Credit can be a tricky concept to understand. It can get even more complicated to deal with when you take into consideration other aspects like managing a business. Business credit cards are an extremely useful tool for businesses. That is why it is important that you understand what goes into getting a business credit card.
Why Should I Get a Business Credit Card?
First and foremost, a business credit card is important when it comes to managing expenses. You can keep your personal expenses separate from your business expenses. It is important to do this when tax time comes around. Not only do you make the tax process easier, you may be able to get more rewards. These credit cards may offer benefits that aren’t available for personal credit cards. This can include access to private lounges, free airline credits, free airline accessibility, and more!
What Do I Need to Get a Business Credit Card?
The requirements for a business credit card varies depending on the financial institution. However, you will typically need to follow three steps in order to get this type of credit card. First, you must define your business. You will need to have a formal business structure that qualifies your business as legit. An example would be an LLC. or an S Corp., structure. If you are self-employed, that’s okay! Sole proprietors are also considered a formal business structure.
You also want to check your personal credit score and have your social security number (SSN) handy. Your credit score is important because it will be checked when you are going through the application process. However, you may also be able to use a “Employer Identification Number” also known as an EIN instead of your SSN.
Even if you apply using your EIN, there is not a guarantee you won’t also have to provide your social security number. This is so the bank can also check your personal credit history.
The reason you may need to provide all that information is because lenders want to verify your credit worthiness before issuing a business line of credit. They understand how easy it is for a business account to be mismanaged and they don’t want to risk losing any money. This adds an extra layer of security for the banks.
EINs can be a bit difficult to understand. Luckily, with a little bit of research you can get a better idea of what they are. It is important that you have this knowledge especially in the world of business finance.
Employer Identification Numbers (EINs) are tax identification numbers that are provided by the federal government. They are distributed through the Internal Revenue Service (IRS) and are nine digits long. An EIN can provide you many opportunities. Some of these opportunities include:
- The ability to file business taxes.
- Business bank account accessibility (some may require an EIN depending on the financial institution.)
- Making the business loan application process easier.
- Establishing a credit file for your business.
- Handling applications for business permits.
- Enhanced privacy for personal information like your social security number when dealing with business.
The application process for an EIN is easy and free. You will not need to provide a lot of information. All you need to do is provide your taxpayer identification number (this can be your SSN, or even a previous EIN.) Once you are successfully activated you will get your EIN instantly.
How to Get a Business Credit Card with an EIN
Every financial institution is different. This means they will have different criteria for the services they offer. However, you will likely need to get an EIN. On top of providing your EIN, you will likely need to provide your SSN as well. The application process for a business credit card is very similar to the application process of a personal credit card.
In What Instances Would People Apply for Business Credit Cards Using EIN Only?
There are a few different instances where you may only try to get a business credit card with just an EIN. Some of these instances may include:
- Protecting your SSN.
- Attempting to avoid a hard inquiry on your personal credit report.
- Avoiding a guarantee for company liability.
Sadly, qualifying for business credit cards using EIN only will likely not work. For example, let’s say you have a wildly successful business. That will likely not matter to the lender, and they will still want to have your SSN and run a hard inquiry on your personal credit.
An EIN will also likely not protect against a personal guarantee of liability. Just like a personal credit card, you are required to guarantee you will repay the funds that you owe. There are exceptions, but not many.
What Does the Application Process Look Like for Business Credit Cards and EINs?
A business credit card application is very similar to an application for a personal line of credit. You will likely not be able to get many of these credit cards using EIN only. However, there may be some lenders out there. It just takes a bit of research. Typically the biggest difference is the fact that you will need to provide business information on the application. When you apply for business credit, that information will be relevant. Information you may need to submit in order to get a business credit card may include your:
- Business name.
- Contact information.
- Financial Information (like revenue, profit, etc.)
You may need more information depending on your financial institution! It is also important that you provide some sort of tax identification number. This is when your EIN can become an asset in the application process.
Your tax identification number classifies both your SSN and EIN as qualifying information. However, a lot of business credit card applications will want the applicant to submit both identification numbers on their form.
If you are a sole proprietor you will likely have already provided your SSN upfront. That means all you will need to provide is your EIN since your personal information is already there.
Sometimes the application may not offer an option you want. You can either try again at another financial institution, or try to contact a customer service rep. When you contact customer service, you can get confirmation about the application guidelines.
Is There a Way to Apply for Business Credit Cards Without a Hard Inquiry on Your Personal Credit?
A hard inquiry may impact your credit. Typically your score can decrease no more than five points per hard inquiry, according to Experian. However, not only can hard inquiries negatively impact your credit, it may be for no good reason. Your credit score may be too poor to qualify for the application. That means you submitted a hard inquiry on your credit and you still didn’t get the lending option you wanted.
It is important to note that hard inquiries aren’t as bad as they may seem. If a hard inquiry negatively impacts your score, it won’t be for long. Unfortunately, there are not a lot of card options that do not require a personal credit check in order to qualify. The ones that do typically require a hefty down payment to prove your ability to handle debt.
You still have options when it comes to handling a business credit line even if you have poor credit.
What are Good Business Credit Options?
There are other options that you can consider when finding a line of business credit for yourself. You can look into options like a secured business credit card, trade lines and a last resort leverage.
