Business credit cards for startups: What you need to know

Unpredictable cash flow makes managing finances challenging for most startups and entrepreneurs. One possible solution may be a business credit card. Business credit cards provide access to flexible funding and help businesses maintain financial stability without sacrificing their independence.

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

What you’ll learn:

• Business credit cards may be the answer to a startup’s financial management challenges. 
• Business credit cards can help startups scale through features like streamlined expense management, access to financing 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 business-grade rewards.
• Once you’ve chosen a business card for your startup, applying can be easy—make sure to have your startup’s tax ID, its previous year’s gross annual revenue, and the personal information of the founder and any major shareholders.

While there are business credit cards designed specifically for startups, a traditional business credit card could be the answer to a startup’s financial management challenges. Business credit cards are designed to help business owners manage expenses more effectively. Some cards even offer features such as expense management tools or rewards like cash back and travel benefits, which can help reduce operational costs.

As a startup or new business, it’s essential to understand which card features can support your business’s growth before choosing a business credit card.

A business credit card can help facilitate your startup’s growth in three key ways.

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. A business card can provide access to flexible, revolving credit to cover short-term financing needs such as paying for supplies, services, or marketing efforts. This can be especially helpful in the early stages of a startup when cash flow is tight and other financing options are limited.

Consolidating business purchases onto one card can simplify bookkeeping, allow you to monitor spending in real time and generate detailed reports for tax filings or business forecasting purposes. With the insights a business card provides about your business’s spending habits, you can work to improve your decision-making and planning as you scale.

Using business credit cards responsibly helps establish your company’s credit history—an essential for securing 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.

When considering a business credit card, startups should focus on cards and features that can support their financial needs and growth plans. Some key factors to consider include—but aren’t limited to—the following:

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

A good place to start is to look at no-annual-fee business credit cards from Capital One. These cards are designed for credit ranging from fair to excellent. They offer a range of APR rates and credit limits that may be just right for your business.

As a startup or new business owner, you’ll likely need to provide a personal guarantee when applying for a business credit card, making you personally liable for any business debt.

Some business credit cards don’t require a personal guarantee. But those 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 to other business cards, these cards generally offer fewer benefits and rewards.

Remember that while a card without a personal guarantee seems appealing, it’s critical to evaluate whether it meets the specific needs of your business. Before making a decision, focus on the features that are most important for your startup.

The best business credit cards for startups offer features that help new businesses grow. These include expense management, rewards and flexible financing. For example, Capital One business cards offer several business-grade benefits, like AutoPay, free employee cards, travel rewards and virtual card numbers for safer online transactions.

Business-grade benefits can also help streamline your operations so that you can scale efficiently.

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 to have the following information at your fingertips:

• Business name and tax ID number: If your startup has a legal name and a separate tax ID, you’ll need them both for the application.
• Address and phone number: If your startup is at home, your personal address and phone number will suffice.
• Total annual revenue: You’ll need to know your startup’s previous year’s gross annual revenue. However, if your business hasn’t generated any revenue yet, don’t worry; just put $0 where applicable.
• Personal information: Whether your business has a separate tax ID or not, you’ll still need the name, address, date of birth and Social Security number (SSN) of the business owner, as well as the personal information of any individuals with a 25% or more share in the business.

With the information you need at hand, you can begin to complete the credit application, opening the door to potential financing opportunities for your startup.

Managing finances can be challenging for startups, but with a business credit card, business owners can access flexible funding options and streamlined expense management while building a credit history.

If you’re ready to support your startup with a business credit or charge card, compare business cards from Capital One and explore the business-grade benefits (and more) available with every card.