Certain types of business credit cards can help you achieve new levels of success.
Affordable financing is something of a holy grail for business owners. You can never have enough capital on hand to help you cover costs while also growing and innovating.
That’s what makes a business credit card with 0% APR so sought-after. Unless you have a generous circle of friends, or you win a small business grant, getting your hands on “free money” for your business is just about impossible. The next best thing is a loan with no interest or other fees—which is essentially what a 0% APR card does for you.
Now, there’s no such thing as a business credit card with an indefinite 0% APR. Instead, some credit card issuers have cards with a special introductory period—typically nine to 12 months—with 0% APR. After that, your APR sets in at a rate that reflects the market Prime Rate as well as your own creditworthiness—so you’ll need to check the issuer’s terms and conditions for the latest APR information. You also need to make minimum monthly payments to maintain the deal.
But for the life of that offer, you essentially have an interest-free loan that you can use in all kinds of ways, from purchasing inventory to investing in new technology or talent. That’s a powerful tool for small business owners.
How do you qualify for one? Not every small business canat—at least not right away. Here’s what credit card issuers consider when you apply:
An Excellent FICO Score
Yes, we’re talking about business credit cards. But when applying for a business credit card, issuers will examine your personal credit score and history and want to see that you have a good-to-excellent FICO score before approving you.
Keep in mind that the FICO scoring scale ranges from 300 to 850 and that most credit card issuers want to see a minimum credit score of 700. Some will consider scores as low as 660, but nothing less.
FICO scores are made up of the following factors:
- Payment history (35%): Throughout your life, you have hopefully mostly made payments on time and have avoided late payments and bankruptcy.
- Amounts owed (30%): The amount of money you already owe to other credit card issuers or lenders is also a major factor.
- Length of credit history (15%): The ages of all your accounts tell issuers whether you’re new to using credit or not.
- New credit (10%): New credit inquiries and accounts show that you are active.
- Credit mix (10%): A mixture of credit types—credit cards, loans, etc.—demonstrates balance.
If you have a sub-660 FICO score, take the time to address the above factors and improve your numbers. This is good personal and business practice anyway—and you’ll be rewarded by the opportunity to qualify for an elite business credit card, not to mention other financing options if necessary.
Few To Zero Delinquencies Or Derogatory Marks
The other major consideration for credit card issuers is the appearance of any delinquencies or derogatory marks on your credit history.
As discussed above, your payment history is a huge part of what makes up your FICO and other personal credit scores. The biggest black eyes your payment history can suffer are delinquencies and derogatory marks on your credit report.
A delinquency is when you are more than 30 days late paying off what you owe your credit card company. A derogatory mark is an indication you didn’t pay back a loan as agreed, and can remain on your report for seven to 10 years.
Obviously, the fewer of these you have in your credit report, the better. Zero would be the best number. Otherwise, credit card companies will be hesitant to extend you such excellent terms via a card with no interest payments for up to a year.
Other Factors Issuers May Consider
Your score and a history of delinquencies or derogatory marks are the biggest factors that virtually every credit card issuer will consider. Other factors that certain issuers may consider include:
- Inquiries in the last 12 to 24 months: New credit activity is good, but a recent history of many, many credit inquiries in an attempt to find a line of credit is a red flag to lenders and issuers.
- Annual revenue: The larger and more successful your business is, particularly when it comes to generating revenue, the better your case for an elite business credit card.
- Employee count: Any business owner of any size business, from corporation to sole proprietorship, can apply for a business credit card. Bigger businesses, however, are a better bet to issuers.
What To Do If You Don’t Qualify
If you apply for one of these business credit cards and don’t get one, what’s your next step? You may need to boost your credit score. If so, consider looking into a secured credit card to help you build your credit, or an unsecured credit card with lower credit score requirements.
You should also get a copy of your credit report and review it for any errors by the credit bureau or other parties. If you do find one, contact the credit bureau to dispute the error and they’ll investigate it for you within 30 days.
Overall, your goal should be to clean up your credit history and improve your credit score until your score meets the minimum requirements of American Express, Chase, Capital One, or whichever credit card company (and their offerings) you prefer.
The Bottom Line On 0% APR Credit Cards
To get your hands on an excellent financial tool like a credit card with a 0% introductory APR period, you need to demonstrate your history of financial responsibility as well as, in some cases, your strength as a business owner. If you’re planning on making major investments in your business in the coming year, now is a great time to get your hands on one of these. It will make paying off your debts much easier than if you have to worry about interest and other fees.