When you’re new to business and haven’t built a good credit history yet, business credit card issuers will likely require you to personally guarantee your business credit card application. This requirement for a business credit card application can be annoying at times, but the reality is that unless you do, your chances of getting new business credit cards are slim to none.
There are a few things you can do to get a business credit card despite a lack of credit history at your business. For one thing, be sure to register your business with the credit reporting agencies; the best known of these is Dun & Bradstreet. You already know the personal credit reports issued by consumer centers. This is essentially the same thing that Dun & Bradstreet will do for your business.
Since you’re new to the industry, and because your business credit is tied to your personal credit as a stopgap measure, you must have a strong personal credit history to get the go-ahead from business credit card issuers. When you decide to apply for a business credit card, it’s important to ensure the accuracy and quality of your credit history.
Naturally, you’ll greatly improve your chances of getting your business credit card application approved if you approach the bank where you already do business—unless, of course, your track record with your local bank isn’t perfect. If this is the case, you can try applying for a modest line of credit instead of a business credit card. The bank may ask you to put down a certain amount of money as a kind of collateral for the line of credit, and when you have proven yourself a good payor and responsible borrower, you will be able to proceed with your application for a business credit card. At that point, the bank will be more inclined to approve a business credit card for your business.
As a new entrepreneur on the block, your business credit cards will most likely come with a higher interest rate. However, the interest rate should not determine whether you use your new business credit card. Instead, at the time you receive your business credit card, you should begin charging your business credit card for everyday business purchases; And when the statement arrives, be sure to pay off as much of the business credit card balance as possible. If you want to save money, pay it all off so there is no interest; If you want to give the bank a chance to earn money on your business credit card, carry a small balance into your next billing period.
The sooner you start building your credit on the business side, the sooner you can withdraw from the personal guarantee you have extended. Once your business has established its own credit history, be sure to call the business credit card issuer and arrange for the appropriate changes to the terms of your business credit card agreement.