Starting a business is tough work. Make it easier to succeed (and less likely to fail) by funding your new business with up to $250,000 in 0% business credit card startup funding…today!
One of the toughest parts of starting a new business is dealing with money.
Raising it. Spending it. Saving it. And trying your best not to waste it or lose it all.
And when it comes to securing startup funding for your new business, the stakes are even higher.
And it begs the question that so many entrepreneurs are trying to solve: What is business credit and is it right for you?
Now, most startup entrepreneurs start by thinking they need to raise lots of startup capital from friends and family, angel investors, or venture capital firms.
However, there are much easier, cheaper, and faster ways to raise startup funding without having to sell a single share of stock (which you WILL have to do if you raise from friends, angels, or VC).
What Exactly is Business Credit?
Business credit is the practice of securing business credit cards using your business EIN that you can use to fund your business.
It is one of the easiest, fastest, most liquid funding options startup founders have today.
The best cards offer flexible benefits and terms that are friendly to entrepreneurs: Including 0% introductory interest rates for 6-18 months, discounts on services and products, travel discounts, and point programs that can help you grow your business faster than you would with other funding methods.
The process is quite simple: You form a business entity, secure an EIN, open a business bank account, apply for credit using your business EIN, receive and activate your credit cards, and pay for services using the credit card itself, or, convert your credit into cash, and eventually repay or refinance the debt before it comes due.
While I realize this a length process, see below for a detailed outline of the business credit process for startup funding.
Who Is Business Credit For?
Business credit is a great funding option for a number of business ventures. The beautiful thing about business credit is that it’s flexible, fast, and rather easy to obtain if you have a strong credit profile.
Successful business credit funding cases include:
- Technology and software startup funding
- Consultants & coaches
- Construction & service funding
- eCommerce funding
- Manufacturing funding
- Real estate fix and flip and property rehab funding
- Most legitimate business startup funding opportunities
As you can see, regardless of your business industry, getting startup funding through business credit can work for you.
Credit Requirements for Business Credit
The most important factor driving your ability to secure business credit is going to be your credit profile. This includes your personal credit score, business credit score, credit utilization score, and whether you have any major marks on your credit report, including bankruptcy and foreclosures.
While the best business credit cards (and the most desirable) only affect your business credit score many of them still require you to submit your personal credit score to secure credit.
Pro Tip: Make sure the business credit cards you apply to only impact your business credit score rather than your personal credit score.
So now let’s get to the good stuff: The steps you need to take to secure business credit.
Step 1: Form Your Business Entity
To secure startup funding, you need to first form your legal business entity. Check out our incorporation resources if you aren’t sure how and where to start.
One of the greatest benefits of having a separate business entity (as opposed to a sole proprietorship) is the concept of limited liability.
By separating your business activities from your personal activities financially and in practice you will protect your personal assets from creditors and liabilities of your business.
Basically, if your business gets sued or in trouble and you correctly operate your business separately from your personal life, your personal possessions can be protected with an LLC or C-Corp.
We recommend you discuss with an attorney or CPA to determine the correct legal entity (either LLC or C-Corp), but either entity will suffice. You also want to ensure you select the correct NAICS code that classifies your business type.
Step 2: Secure Your Employer Identification Number (EIN)
Your business will need an EIN to obtain a business bank account and apply for startup business credit.
To secure your EIN, you will need to apply for your EIN from the IRS using form SS-4. Here are the instructions on how to apply for a business EIN from the IRS.
Your EIN will be a 9 digit number, like this 12-3456789. You need an EIN number to do lots of things:
- Getting a business bank account
- Applying for credit and loans
- Getting business licenses
- Getting business insurance
- Setting up payroll
- Paying taxes
- Many other things
So if you don’t have an EIN, it will be pretty difficult for you to do business, any business!
Not sure if you have an EIN already? You should have received a notice from the IRS that looks exactly like the one below if you have an EIN already.
Not sure? You can call the IRS to have them confirm whether or not you have an EIN.
Step 3: Open a Business Bank Account
Your next step is to open up a business checking account. The bank you use is not entirely important to your business funding options, but, if you plan to build a rather large business you will need to start with a bank that has the products and services capable of properly serving you.
- Business checking and savings accounts
- Business credit cards
- SBA loans and other business loans
- Business lines of credit
- Merchant services (credit card processing)
- And other banking products specific to your needs or industry
Pro Tip: Build a relationship with your local small business banker. If you can forge relationships now, become a good business banking customer, and build up your credit and reputation when you are small, you could have a much easier time securing bigger loans and other banking products as your business grows in size over time.
Step 4: Apply for Business Credit
Applying for business credit cards can go very quickly (if you have a strong profile) or could be a long and twisted road of credit repair and dozens of applications and follow-ups.
However, there are a number of steps you can begin to take now to make your business funding applications go as smoothly as possible.
- Maximize your credit score: While the business credit you want only impacts your business credit score, your initial applications will almost always pull your personal credit score. Experts at business credit consulting companies like BitX Funding and Fund&Grow recommend you have a personal credit score of at least 730+ to secure business credit easily. If your FICO is under 730 we recommend you take the steps to improve your credit, fast!
- Research Business Credit Cards: There are a number of websites that feature credit card reviews and recommendations. A few that we recommend are FitSmallBusiness, LendingTree, and Nav. We recommend business credit cards with:
- 0% introductory rates for 12-18 months
- Low-cost balance transfers
- Benefits, perks, and point bonuses
- Apply For Business Credit Cards: We recommend that you build a spreadsheet of your favorite business credit cards and save the links to the application pages. Now, you can begin to apply for business credit cards. You will find business credit cards available primarily at banks and credit unions, but you can also find credit cards available from retailers and other online resources. Once you apply for business credit cards both online, over the telephone, and through the mail, you will begin to receive notifications of your acceptance or declines.
- Pro Tip: Since many of the best benefits like 0% interest rates have time restrictions, we recommend that you apply for the business cards once you know you what you will purchase with them.
- Use Your New Business Credit Cards: Once you receive your new business credit cards, it’s time to use them! You can now purchase services using your credit card as you would normally do, but how do you convert business credit into cash? The easiest way is to use a service like Plastiq. Plastiq is a service that converts credit card capacity into checks that can be deposited like a normal business check. You can use Plastiq to pay vendors, bills, consultants, rent, and other services and product purchases.
- Cycle Your Credit: Remember, you have a 0% interest rate, but you will still have to make your minimum monthly payments, which average to about 1% of your outstanding balance. The goal of using business credit is to generate revenue and hopefully profits, so you can pay down the credit quickly and safely. If your business is not yet profitable by the time your 0% interest periods lapse and you begin to pay interest, you may consider obtaining a term business loan to refinance your existing debt and buy yourself more time.
Business credit is an extremely powerful tool that you can use for startup funding, inventory purchasing, equipment purchases, real estate fix & flip financing, down payments, and a number of other startup funding needs.
If you use it correctly, you can have 0% interest and low payment seed capital credit to help you establish and launch your business.