Applying for a business credit card can be a smart move for any business owner looking to manage their finances and improve their credit score. However, the process can be daunting.
This article aims to demystify the application process, providing you with clear and concise steps to secure a business credit card that suits your needs.
How do you apply for a business credit card?
Before starting the application process for a business credit card, it’s important to have all the necessary information and documentation ready.
Here’s what you typically need for a UK-based business applying in 2024:
What criteria is needed to submit a business credit card application?
1. Basic Business Information: This includes your business name, contact details, business address, and your industry type.
2. Legal Structure of Your Business: Credit card providers will want to know whether your business is a sole trader, partnership, or limited company.
3. Company Registration Number (CRN): If your business is a limited company or partnership, you’ll need your CRN. This is a unique combination of numbers and, in some cases, letters given by Companies House when your business is registered.
4. Business Financial Information: You should prepare to provide information about your annual business revenue and estimated monthly expenses. Some issuers may also require your business bank account details.
5. Personal Information: As the business owner or the primary cardholder, you’ll also need to provide your personal information, including your full name, address, National Insurance number, and possibly details of your personal income.
6. Time in Business: The issuer may ask about the length of time your business has been operational.
Each credit card issuer may have specific requirements, but having these key details ready will speed up the application process. Ensure all your documents are up-to-date and accurate to pave the way for a smooth application experience.
Step-by-Step Guide to Business Credit Card Application
Here’s a guide to the credit card application process to help you:
1. Visit the Credit Card Issuer’s Website: The first step is to go to the website of the credit card provider you have chosen and click on the ‘apply’ button.
2. Start the Application: Depending on the provider, you might be asked to create an account or sign in to an existing account before you can proceed.
3. Provide Business Information: Enter your business information as accurately as possible. This usually includes details like the legal business name, trading name (if different), business address, contact information, company registration number (CRN), and industry type.
4. Input Financial Details: Provide information regarding your annual business revenue, estimated monthly card expenditure, and any bank account details if required.
5. Specify Your Business Type and Time in Business: Select your business type (sole trader, partnership, or limited company), and specify the length of time your business has been operational.
6. Fill in Personal Information: You will also be asked for your personal information, including your full name, residential address, date of birth, National Insurance number, and potentially your personal income. This information will help credit card issuers assess your personal financial responsibility.
7. Review the Terms and Conditions: Before you submit the application, thoroughly read through the terms and conditions of the credit card. This includes interest rates, fees, penalties, and rewards programs.
8. Submit the Application: After you’ve filled in all the necessary fields and reviewed the information for accuracy, you can submit your application. Some issuers might make instant decisions, while others could take a few days or weeks.
Reviewing and Submitting Your Business Credit Card Application
Here are steps to ensure your business credit card application is ready for submission:
1. Check All Provided Information: Review all the business and personal details you’ve filled out. Ensure names, addresses, phone numbers, and business details, such as your company registration number (CRN) are accurate.
2. Verify Financial Details: Check the figures you’ve entered for annual business revenue, estimated monthly card expenditure, and your personal income. Make sure they match your official documents and records.
3. Review the Legal Structure and Time in Business: Confirm that you’ve correctly identified the legal structure of your business and the time your business has been operational.
4. Revisit Terms and Conditions: Go through the credit card terms and conditions again to ensure you understand them. This includes details like the interest rate, annual fees, late payment penalties, and the rewards program.
5. Prepare for a Credit Check: Most credit card issuers will perform a credit check as part of the application process. This can impact your credit score, so limiting the number of applications you submit in a short period is advisable.
Once you’re confident all the details on your application are correct and you understand the terms of the credit card, you can submit your application. You should receive an immediate acknowledgement of your application.
How do you get approved for a business credit card?
The credit card approval process can vary between different credit card issuers, but it generally involves the following steps:
1. Credit Check: Once you submit your application, the credit card issuer will usually perform a credit check. In the UK, this involves looking at credit reports from Credit Reference Agencies (CRAs) like Experian, Equifax, or TransUnion. The check is to assess your creditworthiness based on your credit history and score.
2. Business Evaluation: The issuer will also evaluate your business information, such as annual revenue, estimated monthly card expenditure, and the length of time in business, to determine the risk level of extending credit to your business.
3. Verification of Information: The issuer may verify the information you provided during the application process. This could involve contacting you or your business for additional information or clarification.
