Sole proprietor? Here's what qualifies you for a business credit card

You might be surprised to learn that businesses of any scale can qualify for business credit cards. You don’t need a brick-and-mortar location, employees, or a huge amount of revenue – in fact, most lenders’ definition of a small business owner is pretty broad. Therefore, if you’re any kind of sole proprietor – like a freelancer, Etsy seller, or Airbnb host – you could be eligible for a business credit card. Which is great, as business credit cards tend to be packed with perks that can help you operate and grow your venture. Moreover, opening a business credit card account helps to keep your personal and business finances separate, which is essential for good financial management.

Much like personal credit cards, applying for a business credit card is fairly straightforward. However, there are some important differences you should know about. In this article, we run through the requirements for a business credit card application and explain why it could be a great choice for your venture as a sole proprietor.

Why should I get a business credit card?

Getting a small business credit card is super useful for a variety of reasons. As we introduced above, it keeps you personal and business finances separate. Not only is this handy for financial management, it also creates a separate credit file for your business. This means that the activity on your business credit card won’t appear on your personal credit report. Even though the lender will do a credit pull on your personal file, your business credit card won’t affect your personal credit score in the long term.

The other big advantage is a flexible source of capital for your business activities. This source of funding can help you manage any unexpected or seasonal expenses. For instance, having a business credit card often makes tax season a little less painful. What’s more, many small business credit cards come with great rewards programs. For example, many cards offer air miles programs that are extremely useful if you travel a lot on business.

What requirements do I need to fulfil to get one?

So – we’ve established that if you’re a sole proprietor, you’re probably eligible for a business credit card. In this section, we’re going to break down exactly what those requirements are, so you can get ready to complete your application. As you can imagine, the precise details of the application will depend on the creditor, so make sure you thoroughly read and understand their specific terms and conditions. However, below is a list of the basic things you can expect.


1. Your legal name

As a sole proprietor, you’ll need to provide your own legal name. They’ll also need your personal contact information and social security number to do a credit pull on your personal file. For most small business credit card applications, you’ll also use your social security number in place of your Federal Tax ID Number, or EIN.

2. Your business contact information

Along with your personal contact information, you’ll need to provide your business's mailing address and phone number. If you work from home, you can list your home address.

3. Time in business

The creditor will also want to know how long you’ve been in business. If your venture is new, you can select the lowest number from the available options.

4. Annual revenue and monthly spend

Creditors will want to know about your business income to make sure you can keep up with repayments and determine your credit limit. As a general rule, the higher your turn over, the more likely you are to be approved. Furthermore, if your turnover is healthy, you’ll also get a larger credit line. However, if your business is new and your revenue is low, don’t be tempted to overstate the numbers – the creditor will look at your personal income instead. In essence, they’re interested in your debt-to-income ratio (DTI), which will help them analyze the risk of lending you money.

When you’re reporting your total personal annual income, it doesn’t matter whether or not your business makes up the bulk of your income. You should report all of your income streams to demonstrate to the lender that you can keep up with repayments. Incorporate all income from other jobs, side hustles, and if you’re married, your spouse’s income. The creditor will take this number and compare it your credit report to calculate your DTI. To find out your own DTI, divide your total monthly debt payments by your monthly income. The lower the number, the lower risk – and the more likely it is you’ll be approved.

The most important thing to remember when applying for a business credit card

The requirements listed above are the basics of your business credit card application. However, the most important thing to emphasize is that you’ll need a healthy personal credit score to get approved. This score is a key factor in helping creditors determine whether or not you are financially responsible. Therefore, before making your application, it is essential to make sure that there are no errors on your personal credit file. Furthermore, if your personal credit score needs some work, it might be useful to hold off applying until you’ve built a better score. You can do this using a credit building card or other similar product.

In summary, getting a business credit card can be a great choice for your venture if you’re a sole proprietor. Although it’s essential to make sure you’re responsible with debt, there are lots of positives to getting a business credit card. Not only will it help you keep your business and personal finances in order, they also come with lots of great perks that can help you grow your business.