Business credit cards for startup businesses: What to know

Startups and entrepreneurs often face unpredictable cash flow, which can make financial management a challenge. One possible solution is a business credit card. Business credit cards provide access to flexible funding and help businesses maintain financial stability while preserving their independence.

Keep reading to learn how business credit cards can help support new businesses, what startups can look for in a business credit card, and how to apply for one.

What you’ll learn:

• Business credit cards can help startups by providing access to flexible financing.
• They can also offer features like streamlined expense management and the opportunity to establish a credit history for a new business.
• Before choosing a business card for your startup, consider things like rates, fees, personal guarantees and the opportunity to earn rewards.
• To apply for a business credit card, you typically need your startup’s tax ID, its annual or estimated revenue and your personal information as the founder, along with that of any major shareholders.

A business credit card for startups is a type of credit card that helps new businesses access financing and track spending. While there isn’t a specific type of business credit card for startups, some cards are designed with new businesses in mind. In general, business credit cards can help business owners manage expenses more effectively and may offer features such as expense management tools or rewards like cash back and travel benefits, which can help reduce operational costs.

Similar to personal credit cards, business credit cards can be used to make purchases by drawing from a line of credit. You can spend money on the card up to a set credit limit and repay that amount over time.

Once the billing cycle closes, you’ll be sent a credit card statement that details the balance owed and the minimum payment required to keep your account in good standing. If you pay your bill in full, you typically won’t be charged interest. But if you carry a balance, you may begin accruing interest charges based on the total amount owed and the card’s interest rate.

Business credit cards offer several benefits, including greater financial flexibility, easier expense tracking and opportunities to strengthen your business’s financial profile. Here are some key advantages to consider.

A business credit card can help startups handle unpredictable costs without requiring large lump-sum borrowing. This enables early-stage businesses to manage ongoing expenses at their own pace.

Financing through a business credit card may be a good alternative for startups struggling to qualify for a traditional business loan. That’s because a business card can provide access to flexible, revolving credit to cover short-term expenses, such as supplies, services or promotional efforts. This can be especially helpful in the early stages of a startup when cash flow is tight and other financing options are limited.

Using a business credit card responsibly can allow you to establish your company’s credit history. In turn, this may help you secure future financing. As you grow your business, a strong business credit profile may lead to better interest rates and more favorable terms from suppliers and lenders.

Compared to personal credit cards, business credit cards can offer higher rewards—usually in the form of cash back, miles or points—that you can earn on business spending. And as your company grows, certain credit card issuers—like Capital One—may offer free employee cards that let you earn unlimited rewards on purchases your staff makes.

When choosing a business credit card, startups should consider factors like costs, requirements and available features that align with their financial needs. Here are some questions to ask when evaluating your options.

Business credit card options come with various rates and fees to review. Startups often face limited cash flow, so when you’re considering a business credit card, evaluate the annual percentage rate (APR) and any introductory rates or fees compared with your business’s spending needs. Ensure that the card’s costs align with your spending habits, that it offers sufficient access to credit and that its benefits justify any fees, like annual fees.

A good place to start could be exploring no-annual-fee business credit cards from Capital One. These cards are designed for businesses with credit ranging from fair to excellent. They offer a range of APR options and credit limits that may be well suited to your business’s needs.

As a startup or new business owner, you may need to provide a personal guarantee—a legal agreement that makes you personally liable for your business’s debt—when applying for a business credit card.

Some business credit cards don’t require a personal guarantee, but these cards are typically harder to qualify for. Cards with no personal guarantee are often unavailable to sole proprietors and usually have minimum account balance requirements. When compared with other business cards, these cards generally offer fewer benefits and rewards.

A good business credit card for startups offers features that can help new businesses grow. Business-grade benefits can help streamline your operations so that you can scale efficiently. These benefits can include:

• Expense management tools
• Business card rewards 
• Employee cards
• No foreign transaction fees
• Security features, like card lock and fraud alerts
• Premier travel benefits, like access to airport lounges or credits, that can be used to offset the cost of Global Entry or TSA PreCheck®

For example, Capital One business cards offer several elevated benefits, like AutoPay, free employee cards, travel rewards and business virtual card numbers for safer online transactions.

Startups can apply for a business credit card by comparing available options, preparing the required information and submitting an application for approval. Here are the general steps you may need to follow.

Once you’ve determined your business’s needs, you can start narrowing down your business card options. For example, are you looking for a card with travel benefits that rewards your spending with miles? Or are you considering a more straightforward cash back card that offers a fixed-rate percentage back on all purchases?

Another way to help you make your decision is to get pre-approved for a business card first. This can give you a better idea of the cards you might be eligible for.

Business credit card applications often require information about you and your business. Once you’ve chosen the right card for your startup and are ready to apply, make sure you have the following information:

• Business name and tax ID number: If your startup has a legal name and a separate tax ID, you typically need both for the application.
• Business address and phone number: If your startup is in your home, your personal address and phone number will suffice.
• Total annual revenue: You may need to provide your startup’s annual revenue. But if your business hasn’t generated any revenue yet, you can put $0 where applicable.
• Personal information: Whether your business has a separate tax ID or not, you usually need to provide your name, address, date of birth and Social Security number (SSN), as well as the personal information of any individuals with a 25% or more share in your business.

With the information you need at hand, you can begin to complete and submit the application. You can usually complete a business credit card application online, by phone or in person.

Once you’ve submitted your application, you may need to wait for a decision, usually anywhere from a few minutes to several business days, depending on the issuer. If approved, you’ll receive your cardholder agreement, which outlines information such as your credit limit and additional card terms.

Want to know more? Here’s additional information about startup credit cards.

Business credit cards for startups can be a useful tool to promote growth because they offer flexible funding and streamlined expense management.

If you’re ready to support your startup with a business credit or charge card, you can compare Capital One business credit card options and check to see whether you’re pre-approved—without harming your personal credit score.