Remember your very first credit card? Even with zero credit history, an individual can still get approved for a student or secured credit card.
But is the situation the same for a brand new home or start up business? A basic no-frills card that will approve a company with limited to no credit history?
The answer is both yes and no – let me explain…
When I opened my LLC, I figured the easiest business credit card to get would be one from a retailer, such as Staples or Office Depot. Wow… was I in for a big surprise!
You would think that these types of cards would have very loose credit requirements. After all, it’s not like some office supply store is anything special, right? Well apparently they feel otherwise. Upon reviewing the application, here’s what I discovered…
That’s right, just to get approved for a petty office supplies store card, your corporation/LLC needs to be raking in $5 million in annual revenue AND have been around for a full 3 years. Obviously, this is not a business credit card for a new business to get! That’s even a tough thing for most established businesses to achieve, since I would guess a majority of small businesses operate in an area south of $5 million in annual sales.
Of course, you can still apply for a retailer card like that if you’re willing to co-sign with personal liability (so it’s not just under your business credit). But the question is… if you’re going to do that, why would you apply for such a low-level card? Wouldn’t it be preferable to apply for the Chase Ink or other major business credit card with rewards, benefits, and universal acceptance?
Conclusion? If you think store cards will be a good credit card for your new business, think again.
Major business cards?
As you know most of the big banks offer credit cards for businesses: Chase, American Express, Citi, Capital One, Discover, Bank of America, and others. So how many of those offer cards without a personal guarantee requirement? The answer is zero.
Whether it’s a major bank (such as the above examples) or a small regional bank, they all have one thing in common – in order for you to apply and get approved using only your company’s credit, you can’t be a new business. The qualifications are comparable (and sometimes even stricter) then the aforementioned Staples card, which kind of makes sense. The bank doesn’t want to be stuck holding the bag if your business goes south. They want to be able to go after the business owner on a personal credit level and get their money back.
Out of the major issuers, American Express, a CreditCardForum advertising partner seems to have the lowest bar to jump over. Back during the Great Recession they imposed a minimum of $5 million in annual sales to be approved (which is comparable to other banks). However after the economy improved, in 2012 they significantly lowered the requirements:
AmEx Green Business Card ($95 annual fee)
Have $10,000 per month in revenue and 6 months operating history.
AmEx Gold Business Card ($175 annual fee)
Have $2 million in annual revenue and 6 months history history
AmEx Platinum Business Card ($450 annual fee)
Have $2 million in annual revenue and 6 months history
Note: By definition, corporate cards are the only ones which do not require a personal guarantee. Regardless of the bank, anything called a “business credit card” or “small business credit card” will require you to co-sign using your Social Security number. If you don’t want personal liability, then what you want is a corporate card.
With all of the above (and any corporate card out there) you will have to prove your qualifications. When I called AmEx’s customer support and asked, they said that during the application you will have to provide your company’s bank account info – they will then call and verify deposit amounts and other information.
As you can see, the Green Business Card is one of the best business credit cards for new business, but probably not a newly minted business. Your LLC/corporation needs to have been around for at least 6 months and pulling in a minimum of $10k per month in sales.
On the other hand, the requirements for the Gold and Platinum Business Cards are the same… $2 million in annual sales. If you’re just starting a new business, these probably won’t be options for you until down the road. All the other banks have similar minimums ($2-5 million annually) which makes the Green’s qualifications substantially below average.
Brand new businesses?
Obviously the American Express Corporate Cards are the best to aspire to… but none of them are for new businesses. So what should you do meanwhile?
If you’re comfortable doing so, your best bet will be to get a head start on the credit building process by signing up for a small business credit card using a personal guarantee. That’s because you can probably qualify (assuming your credit is decent), even if your company is only a day old and has zero revenue. And you can start building a credit history for your young enterprise and can qualify for a genuine corporate card down the road should you scale your business and decide to incorporate.
So what is the best startup card for your startup? My vote is for the Ink by Chase and it’s what I use myself. I also have AmEx business cards but the caveat with those is that they don’t report to Dunn and Bradstreet or Equifax Business credit bureau (so while AmEx small biz cards are great for benefits, they’re not useful for credit building).
Written or last edited on February 9, 2016