What do I need to get a business credit card?

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s.jessica
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What do I need to get a business credit card?

Postby s.jessica » Sat Jan 19, 2013 10:29 am

What would I need to apply for a business credit card? EIN, business name, checking account in business name. Right now I'm just doing it by myself but I haven't quit my full-time job yet. My boss says I can't get a business card because the business I'm starting is a hobby that interferes with my full-time job.

I have a Capital One card for personal use, but it's a crappy card with low limit, annual fee and no rewards. I noticed they have a Spark card for businesses needing to build credit. I was just wondering if it would help that I've been using a personal card with them a little and keeping it paid off.

My main questions are, do I need to have been running the business for a certain amount of time? does it need to be making a certain amount of money? Would an application be another hard pull on my personal credit report? My present employer says they pull your personal credit and base on personal income, but only permit you to use the card to pay business expenses.

One reason I've been looking at business cards is because of my low limits I have on my current cards, I'll have to totally max them out and pay them off 3 times a month and hope I get them paid down before they report. I already slipped up a couple times and charged up my cards a day before they reported, so my utilization was 98%. As much as I hated to do it, I had to open another checking account with a debit card to keep my credit card usage down. I'm only considering this because if business improves, it will already have established it's own credit.


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nomnomnom
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Postby nomnomnom » Sat Jan 19, 2013 2:38 pm

You will build a separate business credit profile (or can), but most every lender will pull a personal credit report as well, so yes, it will result in a hard inquiry for you.

You don't necessarily need to be running it a certain amount of time for certain revenue, but that sort of depends on the credit line you are trying to get and who you are getting it through. My local CU is willing to offer me a business credit card for a business I started 5 months ago that is currently losing money.

For taxes and other reasons, you should only use a business card for business expenses. Otherwise things can get really grey.

I don't understand why your boss said you can't get a business card. That makes no sense as far as I know. I work a full-time, salaried job for a publicly traded company and I also own two side S-Corporations that back different "hobbies" of mine but have separate banking portfolios. Is your boss talking about an anti-compete with your current job?

It wouldn't hurt to start building a business credit portfolio for the long-run. However, I feel like your reasons for opening right now might not be entirely in line with that (personal utilization).

Have you looked into opening another line or two personally and/or requesting credit limit increases?
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s.jessica
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Postby s.jessica » Sat Jan 19, 2013 3:57 pm

The last time I tried this it took a tax guy a couple weeks to figure it all out. I think I made $800 for the year but expenses were $2,000 so I had to put funds from my personal account into the business account every month then ended up with $1,500 in my business account that I used to open the account. I decided I didn't want to do the business anymore and I assumed all the money in the account was mine, so I drew it out and closed the account.

What my employer told me is had I run those expenses through a business credit card with that little income the credit card company could have sued me or even had me charged with fraud. I really don't see how they could do that when the card is in my name and I pay the bill, I guess I don't know the law, that's way I have to pay someone $$$$ to figure my taxes so I can make a little.

Fast forward a couple years, I have a new idea, got a new EIN and want to try it again. I'm going to have to do a large amount of ordering, but don't have enough credit to cover it. I have some personal funds to pay the bill if the business doesn't make enough.

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djrez4
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Postby djrez4 » Sat Jan 19, 2013 4:17 pm

Your boss is a moron.

You have everything you need and more to open a business credit card, assuming your credit history supports approval.
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s.jessica
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Postby s.jessica » Sat Jan 19, 2013 6:27 pm

Boss knows what he's doing, discouraging employees from starting their own business. There's no way I could compete with what he's doing - he doesn't see his employees as a threat that way because he doesn't believe anyone who works for him has what it takes to run a business like his.

My main thought was so the business would build credit, but then that leaves me stuck with a couple crappy cards. That's where if I had a rewards business card it would be too tempting to use it. You know, regular cards = no rewards business card = airmiles points. Be tempting to put that new television for the house on the business card. I'm kind of thinking now I should go after some good cards for myself first so my business card isn't the best card I have.

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Postby Midori » Sun Jan 20, 2013 10:37 pm

Get your business card before you quit your job. Since you'll secure your card, your income and personal credit history is more important than anything your business has... or at least, that's what I've found. (Single-member LLC here.)

Certain amount of time--- it helps, but doesn't guarantee anything. I got turned down for a Lowe's card, even after passing the 3-year mark, because they felt I didn't have enough revolving credit in my file, despite an awesome personal credit score, flawless EX/EQ/TU reports, plenty of business assets, etc, etc, etc.

Does it need to make a certain amount of money-- Again, my impression is that "your income" is more important than "its income".

Hard pull on you personally-- Yes.

Only permits you to pay business expenses-- How would they know? I buy my favorite packs of paintbrushes from Dollar General. How do they know I'm not buying milk and Twinkies? I spend thousands of $ at home improvement stores each year. How do they know that I'm buying paint and lumber for the biz, and not Amazon giftcards? If I buy dinner at Nobu in Dallas, do they know who's at the table with me? At the end of the year, the IRS and your accountant might care... but not SimplyCash Amex/Chase Ink/Capital One Spark/etc.

That being said, is it a good idea to have a dedicated business card? Absolutely! It helps keep your financials separate from your personal expenses. Whether or not that dedicated business card has your actual business name on it or not, though... that matters less. For the first 3.5 years, I just used the debit card associated with my business checking account, and that worked great for keeping track of mileage for supply trips, expenses, etc. Then I got tired of spending so much and not getting any points or rewards or cashback. Rather than risking being uselessly turned down for a dedicated business card when I couldn't even get a store card, I applied for a couple of extra personal cards (to help grow my file, although it's killing my AAoA), and I just know that everything that goes on it is a business expense. In another year or two, I'll give it another go.

Yes, it's normal to float yourself personal loans to keep your business going, especially during times of financial stress. Ouch, it's normal. Going without the new television/vehicle/eating out is also normal. Very normal. :o)

I'd be less inclined to talk personal details with your boss in the future... he sounds like a real confidence-killer. On the other hand, I suspect he could also be an educational person to cultivate, if you can ignore his personality flaws and ego... it's always fascinating to find out how people started out and grew a successful biz, what hurdles they overcame, what problems had to be solved.



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