Business Credit Cards: When They Make Sense

A business credit card is the easiest financing to get, and the easiest to misuse. Used well, it builds business credit and simplifies expenses. Used as a long-term loan, it gets very expensive.

When a business card makes sense

• Everyday expenses you pay in full each month: supplies, fuel, software, travel.
• Building business credit: many cards report to business credit bureaus. See business vs personal credit.
• Separating expenses from your personal spending, which keeps your books clean.
• Short-term float: a purchase you will repay within the interest-free grace period.
• Rewards: cash back on categories you already spend on.

When it doesn’t

• Funding equipment, renovations or payroll for months.
• Carrying a balance at a high rate when an SBA or bank loan would cost much less.
• Using many cards to fund a startup (“credit card stacking”).

How it affects a loan application

• Most business cards require a personal guarantee, and some report to your personal credit too.
• High balances can lower your personal score and raise your debt payments in the lender’s eyes.
• Lenders will list card balances in your debt schedule.

Smart rules

1. Pay in full every month, or at least keep balances under 30% of the limit.
2. Use one card for the business and keep it only for business.
3. Give employee cards limits and review statements.
4. Before applying for an SBA loan, pay balances down to improve your numbers.

Read how to raise your credit before applying.

Frequently asked questions

Does a business credit card affect my personal credit?

It can. Most require a personal guarantee, and some report to your personal credit file.

Is it okay to fund a startup with credit cards?

Only lightly. Carrying large balances at high rates is one of the most expensive ways to fund a business.

Should I pay down cards before an SBA application?

Yes. Lower balances can raise your score and lower your debt payments in the lender's analysis.