4. Decision: After evaluating all the gathered information, the issuer will make a decision. This can be instant in some cases, but it can also take several days or even a couple of weeks.
5. Notification: You will be notified of the decision. If approved, you’ll receive information about your credit limit, interest rate, and any rewards associated with the card. You should also receive instructions on activating and using your new card, which will be sent to you in the post. If your application is declined, the issuer should provide a reason for the decision.
Remember, if your application is declined, it’s best to find out why before you apply elsewhere. You may need to improve certain business financials or credit score aspects. Frequent applications and rejections can harm your credit score, so it’s essential to approach this process thoughtfully.
Throughout this process, patience is key. The approval process may take some time, but it’s an important step to ensure that credit is provided responsibly by the issuers.
What to Do If Your Business Credit Card Application Is Denied
Having your business credit card application denied can be disappointing, but it’s not the end of the road. There are several steps you can take to improve your chances of approval in the future:
1. Understand the Reason for Denial: Credit card issuers are required to provide a reason for denying your application. This could be due to low personal or business credit scores, insufficient business revenue, or even errors on your application.
2. Review Your Credit Report: If your application was denied due to your credit score, request a copy of your credit report from Credit Reference Agencies like Experian, Equifax, or TransUnion. Review it for any errors or discrepancies, and dispute them if necessary.
3. Improve Your Credit Score: If your credit score is the issue, take steps to improve it. This might involve paying bills on time, reducing debt, and avoiding new negative records like bankruptcies or defaults.
4. Strengthen Your Business Financials: If your business revenue is the issue, you may need to wait until your business grows more before reapplying. In the meantime, focus on increasing your revenue and maintaining accurate financial records.
5. Consider a Different Card: Different cards have different requirements. If your application was denied, it might be worth looking into other cards that better suit your current business and personal financial situation.
6. Apply for a Secured Business Credit Card: If you’re having a hard time getting approved for a traditional business credit card, consider a secured business credit card. These cards require a security deposit but are easier to obtain and can help you build your credit over time.
Remember, it’s important not to rush into applying for another credit card immediately after a denial. Too many applications in a short period can negatively impact your credit score. Take time to understand why your application was denied, improve your financial situation where needed, and reassess your needs before reapplying.
Activating your new business credit card after it’s been approved
Congratulations on your successful application! After you’ve been approved and received your business credit card, there are a few steps you need to follow to activate and set up your card for use:
1. Activate Your Card: The card issuer will send you the new business credit card via post, usually within 7-10 business days. Upon receiving the card, you’ll need to activate it before you can use it. This usually involves calling a specific phone number or activating it online via the issuer’s website. The details for activation will be provided with the card.
2. Set Up Online Access: Register for online banking if you haven’t already. This will allow you to manage your credit card account online, view transactions, pay your bill, and potentially set up alerts.
3. Understand Your Credit Card Terms: Revisit your credit card terms and conditions to fully understand your card’s features. Be aware of the interest rates, fees, credit limit, and any benefits or rewards that come with the card.
4. Set Up Payment Methods: Decide how you’ll make payments towards your credit card. This could be through direct debit, online banking, phone, or mail. Consider setting up automatic payments to avoid missing payment due dates.
5. Budget for Your Payments: Incorporate your estimated credit card payments into your business budget. Remember to consider both the principal and any interest that will accrue on balances carried from month to month.
6. Distribute Cards to Employees (if applicable): If your new business credit card account includes cards for employees, distribute them as necessary. Make sure each card user understands the spending rules and how to report their expenses.
Getting a new business credit card is exciting but also a responsibility. By carefully setting up and managing your new card, you can make the most of its benefits while keeping your business finances in order.
FAQs
Does applying for a business credit card affect my personal credit score?
In some cases, the credit card provider might check your personal credit report, especially if your business is new or does not have a credit history. This can impact your personal credit score. However, once you’ve got the card, as long as payments are made promptly, it can help to build your business credit score.
Can I get a business credit card with a bad credit score?
While it may be more challenging, there are credit cards designed for businesses with poor or thin credit. These cards often come with lower credit limits and higher interest rates. Some businesses might opt for a secured business credit card, where you provide a cash deposit up front that serves as your credit limit.
How long does it take to get approved for a business credit card?
The approval process can vary by provider. Some may offer an instant decision, while others might take a few days or weeks. It often depends on the complexity of your business finances and the need for additional checks or information.
