Starting a new business can be an exciting yet daunting task. One of the first things you'll need to do is establish business credit, which allows you to access financing and build credibility with vendors. But what if you're just starting and don't have a long credit history for your new business? The good news is that there are business credit cards available for startups and entrepreneurs with no credit history.
What Are Startup Business Credit Cards?
Startup business credit cards are designed for new businesses that don't have an established credit profile yet. These cards generally have lower credit requirements than traditional small business credit cards, making them more accessible to newer entrepreneurs.
The main benefit of startup business credit cards is that they allow you to establish a business credit profile separate from your credit. This is important because your business and personal finances should be kept separate. Building your business credit score will make it easier to get approved for business loans, lines of credit, and other financing down the road.
Here are some other advantages of using a startup business credit card:
- Get approved based on your credit alone in most cases
- Lower credit limits to start (usually $500 - $5000)
- Use the card for business expenses to establish a credit history
- Separate business & personal expenses for easier tracking
- Easier approval compared to small business loans
The catch is that startup business credit cards tend to have higher interest rates and fees compared to standard business credit cards. But used strategically and paid off each month, they can be instrumental in establishing your business credit.
Qualifying for a Startup Business Credit Card
Since startup business credit cards cater to new businesses, they have lower barriers to approval compared to traditional small business credit cards. Here are some common requirements to qualify:
- Typically need a credit score of 660+ personally
- No prior business credit history required
- 1+ years in business may be preferred
- Annual revenue requirements of less than $10k usually
As long as you have decent personal credit, you should have a good chance of approval. Credit scores below 660 may get approved but likely with lower credit limits.
Some startup business credit cards to check out include:
- Brex Card
- Chase Ink Business Cash/Unlimited
- Capital One Spark Cash/Miles
- TD Bank Business Solutions Credit Card
- Bank of America Business Advantage Card
Be sure to compare the features and reward structures to find the best fit based on your business spending needs. Perks like cash back, travel points, and purchase protections can provide great value.
How to Use Startup Business Credit Cards to Build Credit
To build your business credit effectively, be strategic with how you use your new startup credit card. Here are some tips:
Use sparingly at first: Don't immediately max out your new card. Utilize 10-30% of the limit in the first few months to demonstrate responsible usage.
Pay on time: Payment history is typically the biggest factor that influences your credit scores. Set payment reminders and automate payments to avoid late fees.
Keep personal & business expenses separate: Only use the card for legitimate business purposes and avoid mixing personal expenses. This keeps finances structured.
Limit balance carries: Pay off balances in full each month if possible. Carrying balances leads to interest charges and higher credit utilization.
Request limit increases over time: As you build your credit profile, request periodic credit limit increases to show growth. Just don't overextend.
Check business credit reports: Monitor your business credit reports to ensure accurate reporting by card issuers. Dispute errors if found.
Apply for additional credit: Applying for and responsibly managing additional business credit cards and lines can strengthen your profile over time.
Benefits of Good Business Credit
Building your business credit score has many advantages beyond just getting a credit card. Good business credit can help with:
- Getting approved for loans and lines of credit
- Qualifying for business leases and commercial mortgages
- Improving terms and rates from vendors/lenders
- Increasing overall credibility and trustworthiness
- Allowing you to access more capital when needed
- Keeping business and personal finances separate
- Potentially improving personal credit score
Establishing good business credit early on sets your company up for success as you look to fund growth. Your credit will still play a role, but lenders will look at your business's ability to manage credit responsibly.
Drawbacks to Be Aware of
While startup business credit cards can jumpstart your company's credit, there are some potential drawbacks to consider as well:
High APRs and fees: Interest rates on startup cards often exceed 20% APR. Late fees and cash advance fees can also add up. Manage carefully.
Lower credit limits: Limits around $2000-$5000 are common to start, which may be insufficient for some businesses. You'll need to graduate to higher limits.
Personal liability: As a small business owner, you're personally liable for all business debts, including credit cards. Make payments on time to avoid credit damage.
