How to Apply for a Business Credit Card as a Sole Proprietor

Getting a small business credit card as a sole proprietor

If you have a sole proprietorship, your chances of being approved for a business credit card (and the interest rates you’ll pay if you carry a balance) are tied directly to your personal credit history. Your personal credit will affect the credit card’s initial limit and interest rate. Different credit card companies will have varying eligibility requirements, so while your sole proprietorship may not qualify for one card, you may be eligible for another. 

After being approved for a business credit card, sole proprietors must be vigilant about using the card responsibly. If not carefully managed, a credit card can lead to financial hardship and cash flow problems for a business. 

Notably, according to the Small Business Administration, there is no separation between you and the sole proprietorship you own and operate from a legal standpoint. In other words, you are responsible for the debts your business incurs.

“A credit card is a tool that can be used correctly or incorrectly,” said LJ Suzuki, founder of CFOshare. “Yes, you should get a business credit card because it is a good tool to have in your toolbox. But it is up to you to use that tool wisely.”

5 steps to improve your chances of being approved for a small business credit card

Suzuki noted that many rules governing personal credit card approval apply to getting a business credit card. “Generally speaking, it is still one of the easiest forms of credit to get — you can apply online for any variety of cards with different perks,” Suzuki explained. “But don’t be surprised if they ask for your Social Security number and run a credit check on you personally.”

Consider the following steps and best practices that will improve your chances of being approved for a business credit card as a sole proprietor.

1. Ensure your financial structure is solid.

Before applying for a business credit card, ensure your business finances are organized clearly and separate from your personal accounts. In particular, establishing a dedicated business checking account to manage your income and expenses is crucial. You’ll be able to maintain accurate financial records while showing credit card issuers that your business is legitimate and professionally managed.

Jim Pendergast, general manager at altLINE, emphasized that showcasing your sole proprietorship’s clear financial structure is essential when applying for a business credit card. “A huge part of this process is opening a business bank account that is separate from their personal finances,” Pendergast stressed. “This shows credit card issuers that they are serious about running their businesses professionally and have accurate financial records, such as cash flow documentation.”

2. Consider where you want to apply for your business credit card.

Countless business credit card providers exist. When assessing the best option for your sole proprietorship, consider that these cards are backed by financial institutions, banks and credit unions — and these entities are more inclined to approve businesses with which they already have a relationship.

To get started, check with the banks where you already have personal and business accounts and ask if they issue business credit cards. You can also turn to a bank where you were approved for a small business loan. These financial institutions are more likely to approve you because they already know your creditworthiness. 

Additionally, consider the perks and rewards a business credit card offers. For example, a cash-back card may make sense or you may prefer a travel rewards card.

3. Check your credit score before applying for a business credit card.

As a sole proprietor, your personal financial situation matters more than it would for business owners in other business structures, such as a limited liability company or S corporation. Card issuers will scrutinize your personal credit score.

Before applying for a business credit card, check your personal credit score. According to Experian, a good credit score is in the 700s. However, there is some flexibility here. For example, FICO considers scores between 670 and 739 good while VantageScore considers scores between 661 and 780 good.

Ryan Duitch, CEO and founder of Arro Finance, says sole proprietors should focus on improving their credit score before applying for a business credit card. “Sole proprietors should treat applying for a business card just like a personal one,” Duitch explained. “Be sure to have strong credit by keeping your utilization low and show a clear business purpose for the card by submitting activities and revenue.”

4. Ensure you have all relevant application information handy.

When applying for a business credit card as a sole proprietor, you’ll be asked to provide your Social Security number, recent financials to show monthly revenue and expenditures and potentially your company’s tax identification number (TIN).

While most other small businesses will be required to provide an employer identification number (EIN) as their TIN to apply for a business credit card, your status as a sole proprietor means you’ll generally use your Social Security number instead. If you hire employees, you’ll be required to have an EIN assigned to your business by the IRS. However, even as a sole proprietor without employees, obtaining an EIN can be beneficial as some financial institutions may prefer it for business credit card applications. 

