As a small business owner, having a good business credit card can help you manage your cash flow, keep your business and personal expenses separate and offer rewards and perks tailored to your business.
If you’re a sole proprietor, you may be wondering whether you can even get a business credit card and, if so, which one to choose. Here’s what you need to know.
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Can a Sole Proprietor Get a Business Credit Card?
Most businesses, including sole proprietorships, are eligible to open a small business credit card. That’s because most small business credit cards use your personal credit history and not a business credit history to determine whether you qualify.
When you apply, simply enter your Social Security Number or individual taxpayer identification number. While sole proprietors aren’t required to have an employee identification number (EIN), getting one and adding it to your application could help you establish your business credit history and make it easier to borrow from other lenders in the future.
How To Choose a Business Credit Card for Sole Proprietorship
As with your personal expenses, it’s important to pick the right credit card for your business expenses. Here are some factors to consider as you shop around and compare your options:
- Your credit score. Most of the best small business credit cards are designed for business owners with good or excellent credit. According to FICO, that typically means a credit score of 670 or higher. Check your credit score to gauge your credit health, then focus on cards that can offer good approval odds based on your profile.
- Your expenses. Take a look at your most common expenses as a business owner. Some business credit cards offer accelerated rewards for select expense categories, allowing you to maximize your rewards on your biggest costs. Alternatively, if you don’t spend a lot in any one area, you may consider a card that offers a high rewards rate on every purchase you make.
- Your preferences. Beyond rewards, think about other features you’d like in a credit card. For example, do you prefer cash-back rewards that you can use to help build your business, or would you rather earn points and miles you can put toward personal or business travel? Would you like an introductory 0% APR to help with startup costs? Make sure you compare several credit card options to get an idea of which features are available and which ones are most important to you.
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How To Apply for a Business Credit Card as a Sole Proprietor
Once you’ve spent some time comparing your options and deciding which card to apply for, the online application process is usually straightforward. While the format of the application can vary slightly by issuer, you’ll generally need to provide the following information:
- Your title
- Full name
- Date of birth
- Mother’s maiden name
- Social Security number or individual taxpayer identification number
- Address
- Contact information
- Gross annual income
- Legal business structure
- Business name
- Desired name on the card
- Employer identification number (if you have one)
- Business address and phone number
- Number of employees
- Business established date
- Annual business revenue
- Estimated monthly credit card spend
- Business category and type
You’ll have the chance to say whether you want employee credit cards, but you can also request them later. Once you’ve entered all of the required information, you can review the card’s terms and conditions. Once you’re ready, submit the application. In most cases, you’ll get a response within seconds. In some situations, though, the credit card issuer may mark your application as pending and mail you a decision letter.
If your application has been approved, you’ll typically receive the card within a week or two.
Benefits of Credit Cards for Sole Proprietors
While it may not seem necessary to have a business credit card as a sole proprietor, there are several benefits you can enjoy by having one.
Separate Business and Personal Expenses
As a sole proprietorship, there’s no legal separation between you and your business. But when it comes to filing your taxes, maintaining a financial separation is crucial. A business credit card can make it easier to keep up with your accounting and know which expenses are deductible.
Minimize Impact on Your Personal Credit
While business credit card issuers typically require a personal credit check when you apply, many of them don’t report your regular activity to the consumer credit bureaus. That said, some may report negative activity, so it’s still important to make on-time payments.
Improve Cash Flow Management
When you use a credit card to make purchases, you’re borrowing money from the card issuer. Depending on the card, you may get a few weeks after your monthly statement date to pay your bill, and if you pay in full every month, you won’t incur interest charges.
Being able to float your credit card payments can make it easier to manage your cash flow, especially if your revenue is irregular.
Build Business Credit
Even without a separate legal entity, you can build a business credit history as a sole proprietorship, and a business credit card can help. Start by registering your business with your state and requesting a DUNS number from Dun & Bradstreet, one of the major commercial credit bureaus.
It’s not technically necessary to have an EIN to build business credit, but you may need one to apply for a loan later, so it’s not a bad idea to have one. As you use your new credit card regularly and make on-time payments, it’ll help establish a positive business credit profile.
Enjoy Rewards and Perks
Many business credit cards offer rewards on your everyday purchases, and depending on which card you choose, you may also benefit from other business-specific features, including free employee cards with spending limits, integration with popular accounting software programs, expense reports and more.
Some business credit cards also offer other perks, such as 0% APR promotions, travel fee credits, insurance protections and more.
How To Get a Small Business Credit Card as a Sole Proprietor
Getting a small business credit card as a sole proprietor with an established business is usually as easy as applying for the card. The process will only take a few minutes unless the card issuer contacts you to gather additional information before making their decision.
If you’re starting a new business, getting a small business card may be more cumbersome. Since you don’t have proven cash flow or revenue, your personal credit may be a bigger factor in the decision process. You’ll want to assess your eligibility by checking your personal credit score. Then, if needed, you may want to take steps to improve your likelihood for approval. Paying off existing debt, keeping your credit utilization low and overall making yourself a strong candidate could make a difference.
For someone with bad personal credit but strong revenue or venture funding, you may be better off with business credit cards without a personal guarantee. These cards are limited but can be good options.
Find the Best Credit Cards for 2024
No single credit card is the best option for every family, every purchase or every budget. We've picked the best credit cards in a way designed to be the most helpful to the widest variety of readers.
Bottom Line
As a sole proprietor, it’s a good idea to get a business credit card that you can use for everyday business expenses. As you consider which card to get, review your business needs, as well as your credit profile and general preferences, to determine the best fit for you.