Time commitment: Building business credit takes diligence, especially in the beginning. Checking statements, monitoring credit reports, and staying on top of payments takes time.
Impact on personal credit: Lenders may view high business credit card balances negatively when you apply for consumer credit, even if you pay on time.
While startup business credit cards have clear advantages, make sure you weigh the potential downsides as well based on your business situation. Have a plan for graduating to better credit products down the road.
Types of Business Credit Cards to Consider
If you're starting a business from scratch, a dedicated startup credit card can be a smart option. But you also have alternatives like traditional consumer and small business credit cards. Here are the key options:
Startup Business Credit Cards
As discussed, these specialized cards cater specifically to new businesses with no credit history. They feature:
- Lower credit limits ($500-$5000)
- Minimum requirements for approval
- Ability to establish business credit
- Higher APRs and fees in most cases
Top startup business card picks: Brex Card, Chase Ink Unlimited, Capital One Spark Miles
Small Business Credit Cards
These standard cards require an established business credit profile, typically 3+ years in business. Benefits include:
- Higher credit limits ($10,000+)
- Lower interest rates (around 10-20% APR)
- More rewards opportunities (cash back, travel)
- Perks like employee cards and spend tracking
Top small business card picks: Chase Ink Business Preferred, Capital One Spark Cash Plus, Amex Blue Business Plus
Consumer Credit Cards
Some entrepreneurs use personal credit cards to finance their startups. Consider if you:
- Don't qualify for a business card yet
- Want to earn consumer rewards like cash back
- Are a sole proprietor without a legal entity formed
Top consumer card picks: Chase Freedom Unlimited, Citi DoubleCash, Wells Fargo Active Cash
Consider which card type aligns best with your goals, credit needs, and spending patterns as your startup launches.
Top 5 Startup Business Credit Cards
Here is an overview of some of the top recommended startup business credit cards to consider:
- Brex Card for Startups
- No personal credit check or personal guarantee
- Up to 7x points on rideshares, travel, restaurants
- Points can be redeemed for cash back
- No preset spending limit
- Chase Ink Business Unlimited
- $500 bonus after spending $3000 in first 3 months
- 1.5% cash back on all purchases
- 0% intro APR for first year
- No annual fee
- Capital One Spark Miles
- 50,000 bonus miles after spending $5000 in first 3 months
- 2X miles per $1 on all purchases
- No foreign transaction fees
- $95 annual fee waived first year
- TD Bank Business Solutions
- $300 bonus cash back after $3000 spend in first 90 days
- Unlimited 1% cash back
- 0% intro APR for first 6 months
- No annual fee
- Bank of America Business Advantage
- $300 statement credit after $3000 spend in first 90 days
- Unlimited 1.5% cash back on all purchases
- 0% intro APR for first 9 months
- No annual fee
As you compare, look at the rewards rates, sign-up bonuses, intro APR offers, and fees to determine the best option for your business.
Tips for Managing Your Startup Business Credit Card
If you do get approved for a startup card, be sure to implement good management habits from the start. Here are some tips for managing your business credit card responsibly:
- Avoid carrying balances whenever possible, pay in full each month
- Set payment reminders and automate payments
- Use for business expenses only, track carefully
- Check statements for errors and monitor credit reports
- Pay down large purchases quickly
- Keep utilization below 30% of the credit limit
- Set email/text alerts for large transactions
- Look for opportunities to request credit limit increases
- Create a plan for keeping organized records
Conclusion:
Establishing business credit should be a top priority for any startup founder, even if you don't have a long credit history personally. With the right startup business credit card, you can begin building your company's credit profile from scratch. This will pay dividends as you look to fund growth through business financing down the road.
The key is using your startup card strategically - keep limits low, make payments on time, and only use it for legitimate business expenses. Monitor your credit reports closely and aim to graduate to cards with better terms. With diligence, you can build strong business credit to set your new venture up for long-term success.
For any online business looking to accept payments and manage finances, 5 Star Processing is an excellent solution. They provide secure credit card processing solutions and merchant services for startups and small businesses. Check them out for easy, fast, and reliable payment solutions to take your business to the next level!
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