Business credit cards can be a great tool for businesses of all sizes. Applying for a business card can be a fairly straightforward process, but the application might have some questions you may not have seen before. For instance, your application will likely ask for your annual business revenue. So, what is annual business revenue and how do you report it?
What is annual business revenue?
Annual business revenue is the total amount of income your business generated over the course of one year. This is different from profit, which is the amount of money earned after deducting operating costs, taxes and other expenses. Revenue is the sum total of all the money your business brought in, whether that be through sales, the acquisition or appreciation of new assets or any other means.
It's important to report the most accurate information possible for annual business revenue on a credit card application by adding up the money your business made from any and every income source. A common source of revenue may be the products or services your business sells. If your business leases out a building or equipment, you must include that as revenue too. Be sure to carefully go over your records to ensure that you're including all revenue streams for the past 12 months.
Reporting annual business revenue
Once you've determined your annual business revenue, you're ready to report it on a credit card application. It's typically best practice to only include income that can be verified through documentation. Small business owners may be able to report both business revenue and personal income to issuers. This may further assist in showing issuers that you are capable of making your monthly payments if they approve you for a business credit card.
If you're a sole proprietor, such as a rideshare driver or freelancer, you can still apply for a small business credit card. Just as a business would, you can report your pre-tax income from the previous year as your revenue.
When you report your revenue, there are some things that maybe you shouldn't include, such as any income in your total revenue that can't be verified through documentation. An issuer may request proof of revenue, so it's important to have the paystubs, contracts, receipts, invoices or other paper trails to back up your figures.
Additionally, don't include any income that isn't related to the business. If you're working another job while trying to get your business off the ground, do not include that income as business revenue. You can still report it as personal income, but it's important to make that distinction. Personal income should be reported in the personal information section of the application, rather than the business information.
There are a couple of reasons you're required to submit your annual business revenue for credit card applications:
- It helps issuers decide if you're likely to spend responsibly and make your payments on time.
- It gives issuers guidance when deciding on your credit limit.
Tips for new businesses
If you're a brand-new business looking to get a credit card, you may not have a year of revenue yet. So how do you report annual business revenue for new business' credit card applications? It depends on the issuer.
- Enter $0: If your business hasn't made money yet, that may not automatically disqualify you. Some issuers are fine with you reporting zero for annual revenue. In this case, they will rely on your personal income to make their decision.
- Use sales projections: Some issuers will allow applicants to include revenue projections on an application. However, be sure to get explicit permission from the issuer first. Projected revenue may come from contracts, business plans and expected sales. Make sure to have documentation in case the issuer asks for it.
In summary
It's important to accurately report your annual business revenue when applying for a business credit card. Annual business revenue is the total of all income brought in by your business before taxes or expenses are taken out of it. Having an accurate number may help you get a credit card and credit limit that best suits your business.
