Getting a business credit card?

[df6548]

Hi all,
I am in the process of launching a small business. I formed as an LLC, have established a bank account, and am almost ready to begin taking on clients. However, as a brand new business with no credit history, I am having trouble securing a business credit card. My business is personal shopping, so a credit card of some kind is absolutely essential. Cash is just not a practical option (some stores do not offer cash refunds on returns, and I don't want to be carrying thousands of dollars in cash around with me) when shopping for high-end clients. Yes, I have a debit card, but it does not offer the same kind of protection as a credit card, nor will it build a credit history for my business. I also have some startup expenses (cell phone, LLC publishing, promotional materials) that I would like to pay for with a credit card, then pay off as soon as I start turning a profit.

I tried applying for a small line of credit and credit card with Chase, but was declined. Then I tried applying for the Capital One Business Platinum card, which is supposed to be specifically geared toward entrepreneurs looking to build credit for their business. I was declined for that as well. I'm at a loss for what to try next, and since getting my business up and running is largely dependent on securing some kind of credit card, I feel like I'm kind of "stuck."

My personal credit is pretty good (in the 730 - 760 range). I've had credit cards for 15+ years and have never once had a late payment on anything, ever. I've also paid off two car loans. I do have quite a bit of personal credit card and student loan debt, but paying those off is the motivation behind starting this business, which makes not being able to get started especially frustrating.

I do know about the Staples business credit card, but it seems that even if I'm approved they would not be able to provide much of a credit limit. (I need a limit of at least $3,000 or so.) What should I do? I really don't like the idea of just using my personal credit card--I'm trying to keep my personal finances separate from the business, and again, it won't build business credit. Plus it just doesn't present the same professional image as a business card will.

What should I do?

[vangogh]

Is the established bank account specifically for your business or is it a personal account? When I opened my business account with Chase they gave me a credit card for the account. At the time I had a history of having a personal account with them, but there was never much money in it and I opened the business account with the bare minimum. I think it was $100.

Maybe the difference is simply the time, since this was years before the recent credit crisis, but I would have expected a business account would get you some kind of business credit card.

I'm assuming at the least the business account came with a check card. Do you have enough cash to put in the account so you could use the check card?

If you're an LLC I don't think you can use the personal credit card. The idea behind the LLC is to offer personal protection, but if you mix the personal and your business I think much of the protection falls aways. I think you have to be careful making sure all money going in and out of the business goes through the business account and not through your personal account at all.

[Steve B]

I don't think you're going to be able to get a business credit given your circumstances. The bank wants to be convinced that the LLC is going to pay it's obligations. In order to do this they will want to see proof that the business is financially successful and that it has a history of paying other similar creditors. Without a history and several years of financial statements to show them, they'd be crazy to give you a credit card. Banks are very aware of the statistics for success for a new small business.

You will need to find another way around this issue (Debit Card) until you can finally convince one or two (or seven) places to let your business have a line of credit. I'm guessing you are still several years away from a traditional credit card offered from a bank.

[df6548]

The checking account is a business-specific account. I ended up going with TD Bank, because my personal accounts are there and I've been happy with their service, and because their minimum balance requirements are a LOT more reasonable than Chase. At Chase, I would've had to maintain a $5,000 daily balance or pay a hefty monthly fee. At TD, it's $500 minimum and they waive the requirement for the first year. I would've gone with Chase checking IF they'd approved me for the line of credit, but without that there was no incentive to go with them.

Yes, I have a debit card, but since I don't have any clients yet, there are only a few hundred dollars in the account. This presents a problem since I was hoping to use the credit card to cover some startup costs (LLC publishing alone is about $1300) and will also need some money to cover the costs of my first few clients. They only pay a deposit up front, with the balance paid on receipt of goods. So if I have $1000 in my bank account and am shopping for three clients that each need $1000 of goods, I have a problem. With a credit card, I could pay for everything up front, collect the full amount from the client, and then pay off the card.

The other problem with debit:
-Not building any credit for my business
-Some stores still treat a debit purchase as a cash return, meaning that even if I pay with a card, they will refund it as cash, which is not something stores can/want to do, especially for large purchases. I don't want to be stuck with a bunch of store credits.
-If I can't get a company credit card/cards, I'll have to give the business debit card (and therefore, full access to the checking account) to my shoppers. That scares me. The alternative I guess is large amounts of cash, which I've had to do for jobs before, but it's risky and I'm always scared I'll lose the money.

I'm trying to find someone who will lend me a couple thousand dollars to get started for the first couple of months, but waiting "several years" is really not an option for this type of business. I need to start building credit now so that I can get a company card sooner rather than later.

