Business Credit Card Qualifications: Minimum Requirements Lenders Expect

Primary Business Credit Card Qualification Factors

There are a few general factors that play into a lender's decision to approve or deny your business credit card application. You can work on and improve some of these before applying, while others may take months or even years to build up.

1. Personal credit score

If you're a newer business entity or sole proprietorship, many card issuers will require a personal guarantee from you as the business owner. That's because a business with little established credit history isn't necessarily able to qualify for a credit line on its own, especially if it doesn't have a business credit score to lean on.

Instead, your personal credit score is likely to come into play. Many issuers will want to see a fair credit score or better, though the best cards and lowest interest rates are typically reserved for applicants with excellent credit histories. If you have a lower credit score, you may still meet some business credit card qualifications, just expect that you may get a smaller line of credit, a higher interest rate, or you may only get approved for a secured card that requires a deposit or one with high annual fees.

2. Business credit score

If you've been in business for a while and have a business credit history, lenders will often want to look at your business credit score, either in place of or in addition to your personal credit score. Unlike a personal credit score, which is usually linked to your SSN, business credit scores are tied to your company's Employer Identification Number (EIN). Like a personal credit score, though, your business score shows how your company has handled debt in the past: what sort of credit you've taken out, how it was repaid, and how much you still owe.

If you're a newer business, it's normal not to have a business credit score yet. Over time, as you take out business credit and pay back what you owe, you'll build a healthy score. And if you have a good business credit score, you'll often meet business credit card qualifications that earn you better terms, higher credit limits, and don't rely as heavily on your personal credit history.

3. Annual revenue

Lenders want to see that your business is generating enough revenue to cover whatever line of credit you're asking for. There's no set limit but expect to show at least a modest revenue history as part of the business credit card qualification process. Card issuers that cater to startups and freelancers tend to have lower revenue thresholds, while cards designed for big companies and corporations often expect to see six figures or more in annual revenue.

If your business is new and isn't generating revenue yet, it's not impossible to get a business credit card. Some issuers will still approve you based on other business credit card qualification metrics, like projected revenue, your personal income, and your personal credit score. Just expect that your options will be more limited.

4. Business history

The longer you've been in business, the more stable your business appears to be. If you've been running for several years with consistent revenue, this can be a signal to lenders and credit card issuers that you are more stable and less of a risk than a newer business that hasn't proven itself yet.

Again, this business credit card qualification doesn't have a set limit, but you can expect most issuers to want to see that you've been in business for at least six months to a year. There are some credit card companies that offer accounts to startups and new businesses with limited (or no) operating history, but you can expect this to impact the credit limit and rates you're offered.

There isn't much you can do to speed up your business history, either, other than keep operating and tracking revenue until it's time to apply again. Thankfully, a strong personal credit score can sometimes be enough to make up for this business credit card qualification with certain issuers.

5. Industry risk

Some industries are considered riskier to lenders, which can affect approval odds and the credit terms you're offered. If you're in a risky industry, you might have stricter business credit card qualifications to meet before you'll get approved.

Some industries that are commonly viewed as riskier include those that:

• Are cash-based

• Have high failure rates

• Are associated with shaky regulatory requirements

As a result, business owners in these industries may face more scrutiny when it comes to business credit card qualifications. Of course, that doesn't mean they can't qualify for a business credit card, just that other factors (like credit score, revenue history, and business history) can carry more weight.

6. Existing debt and credit utilization

Before approving you for new credit, lenders will want to look at how you're managing any current debt, both personal and business. To do so, they'll look at your existing debt accounts and calculate your credit utilization ratio. Thankfully, this is one factor you have the power to change before you start applying.

A business with high balances on other credit lines, or a personal credit profile with a high utilization ratio, appears riskier to lenders in terms of business credit card utilization. If you have any unresolved balances, accounts in collections, past due balances, or maxed out credit cards, this can be a blocker in terms of credit card approval... even if your other business credit card qualifications are relatively healthy.

Credit utilization is the percentage of your credit lines that you're actively using. If you have a credit card with a $50,000 credit limit, for example, and you are carrying a $40,000 balance, your credit utilization is 80%. Many lenders will want to see this number under 40% or so, though that can vary.

Your debt-to-income ratio (DTI) also matters, especially for sole proprietors and small business owners whose personal and business finances are intermingled. DTI measures how much of your income is already spoken for by existing debt; if you're bringing in $10,000 per month but your existing balances have minimum payments totaling $6,000, your DTI is 60%.

Lenders aren't just looking at whether you can make minimum payments. They want to see whether taking on more credit makes sense given everything else you're already carrying around.

How to improve your business credit card qualifications

Not sure if you'd be approved if you submitted a credit card application today? There are a few things you can do in the coming weeks and months to better your chances.

• Check your credit report. Request a personal credit report and check it for any errors. If you find one, dispute it with the credit bureaus. Also use this report to analyze your debt burden and pay down any revolving balances, if you can.

• Maintain separate accounts. Open a dedicated business bank account and separate your business and personal finances, if you haven't already. Request an EIN (even if you're a sole proprietor) and start running all business income and business expenses through that account.

• Intentionally build business credit. A healthy business credit score is an important business credit card qualification. Spend the next few months opening vendor accounts or a small business loan in your business's name, and make all payments on time. This will help build your business credit score so you won't need to rely on personal guarantees as heavily.

• Gather documents. Lenders will often want to see recent tax returns, bank statements, monthly revenue, and business cash flow as part of your business credit card qualification Gathering these now, or knowing where the reports are in your accounting software, will save you time and headache.

• Pay down debt. Put extra toward balances on any existing debt if you can, especially high-utilization credit lines. Reducing what you owe improves both your personal and business credit profile.

What you'll need to apply

There are some key items you'll need as part of your business credit card qualification.

• Your legal business name and business structure (sole proprietorship, partnership, LLC, corporation)

• Your EIN or Social Security number

• Estimated annual business revenue

• Number of employees

• Time in business

• Your personal information, including your SSN, since most cards require a personal guarantee

Having all of this ready before you start the application saves time and reduces the chance of errors that could slow down or derail your approval.

Final thoughts

Business credit card qualifications boil down to a few important questions that each lender is trying to answer: can this business pay its bills, how risky is the industry it operates in, and how much history is there already? Annual revenue, time in business, and existing debt all factor into the final decision, though your personal credit score tends to carry the most weight if you own a newer business.

That said, a limited credit history today doesn't mean you can't qualify in a year. Plus, there are things you can do to improve certain business credit card qualification factors, like if you have a high credit utilization ratio or sparse credit profile. Putting in the work before you apply can improve your odds of approval and the terms you're offered.