The card issuer will also want to know how long you’ve been in business. Banks and other financial institutions want to minimize their risk. Card issuers are more willing to work with a more established sole proprietorship than a new one.

5. Decide what you can offer as a personal guarantee.

Since credit card issuers want to manage their risk with the borrowers they take on, sole proprietorships that offer a personal guarantee have a better chance of being approved. A personal guarantee means you agree to use your personal assets to repay the debt if your business cannot. 

If your credit history is limited, consider applying for a secured business credit card, which may require a cash deposit as collateral. While business credit cards typically do not require specific physical collateral like company equipment or real estate, offering a secured option can help establish your creditworthiness. 

Benefits of credit cards for sole proprietors

Using a business credit card responsibly can improve your credit score and offer additional perks. “Credit cards are an excellent form of debt to float temporary cash shortfalls or finance large online purchases such as furniture or software,” Suzuki explained. “[But] credit cards are a terrible form of long-term financing. You would be better to get a working capital line of credit or term loan if you need debt for more than a few months.”

The following are some of the benefits a business credit card can offer your sole proprietorship:

• Business credit cards help build credit: The higher your personal credit score, the more likely you’ll be approved for a business credit card. You’ll also receive more favorable interest rates and higher credit limits. Additionally, by using a business credit card and repaying it in full each month, you show financial institutions that you’re trustworthy and reliable. 
• Business credit cards earn rewards: As an incentive for applying to specific business credit cards, card issuers offer excellent rewards, such as sign-on bonuses, travel miles and cash back that you accrue as you use the card. Since you may spend thousands on purchases, these rewards can rack up quickly. Business owners can reinvest rewards, use them for business purchases, fund business travel and more. 
• Business credit cards simplify accounting: Sole proprietors without a business credit card typically use their business checking account and personal credit cards to pay bills. However, mixing personal and business expenses causes accounting confusion. With a business credit card, it’s much easier to corral your business charges in one place for reduced paperwork. In addition, business credit cards provide quarterly or year-end summaries and some give you an online dashboard to help you track expenses. 
• Business credit cards even out cash flow: Business credit cards can help with cash flow problems. When you can charge significant purchases to your business credit card, you can make those purchases when you need them, not just when you have that amount of extra cash on hand. This is especially beneficial for seasonal businesses that may need to invest before their busy season brings in the bulk of their revenue.  
• Business credit cards offer benefits and protection: When switching from a business debit card or checking account to a business credit card for major purchases, you get better fraud protection and other benefits from your credit card company, including free additional purchase protection or travel insurance.

Popular credit card options

While it’s impossible to list every potential credit card available to sole proprietors, the following are well-regarded options. Benefits vary by the card issuer, so consider rewards, interest rates and fees: 

• Visa small business credit cards: Visa is a credit card brand marketed through different financial institutions with varying interest rates, terms and benefits. It’s the most widely accepted credit card type. You’ll have to go through a financial institution to get one. Visit Visa online to learn more.
• Mastercard small business credit cards: Mastercard is also a credit card brand distributed through various financial institutions. While it’s widely accepted, it’s not quite as ubiquitous as Visa. Visit Mastercard online to learn more. 
• American Express business credit cards: American Express is a higher-end card with annual fees. It offers excellent support and benefits but is not as widely accepted because it charges merchants higher fees than other card brands. Visit American Express online to learn more.
• Capital One business credit cards: Capital One offers various Visa and Mastercard business accounts. Its business cards provide up to 2 percent cash back on eligible purchases, along with other rewards, such as discounts and double points, when you book travel through Capital One Travel, its travel booking service. Visit Capital One online to learn more. 
• Citi business credit cards: Citibank offers various Visa and Mastercard accounts. The Citi AAdvantage Business World Elite Mastercard offers double miles on American Airlines purchases and bonus miles for meeting spending thresholds. The Citi Costco Anywhere Visa Business Card provides 1 to 4 percent cash back on gas and EV charging (including at Costco), 3 percent cash back on dining and eligible travel and 1 to 2 percent cash back on other Costco and general purchases. Visit Citi online to learn more. 

Jennifer Dublino contributed to this article.