[Dee2x]

You appear to be a good candidate for a SBA microloan. Microloans can be used for working capital, supplies, equipment and etc. The maximum you can borrow is $50,000 but it doesn’t appear you need anywhere near that amount. Microloans are not issued by the SBA but though intermediary financial institutions. You may be able to find one by Googling SBA microloans for your area. You also may want to consider a Sam’s Club microloan. You have to be a member of Sam’s club to apply but membership is only $35 annually. Loans are available from $5,000 to $25,000. Also, Starbucks is collaborating with Opportunity Finance Network to offer a microloan program to small businesses this year. It should be coming out soon. One other you can check out is the SBA loan program offered by Office Depot which allows you to borrow between $5,000 and $25,000. The one thing I want to caution you about is arbitrarily applying for loans. Before you formally apply for a loan, make sure you have a pretty good chance of getting it because every time you apply and are turned down it affects your credit score. Wishing you success!

[vangogh]

I don't think you're going to be able to get a business credit given your circumstances. The bank wants to be convinced that the LLC is going to pay it's obligations.

I was able to get a credit card for my business with probably even less ability to convince someone I could pay it back. I don't know if it was due to the difference in the general economy, but the bank gave me a card without me even asking for one. It came with the business account.


Yes, I have a debit card, but since I don't have any clients yet, there are only a few hundred dollars in the account.

Trying to be a little creative here. What if you used your personal credit card to get a cash loan. Put that money in the business account so you can use the debit card. Assuming you have a client you should be able to get it right back and pay off the personal card. I'm not sure the best way to handle that as far as mixing the personal and the LLC, but I would think there's a way.

[Steve B]

Yes, but you're set up as a Sole Proprietor so it was really based on your personal credit since you would ultimatetly be responsible. This guy has formed an LLC., so the responsibility for paying it back is only with the business.

[LFinkle]

When I first started out I used a personal credit card for business expenses until I was able to build up credit. It's hard to get credit w/o a credit history, especially in today's world. Also American Express sometimes is more lenient than others so you might try them.

[vangogh]

Yes, but you're set up as a Sole Proprietor so it was really based on your personal credit

My point is I had little personal credit at the time. I had very little money in my personal account and had a rising credit card debt. I did have a history of paying my bills, though I don't think they checked my credit scores unless they have some instant access to it. The bank wouldn't have known based on my account whether or not I paid my bills. I walked out of the bank with the card. Maybe it is due to the difference in sole proprietor vs LLC or maybe it's due to the general economy then and now. Just saying my bank gave me a card without me doing anything to suggest I deserved one at the time.

[df6548]

Thanks everyone for the input. I'm not sure why Chase turned me down for the line of credit. The guy I was working with at the bank said he thought I had a good shot of getting approved, and that I'd have a decision in 2-3 days. Well, a week and a half went by without him returning calls or e-mails, so I finally called their customer service number and asked about the status of the loan, and they told me it had been denied a week ago. The branch rep completely disappeared and never bothered to personally contact me and tell me I was denied. Really not impressed by Chase customer service! I was/am pleased with the service at TD Bank, but they only offer business credit cards to established companies, not brand new ones.

I will look into the SBA loans, although I think I can borrow the amount of money I need (in the $5000 - $10,000 range) from a combination of family members. That will allow me to get started, but the bigger problem with the line of work I'm in is getting my hands on a credit card ASAP. With the kind of business I'm running, it's going to be an accounting nightmare to use my debit card/checking account for everything, even if I get a loan and have plenty of money available there. My plan was to use the checking account JUST to pay business expenses and deposit payments from clients. All of the shopping I do for clients (which will include massive amounts of purchases from lots of different stores, as well as returns and exchanges) really needs to be on a credit card. It's entirely possible that I'll have hundreds of store transactions per month, which means money constantly flowing in and out of my checking account. The other headache is that returns often take a few days to get credited back to your account. No big deal with a credit card, but with debit, a lot of outstanding returns could leave me with a cash flow problem.

I really, really want to keep my personal credit cards out of the business altogether. I don't mind giving a personal guarantee to get a business card, but if I was declined for the Chase line of credit and the Capital One card that is specifically for entrepreneurs looking to build business credit (and is marketed to those with fair/poor credit--mine is in the 700s!) it doesn't give me much hope that I'll get approved for anything else. Plus as Dee pointed out, I can't just keep applying for stuff or it will hurt the good credit I've worked so hard to build.

So I guess the real question is, how do I start building business credit NOW so that I can get a credit card within the next few months? Another thread suggested the Staples card, but the application on their website asks for my SSN, not just the business tax information. Are there smaller store cards out there that don't require a personal guarantee?

[Spider]

It's coming across to me (and I'm sure to the banks as well) that you want your bank and the creditcard issuing bank to carry the risk of your new business and you won't or can't carry any risk yourself. You must understand that banks are not in the risk business - they are in the money business. They lend money only to those people in whom they have a very certain belief that they won't default.

Starting a new business is risky. You must find a way to cover the whole of the risk because that is not the role of a bank. If you will not or cannot carry the risk, you must find someone who will. This is the reason I always advocate starting a business with your own money. The time to approach a bank for a loan is in about 12 months when you can show a record of performance, when lending to your business is far less risky.

