Getting credit as a new small business can be frustrating. Think back to the catch-22 that many college graduates face, companies only want to hire employees that have experience but how are new workers supposed to get experience in the first place if no one will hire them?
Managing Financial Risk
It can be the same with a new small business. Banks don’t want to lend you money since your business doesn’t have a credit history to indicate whether you’ll pay back the money you borrow.
You can definitely understand the perspective of the employer and bank, they’re both trying to minimize the chance that they’ll lose money when taking a risk on an unknown employee or borrower.
What’s one way that companies use to build trust and reduce risk when looking for future employees? They setup an internship program where they can get to know prospective workers without the cost of full time salary and benefits.
Open a Personal Bank Account
You can use the same principle when applying for a business credit card by already having a personal account at the bank where you apply. When you approach your local banker about opening a business card, you’ve already gone through a trial period by having an account at their branch.
They can see your account balance history and whether you have any personal credit cards through the bank. Since banker already has a financial relationship with you and can speak with you face to face about your current financial situation and your plans for your business they are better able to gauge the risk of opening a line of business credit.
Open a Business Bank Account
Of course, simply having a personal account with a bank doesn’t automatically qualify you for a business credit card. The best approach is to first open your business bank account at your local branch. Once you have that established, talk to your banker about your need for credit for your business. Ask what different options they offer and what you need to do to get approved for a credit card.
Build a Solid Financial Record
Just opening the bank accounts isn’t enough. You’ll also have to be responsible with your personal finances to set a good track record. No bounced checks or late credit card payments. Keep a steady balance in your business bank account to establish a track record of financial liquidity.
Having a personal and company bank account at the branch, a relationship with the bank manager, and a history of managing your money wisely will give the bank more information to help them gauge the risk of granting your business a credit card. Of course this isn’t something you can just do overnight so your best bet is to get started today. If you can build a good track record and a personal relationship, your chances of being approved for a business credit card look pretty good.