Guide to annual business revenue on credit card applications

If you’re gearing up to apply for a business credit card, one thing you may be asked to report is your annual business revenue. This is the total amount of money your company makes in sales over the course of a year, not including expenses. Credit card issuers, investors and lenders use this information to get a clearer picture of your business’s financial health—a major factor in their decision to approve you.

Reporting this number honestly and accurately is key, so here’s what your annual business revenue really means and how to calculate it.

What you’ll learn:

• Annual revenue refers to the total income your business makes from its operations over a year, not counting any expenses.

• When you apply for credit—like a business credit card—your annual revenue may be requested because it can show how well your company is performing financially.

• To calculate your company’s annual revenue for a business card application, add up all sources of verifiable income, like products or services sold, over a one-year period.

Annual business revenue measures how much money your company makes over the course of a year. This is calculated by figuring out how much your company earned from things like selling products or services but before subtracting expenses. You can find your business’s annual revenue on the first line of your income statement, which is labeled “sales.”

This is different from profit, which measures how much your company earns after subtracting the cost of goods sold (COGS) from total revenue. Revenue can help you understand how well your company is performing, and you can use it to compare your business’s financial health year over year. Understanding your annual revenue can help you make decisions when it comes to how much inventory you need. You can also use this number to help set projections.

Potential investors typically request other metrics, like cash flow, margins and annual sales. Annual sales refers to the amount of money your company has made from selling goods or services over a 12-month period. Annual sales are part of your company’s annual revenue. But compared to revenue, sales can offer different perspectives to those looking at your annual reports. 

Annual revenue includes money your company has made from both core operations and nonoperating income. This could include things like investments, interest or one-time events like the sale of a property. Annual sales, on the other hand, only include the money made from your business’s core operations. Because annual revenue takes into account one-time events, investors usually pay more attention to your business’s sales to get a better sense of its growth.

When a business card issuer asks for your company’s revenue on an application, they’re typically asking for the gross income your company made in a 12-month period. To calculate your company’s gross income, you’ll need to include all the income your business has earned from reliable, verifiable sources. These sources include:

• Products sold

• Services performed

• Assets acquired

• An asset appreciating

• Property leased

• Equipment leased

When you’re reporting your business’s revenue, be sure to exclude any personal income. You’ll usually find a separate section to enter your income on the application. Just make sure all sources of income can be backed up by documentation.

If your business hasn’t made any money yet, you can report $0. In this case, you might be asked to report your personal income instead. Some card issuers will accept estimated revenue projections instead of actual revenue. You can figure out your potential revenue based on your business plan and expected sales—but keep in mind, you might need to provide documentation to back up your estimates.

Here are some examples of how to calculate annual revenue:

Suppose you own a breakfast shop that sells coffee, pastries and breakfast sandwiches. To calculate your revenue, first multiply the quantity of each product sold over the course of a year by its price:

• Coffee: $1.50 X 3,000 units sold = $4,500

• Pastries: $3.00 X 1,200 units sold = $3,600

• Breakfast sandwiches: $5.75 X 1,000 units sold = $5,750

You then add these figures together to determine your sales:

• Sales: $4,500 + $3,600 + $5,750 = $13,850

Say you also own the building and lease a portion of it to a tenant for $1,000 per month. You would consider this nonoperating revenue by multiplying the rent times 12 months:

• Nonoperating revenue: $1,000 X 12 = $12,000

You then add your sales and nonoperating revenue to calculate your annual revenue:

• Revenue: $13,850 + $12,000 = $25,850

For this business, the annual revenue you report on a credit card application would be $25,850.

Say your small business is an art studio that sells artwork and supplies. You start by determining your business’s sales by multiplying the products you sold by their price:

• Artwork: $250 X 30 units sold = $7,500

• Paintbrushes: $15 X 200 units sold = $3,000

• Canvases: $20 X 180 units sold = $3,600

• Paints: $30 X 125 units sold = $3,750

You then add the totals from each product category to determine your company’s sales figure:

• Sales: $7,500 + $3,000 + $3,600 + $3,750 = $17,850

In addition to selling artwork and supplies, you also offer painting classes. You would include this in your revenue calculation as a service offered by multiplying the cost of each class by the number of classes sold in a year: 

• Classes: $55 X 250 classes sold = $13,750

To calculate your company’s annual revenue, you then add the total sales from products and services sold together:

• Revenue: $17,850 + $13,750 = $31,600

For this company, you would report $31,600 in annual revenue on a business card application.

When you’re applying for a business card, the card issuer usually asks for your company’s annual revenue. But each card issuer may have its own requirements and criteria when evaluating a card application.

In addition to annual revenue, some factors that may be taken into account on a business card application include:

• Business credit score

• Personal credit score

• Amount of time your company has been operational

This information can show how likely you are to pay back a debt based on the card issuer’s specific metrics and evaluations. It can also be used to set business card terms and credit limits.

If the card issuer decides you’re a good fit based on the information you provide, you might be extended a business card offer. But the types of credit cards you qualify for can vary depending on your business’s profile.

Annual business revenue is an important measurement and can show how well your business is performing financially. But it’s not the only factor that’s considered. There might be requests for your annual revenue plus other details about your company to see which card offers you might be eligible for.

If you’re considering a business card, you can get pre-approved with Capital One to find a card that matches your company’s profile and can help fuel business growth.