[Steve B]

I still believe you are a few years away from your business getting credit from a bank. You can probably get some credit from some small stores or other suppliers that might let you have a 30 day term. Once you've established a pattern of paying them on a routine basis, then you can list them on future credit applications.

You are in the same position that most small businesses have been in - you have an idea that you are confident in but you don't have enough money to properly fund it on your own. Why would a bank take the risk in this situation? Banks are well aware of the success / failure rate of new businesses. It's unfortunate perhaps, but you need to give the bank something more concrete than your good idea before they will consider a loan.

[vangogh]

I just noticed you applied for both a line of credit and a credit card. I had missed the line of credit part. Have you been rejected for both? I can't see a business offering you a line of credit since you're just starting out, but a credit card is something different, even if they sound the same. Did the bank specifically turn you down for a credit card?

The bank wouldn't be behind the credit card. It would be an ordinary Visa or Master Card or whatever in your business name. I wouldn't think that would be hard to get. If those same companies are willing to give you a personal card they should be willing to give you a card for your business name.

A line of credit is something else. By asking for one you're asking the bank to take on the risk for your business and there's no reason for them to do that. That's your job. If you believe in yourself and your business idea then you should be willing to take the risk.

[df6548]

Hi guys. Yes, I've tried applying for both credit cards and lines of credit. No luck with either. As I explained in the posts above, I am planning to borrow the money for LLC costs, etc. from family members. I'm starting this business as a way out of unemployment, so all of the "risk taking" stuff is not really helpful. I'm great at what I do and definitely believe in my business, but unemployment ate through most of my savings, so making a personal investment beyond $1000 or so is just not possible.

My question still remains, which is how to get a credit card (NOT a loan) for business use. I'm not looking to use the credit card as a loan. As I explained in my earlier posts, I am simply in a business where a credit card is a necessity, and waiting 2-3 years to apply for one is not an option. I need to begin building business credit NOW so that I can apply for a card within the next 6 months at most.

[vangogh]

If you do a search for business credit cards you'll find plenty of places to apply. Once you've been in business for a little while they'll start coming in the mail nearly every day too. :)

I'm still surprised you couldn't get one through the bank, but maybe it's how things are now given the economy, especially given the role the credit card companies played in the current economy. If you couldn't you couldn't.

The risk stuff is simply something you have to do to be in business. I don't think anyone is suggesting you risk your life's savings, but you more than anyone has to be willing to back up your business. When I started my business I used my personal credit cards a lot. For a little over a year if I could charge something I did. I put myself in debt, but I was confident that in time I'd be bringing in more money and be able to pay off the card. I didn't want the debt, but had I not used the cards I wouldn't have been able to last early on while I was building a client list.

I'm not saying you should do the same thing of course, but thought I'd share my story a bit so you can see there are options.

[Spider]

Here is a way you can get a business credit card soon. You say you are going to borrow money from family members. Perhaps your family members have good credit, and even a business card of their own. Perhaps they will let you "borrow" their credit.

By making them part of your business, and a signatory to all your business accounts and personally stand as surety for the card, their good credit will reflect on you. If they would be able to get a business card in their own right, the issuing bank would likely accept them as joint cardholder with you. But remember, if you screw up, they will have to pay. And you will probably feel obliged to pay them back, no matter what.

It is not a method I would recommend, and it is certainly not something I would agree to if anyone asked me to do it --- but you asked for a way and this is a way.

[MyITGuy]

I had a conversation with my bank manager a few months ago and he mentioned that they are unlikely to extend credit or setup loans until a business has been operational for at least 2 years. You have to start small and work your way up just as you would your personal credit. For what it's worth, I've been in business since 2009 and I'm still not getting the credit lines you're looking for, and my business income is 6 figures. (It should be noted that I'm not applying for credit everywhere either).

If you want to start building your credit here's a few things that can get you started, but don't expect big results yet:
Establish a D&B Number (D&B (http://www.dnb.com/)). It's free to setup, however they will try to push you to pay for their service to ensure their records are accurate.
Apply for store credit at the places you're going to be shopping at. In my case this was Ingram Micro (Wholesale technology products) and Dell (Servers, Networks and etc...)
Apply for a credit card with Capital One - This is probably the most lenient company as far as establishing credit.
Look into establishing a secured credit line - I.E. Bank of America had a program where you purchase a CD using business funds (Minimum of 10K at the time), then they would loan you the same amount of money using the CD as collateral. Just be sure that they report to D&B and other credit bureaus.

In the meantime, get a debit card with a Visa/MasterCard Logo which will provide you with the protection your looking for. If it's "inconvenient" for you to see all of these transactions in your main account, then I'd suggest opening a second account for purchasing only. If you don't have the funds then you should obtain a personal loan in your name, which you then loan to your business with the appropriate repayment terms to ensure you keep your financial information separate (Otherwise you can loose the protection of the LLC you setup)

[Twhansbury]

American Express has cards that you can grow into.
Suggested before call them.
You might have to guarantee the payments personally. This is only a problem if you don't plan on paying them back.
Once your up and running you can change things.