What to do if your business credit card is denied

A business credit card can make it easier to run your business and potentially earn miles, points or cash rewards as you spend money.

Business credit cards can also be easier to qualify for than, say, a business loan. However, you can’t always be the business card lock.

“A company can have millions in the bank and still not get a credit card,” says Enrique Dubugras, co-founder and CEO of Brex, a corporate credit card aimed at startups.

If you applied for a business credit card and got rejected, here’s what to do next.

Understand why you were rejected

There are several things that can cause a credit card company to reject your application for a business card. Read on to find out the possible reasons.

No credit history

“The most common reason we see business owners and startup founders being denied credit is because they have little to no credit history,” Dubugras says. “Without an existing credit history, traditional banks and lending institutions will not provide them with a card to access the funds they need to start their business.”

Negative credit history

A negative credit history can be just as devastating as having no credit history. A recent delinquency on your personal or business loan could work against you when applying for a card, says Carly Linden, author of BestCompany’s business loan blog.

“Credit card issuers look at your payment history and take into account the type of delinquency and how long ago it was,” Linden says.

The later a black mark appears on your credit history, the more impact it can have on credit decisions.

Too many card apps

Applying for multiple cards within a short period of time can also be a wake-up call for card issuers.

“I personally was denied a business credit card because I applied for a personal credit card from the same company in the same six-month period,” says Stacy Caprio, marketing strategist and serial entrepreneur.

You may also be denied if you applied for multiple cards at different banks. Chase, for example, introduces the 5/24 rule that if you opened five or more personal credit cards at any bank in the previous 24 months, you won’t be able to get a Chase business credit card.

The meager financial performance of the business

New businesses may also be denied a business credit card if they do not have sound financial means.

Doug Mitchell, owner of Ogletree Financial Services, applied for a business credit card with American Express when his agency was brand new.

“We were a start-up insurance agency, so we didn’t really have the financial capacity to share,” Mitchell says. After being denied a business card, he and a business partner resorted to personal credit cards, real estate loans, and their current income to finance initial business expenses.

Application with errors

It’s not just the big things that can confuse you when applying for a business loan.

Incorrect entry of your income when applying or failure to provide any supporting documentation requested by the credit card company may result in your application being thrown out.

What to do if you are denied a business loan

If you are denied a business card, do not refuse to receive approval without first taking the following steps:

View your personal and business credit reports

The Fair Credit Reporting Act allows you to request a free copy of your credit report if you have been denied credit. To get your credit report, you must submit a written request to the credit bureau that provided the information the lender used to deny you. You will also need to submit a copy of the adverse action notice that the lender should have given you. This notice explains why you were denied a loan and which credit bureau they got your information from.

You have 60 days from the date you were denied a request for a free copy of your credit report. Once you receive it, check for any negative ratings or errors that could lower your credit score. If you see an error, take action to challenge it.

Ask your credit card company to reconsider your decision.

Sometimes getting approved for a business credit card is as easy as asking the issuer to take another look at your application. This tactic worked for Caprio. “I called and explained the situation, and they reviewed and approved me manually,” she says.

A review request can only work if you have a pre-existing relationship with a bank or credit card company, Dubugras warns. And if you’re asking for a review, be prepared to make a strong case for your business, especially if it’s still in its early stages.

“Cash or equity in a business can be overlooked when it comes to history of operations and earnings, although cash and equity are the best indicators of solvency,” Dubugras says. “So, in this situation, it’s good to focus on them.”

Improve your finances and credit

Asking for a review can speed up business credit card approval, but sometimes you may have to take the slower route.

In Mitchell’s case, he focused on strengthening the fundamentals of the business and developing good habits with personal trust.

“We became more attractive to credit card companies because we paid our balance in full and on time each month,” he says. “After a couple [of] years of solid cash flow, growth and on-time payment, getting business credit cards was no longer a problem.”

In addition to focusing on growing your business and improving your personal credit, take care of your business credit as well. Building vendor lines of credit and paying vendors on time each month can help you start building a business credit history if you can’t qualify for a credit card or loan yet.

Consider a secured business credit card

A secure business card can offer purchasing power when you can’t get a traditional business credit card.

“If you don’t have credit and no other choice, secured cards are generally a good choice,” Dubugras says. However, the main disadvantage “is that they are difficult to maintain, especially for busy founders and business owners.”

Protected cards may also have higher annual fees or annual interest rates if you have a balance, both of which can cost your business money.

“My advice is to use them and pay your bills often and often, taking extra care not to spin,” Dubugras says.

Not only will this help keep interest charges to a minimum, but it will also improve your credit score. Just remember to watch what you charge so you don’t put too much strain on your business’s cash flow.

“At the end of the day, business debt is still your debt,” Mitchell says.

bottom line

Being denied a loan application can be discouraging, especially when you’re looking for a business card to grow your new venture. To move forward, it’s important to understand why your application was rejected and correct any errors in your credit report or financial gaps.

While you may be successful in pursuing a reappraisal, you will likely need to focus on improving your personal creditworthiness, strengthening your business’s financial performance, and regrouping time before reapplying.