a purchase. If you use it properly, the reward program can help you save money but lowering the amount of money you borrowed.

The cash rewards program varies on the credit card company. It is important to find out how each credit card company handles their reward program and see if it is the best for your business needs.

Remember that every credit card has fees attached to them so be sure to go with the card that has the lowest fees. Find information on the annual fee, APR, and more.

The Bottom Line

It can be overwhelming to navigate between all the different credit card issuers. Do research before you apply for a credit card and be aware of any fees associated with them.