Business Credit Card Requirements for Sole Proprietors

For sole proprietors who are looking to avail themselves of a business credit card, this article will be useful in helping explain how business cards are issued compared to personal versions.


Unfortunately, it is not exactly a rosy situation for sole proprietors who are looking to pick up a Visa, Amex or Mastercard. This is because the banks that issues the card will not see the business owner and the business as two separate entities. The sole proprietor will be personally liable for the charges, which means the financial status of the owner is evaluated in the issuance of the credit.

This would mean that a person's assets are liable to be seized in the event of inability to pay back the business debt. Cards for sole proprietors are still very popular as it is easier to get than a line of credit or a business loan from a bank. However, the bank that issues a card to a sole proprietor will let them know that their personal assets could be repossessed in the event of failure to pay the debt on the credit card.

For all intensive purposes, the bank will look at you, the sole proprietor, as the end all for the credit. If you get a card, you get it because you are a good risk as a person. If you don't, it is because you are not. This is why it is difficult to be a sole proprietor in this regard. If you do get a card, however, it can be a real help.

A business credit card can:

• Provide a buffer zone or grace period of about a month where it can be used and then paid off in full to avoid any finance charges.

• Help a company with much needed funds in case of an emergency as no other source will easily fund a sole proprietorship.

• Accumulate points and rewards that can be redeemed for discounts that might help the business. For example, many credit cards have tie ups with airline companies that will allow free air miles to collect as and when they use their card. A sole proprietor who travels a lot might be able to save a significant sum just by using their credit cards regularly.

Though it is a business credit card, one should practice diligence when using the card as debt can easily get out of hand if left unchecked. A business owner should try to pay off as much of the balance as possible without allowing the card to accrue heavy interest or finance charges. The credit card should also be strictly used only for expenses that are necessary for the business.

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