How To Get Business Credit Cards For Your Business
Business Lines of Credit (BLOCs) can be a fantastic way to supercharge your business. The Lines of Credit (LOCs) act much like a credit cards, and in some cases are; providing your business with access to revolving credit. The more revolving credit you get, the more you can draw on at any time and pay interest on only the amount borrowed. The LOCs help smooth out your cash flow and give you access to funds otherwise unavailable. The process of obtaining these LOCs is fairly straightforward, but will take some planning and time.
BLOCs also help protect your personal credit in two ways: 1) the credit lines do not show up on your personal credit and thus don’t affect your personal credit utilization and 2) once you get around the personal guarantee, the debt is not guaranteed by you personally.
As a Real Estate investor in St. Louis and Albuquerque, my credit rating is incredibly important. So I needed a way to protect my credit rating.
I started by obtaining the Chase Business Ink Preferred card and the American Express Business SPG Card (now the Marriot Bonvoy Business Card). These cards were not tied to my personal credit and would not negatively affect my credit rating. However, I did have to provide a personal guarantee. In other words, if I defaulted on these business cards, my personal credit would be affected.
Now, I have no intention of ever defaulting on any debt that I owe. However, I wanted to gain some extra protection for my personal assets, while also improving the credit worthiness of my business so that it could stand on its own from a lending perspective.
Additionally, I had hit the Chase 5/24 rule which prevented me from accessing any more Chase cards tied to my personal credit; and I had also hit the American Express five card limit. I find these two banks offer the best credit card perks, especially as a military member (e.g., low interest rates and no annual fees).
Therefore, my next step was to improve the credit worthiness of my business. I’ve outlined the steps I’ve taken to do this below.
Steps to Obtain Business Credit Cards
1) Create an LLC and register with the state that it was incorporated with. I used Legalzoom to establish mine, but you can certainly do this yourself or hire an attorney.
2) Ensure that you have a Federal Employment Identification Number (EIN) from the IRS tied to the LLC. This service is provided for free. You can start your application here: Apply for an EIN.
3) Establish a business checking account tied to that EIN. Banks generally use this to determine the actual date the business was started. Most banks want businesses with at least two years of history and $25k in annual revenue before issuing revolving credit.
4) Find a physical address that is not your home address. If needed, you can use services like legalzoom to provide a virtual office.
5) Create a website. I used Squarspace, but there are several options to include Wordpress.
6) Establish a business email address, such as support@businessname.com. Do not use gmail or yahoo. The website services will generally give you a solution when creating a website.
7) Establish a Toll-Free Number and Fax number thru services like Ring Central, which charges about $10/month.
8) Obtain a Duns number from Duns and Bradstreet. This is free, but they tend to try and upsell you to use their credit monitoring and credit building services. This is not needed. Stay strong my friends!
9) Use the SAME business name everywhere (e.g., websites, bank accounts, bills, etc.). Bank will want to see consistency across all of your accounts to ensure that your business is legitimate.
11). Update your business info on google here.
12) Keep an average balance of at least $10,000 in the business checking account to establish the highest bank rating known as a “High Five” rating.
13) Establish 2 – 3 tradeline accounts with starter companies such as Grainger, Quill, or Uline. These tradeline accounts are known as “Net-30 accounts”. Net-30 accounts allow you to purchase goods on store credit that you must pay back in 30 days. They then report back to the business credit agencies like Duns and Bradstreet and Experian, the two most used by banks to identify credit worthiness. The faster you pay off these accounts, the better the rating.
In my experience, Grainger was the easiest to establish. Quill required me to purchase products in excess of $100 per month for three months before approving an account, but I’ve heard that you simply need to purchase approximately $25 worth of goods before being granted access.
It will take about three months before you can apply to more prominent businesses for net-30 accounts
14) After you have the 2 – 3 tradelines established with about three months worth of history, you want to get 2 – 3 more tradeline net-30 accounts from companies like Staples, Office Depot, Lowes, Radio Shack, Best Buy, Amazon, FedEx, or Dell. Remember to continually ask for credit limit increases.
13) After you have these 5+ tradelines with about 90 days of history, you can get revolving credit (e.g., business credit cards) from companies like Dell, Staples, Office Depot, Walmart, Lowes, Home Depot, Amazon, Apple, Auto Zone, Rental Car companies, and Gas Station companies such as Shell. The credit limits are based on the limits you already have approved. Dell is known to approve credit limits of $10k so I would recommend starting with them.
14) Lastly, the holy grail, once you have revolving credit established from 10+ of the companies provided in step 13, you can get revolving credit from American Express, MasterCard, and Visa to continue the travel hacking awesomeness!
Wells Fargo is a very friendly business bank. I applied for both the Wells Fargo Business Secured Credit Card ($25 annual fee, 800-359-3557) and a Wells Fargo Business Loan (877-929-0271). There was a hard inquiry on my personal account for each account, and the minimum loan amount was $5000. The activity is reported to the SBCA but not report to my personal credit report. The Unsecured credit card is automatically upgraded to an unsecured credit card upon bi-annual reviews.
I hope you found these tips helpful, and they enable you to strengthen your business financial position while providing the added benefits of travel hacking.
Resources:
a. https://www.nav.com/blog/a-14-step-checklist-to-make-your-business-legit-20000/ & https://cdn2.hubspot.net/hubfs/408309/SPS_Bootcamp_Presentation_Carpentier,%20Kim.pdf?t=1518975754342
b. https://www.youtube.com/watch?v=Rz5HyFuAd9M
c. https://www.youtube.com/watch?v=iRvsIlAnIFs