If your small business is in need of expansion, you might realize your business credit card’s current limit no longer fits your needs. These tips and options will help you increase your credit limit without hurting your credit score.
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Your rewards card may be your go-to way to cover day-to-day expenses or large purchases for your business. As your business expands and spending increases, you might find that your card’s credit limit no longer fits your needs.
You could take out a business loan to get working capital, but those can sometimes be difficult to qualify for. Raising the limit on your business rewards card can be an easier way to increase your purchasing power, while potentially racking up more cash back, miles or points.
Increasing your credit limit isn’t rocket science but there’s a little prep work involved. These tips can help raise your odds of landing a higher limit.
See related: The best business credit card perks you’re probably not using
6 things to consider if you want to raise your business credit card limit
1. Payment history and cash flow matter
Positive cash flow is everything in business – without it, you’re more likely to run into trouble keeping up with credit card and other debt payments.
“Having a strong payment history is the best thing a small business owner can do to increase the chances of getting approved for a higher credit limit,” says Marc Andre, founder of personal finance blog VitalDollar.com. “Credit card companies know that most businesses experience some challenges related to cash flow, so carrying a balance on the credit card isn’t a problem but you should be consistently making your monthly payments on time.”
Review your payment history for all your business and personal credit cards, not just the one you’re requesting a credit limit increase for.
“In most cases, both the business and personal credit history will be considered for the owner of the business,” says Andre, and a solid track record of on-time payments overall can work in your favor.
2. A strong banking relationship can help
If you have multiple business rewards cards, you could request a higher limit on all of them. But it might make sense to start with the card issued by your primary bank first.
“Your business banker will understand your needs and be able to provide custom recommendations to work with you and help you achieve your goals,” says Alex McElyea, senior product manager of credit cards at OneAZ Credit Union in Phoenix, Arizona.
Your bank may look beyond your business credit score or personal credit scores to gauge creditworthiness.
For example, they may review the balances across your business and personal accounts or your payment history for other loans or lines of credit you’ve had with the bank in the past. The age of your credit card and bank accounts can also come into play.
“If you’ve had a particular credit card for a while and you’ve always paid on time, you’ll have a better chance of getting a credit limit increase with that issuer,” says Andre.
3. Check your income and update your information
Before asking for a higher limit on your business rewards credit card, consider whether your income justifies it.
“You can use income from a variety of sources to qualify for a business credit card and to impact your credit limit,” says Priyanka Prakash, lending and credit expert at small business marketplace Fundera.
That includes business income, as well as income from a side hustle, investment income or your spouse’s paycheck. Your credit card company may look at the total income picture to determine your ability to repay what you charge with a higher credit limit.
Prakash cautions that some card issuers may look for a minimum amount of business revenue before raising your limit, but “you can usually fulfill this requirement with projected revenue.”
Updating your financial statements can give you a better idea of your current and future revenues. Key statements to review include:
- Cash flow statements.
- Income statements.
- Balance sheet.
Being able to show a significant boost in revenue could reassure your card issuer that you’re deserving of a higher limit.
“If you brought on a big new client, launched a new product or landed a contract that significantly increases your business revenues that can definitely be used to support a request for a credit limit increase,” says Prakash.
Just be sure to keep your credit card company in the loop.
“When you request the increase, you want to make sure the issuer has current and updated information, like income, to use in the decision-making,” says Andre.
4. Get the timing right
A slow and steady pace may pay off when asking for a higher business rewards card limit.
Prakash recommends using your card for at least a year before trying to raise your credit limit. “One year gives the card issuer enough time to assess your payment history,” she says, and after that time, “most card issuers give you the online request option, which is fast and instantaneous.”
Timing also matters if you’ve recently paid off a business or personal loan or line of credit. Closing a credit line could result in a temporary drop in your credit scores. A quick check of your business and personal credit reports and scores can tell you where you stand if you’ve recently closed an account.
If your credit limit request is denied online, don’t hesitate to argue your case over the phone.
“Calling the company can sometimes help, especially if you have a relationship with the issuing bank,” says Prakash.
If a score drop associated with a debt payoff is the issue, it doesn’t hurt to ask the credit card company to reconsider based on your bigger financial picture.
See related: How to cancel a credit card without hurting your score
5. Pay attention to the credit score impact
Asking for a higher credit limit on your business card could affect your business and personal credit scores, directly or indirectly.
For instance, your card issuer may do a hard or soft pull of your credit. A soft pull would have no impact but a hard inquiry of your business or personal credit could knock points off your respective scores. A higher business rewards card limit can also hurt your personal score if you’re not managing it properly.
“If you become delinquent on payments, the business card issuers can report that negative history to the personal credit bureaus,” says Prakash, impacting your personal credit score.
Similarly, increasing your card’s credit utilization ratio or maxing out your new higher limit could also reflect negatively on your personal credit. Credit utilization – the amount you have borrowed compared to your credit limits – is the second most important factor in credit scoring calculations after making on-time payments.
Prakash says the simplest way to avoid these scenarios is by tracking your card spending closely using your business accounting software or the online tools provided by your card issuer.
6. Consider a charge card with no preset limit
Applying for a charge card with no preset spending limit is an alternative to raising your rewards card limit. Here are some of the top no preset spending limit options:
- American Express® Business Gold Card.
- The Business Platinum Card® from American Express.
- The Plum Card® from American Express.
- Business Green Rewards Card from American Express.
A charge card gives you the ability to make bigger purchases without having to request a credit line increase, says Prakash, “however, you have to pay the balance in full each month.”
Paying in full allows you to avoid interest charges but you could hit a snag if your business revenue is inconsistent from month to month. Certain charge cards can offer some leeway with payments, however.
With the American Express Business Gold Card, for instance, you can use the Pay Over Time option to carry a balance with interest on purchases of $100 or more. The Plum Card allows you up to 60 days to pay with no interest.
Those are good options to have but they may not be feasible for every business owner. Think carefully about the pros and cons of charge cards, as well as your business needs and long-term outlook.
“Using a credit card often helps businesses manage their cash flow and provides more flexibility for spending,” says McElyea. “When business owners have to make a big purchase, a credit card offers the opportunity to pay for them over time as their cash flow grows.”
- Weigh the annual fees, rewards structure, card perks and the APR you might pay with Pay Over Time before committing to a charge card.
- And remember, no preset spending limit doesn’t mean you can spend with abandon.
- Instead, it means your credit limit may adjust month to month, based on your business credit scores, payment history and purchase history.
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