If you do not qualify for an unsecured credit card, you can try a secured one! These work basically the same as a secured personal credit card. In order to get the card, you will need to provide something for collateral. This typically is seen as a refundable deposit. The deposited amount will be what determines the credit limit. The reason that these cards are easy to qualify for is because of the fact that they don’t pose a high threat to the lender.
Another credit building option is trade lines. You don’t need to only build your credit history with a credit card. You can still work on your credit score in other ways. It is possible to see if your lender will establish a line of credit. You can ask your lender to report positive payment activity to the business credit bureaus. This can help establish a stronger score to make it easier to qualify when you are ready to get a business credit card.
Finally, you may be able to make a last ditch effort. You can try to talk your way into the credit card. If you have a strong relationship with your financial institution, you should consider this option. You can try to use the fact that you are a loyal customer with a positive banking history. Local financial institutions may be willing to bend the rules a bit if they are familiar with you as a client.
All financial institutions are different. That is why not every method will work. However, they may be worth the try!
Commonly Asked Questions
Understanding getting a business credit card with an EIN may be an obstacle to understand. There are some commonly asked questions that can provide you more clarity about this credit option.
Can I Get a Business Credit Card with My EIN?
You may be able to get a business credit card with your EIN. Some examples of credit cards may be corporate business credit cards, corporate store credit cards, and corporate gas cards. However, it may be difficult to get a credit card with just your EIN.
What is a Corporate Business Credit Card?
Corporate credit cards can provide you the opportunity to get a line of credit for your business. You may have the option of only providing your EIN. However, you will likely have to provide a personal guarantee for company liability. This means you may be personally responsible for handling the amount of credit that you rack up. The terms and conditions of these credit cards vary by financial institution. That is why it is important to read the terms and conditions of your applications.
What is a Store Business Credit Card?
You can get a specialized credit card for your business. If there is a supply store that you frequent like Staples or BestBuy, then you may want to consider a corporate store credit card. Since store credit cards are typically easier to qualify for, you may be able to only provide your EIN. Some benefits of a business store credit card are their perk opportunities. You may be able to redeem perks like cash back, discounts and other rewards.
What is a Gas Business Credit Card?
This is another type of specialty credit card that you can consider. You may have the opportunity to only provide your EIN and avoid personal guarantee. However, your company may be required to meet other requirements. These may include revenue guidelines.
Can I Use My EIN Instead of SSN When Applying for Credit?
Maybe! Every financial institution is different. This means that their application process will vary. You may be able to substitute your SSN with an EIN. However, you may need to provide both. It is important to check with your lender before beginning an application.
Do I Need an EIN to Open a Business Credit Card?
Not necessarily. Most of the time you will be able to still open a credit card even if you do not have an EIN. That is because an EIN is used as a taxpayer identification number. Another ID number that qualifies is your SSN, which you may be able to use instead.
What Credit Cards Can You Apply for with an EIN?
Credit card terms are subject to change. However, some popular EIN credit card options include the Capital One Spark Cash for Business, Chase Ink Business Cash Credit Card, Chase Ink Business Preferred Credit Card, and more. There are a few different options available. However you will likely still need to pass a personal credit check in order to qualify.
What is an EIN and How Do You Get One?
An EIN is an Employer Identification Number. There are three steps that you must follow when getting an EIN. First, you will want to determine your eligibility. You will likely qualify if your business is located within a United States’ Territory or State. The person who submits the application should have a valid taxpayer identification number. This can be a social security number (SSN), Individual Taxpayer Identification Number (ITIN), or Employer Identification Number (EIN). It is important to note that the Internal Revenue Service (IRS) limits one EIN per responsible party per day.
The IRS defines a responsible party as the person who assumes ownership or control of the entity (business). This cap is only applicable to non-government entities. It also specifies that the responsible party must be a person and not an entity as well. The next step is to go through the online application.
There may be other application methods, but going online is the most convenient. You want to understand the application before submitting it! When filling out the application online you will need to finish it in one session as there is no save option. The application session expires after 15 minutes of idling. If the session expires, you will need to start from the beginning of your application. Once complete you are good to submit the application!
After you submit the application, you will instantly get your EIN.
Types of EIN-Only Business Credit Cards
There will likely be no credit card that is EIN only. Even though you may be able to use your EIN in place of your SSN, you will likely need good personal credit. However there are some companies that are changing the way corporate cards work. Brex, a relatively new company, uses underwriting algorithms to determine eligibility.
What’s Different About EIN-Only Credit Cards?
An EIN-only credit card would only require your EIN opposed to your SSN or a personal credit check. It is a common misconception that you can use your EIN to overcome submitting your SSN and a personal credit check. A majority of the time, you will see that you will need to provide both your EIN and SSN on top of conducting a credit check.
It is fairly easy to get an Employer Identification Number (EIN). You may be able to use this EIN when trying to get a business credit card. Your EIN is classified as a tax identification number so you may be able to use this in place of your social security number (SSN). However, some applications may require that you provide both your SSN and EIN. It is a common misconception that using your EIN on an application means you avoid a hard inquiry to your personal credit. While that may be the case at some financial institutions, you will likely need to submit a personal credit check as well. It is pretty hard to qualify for business credit cards using EIN only. Make sure to read the terms and conditions of your credit agreement before submitting an application!