Applying for a Business Credit Card Is About to Get (Slightly) More Complicated

May 4, 2018

This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

Banks may soon — if they haven’t already — start asking you more questions about who holds ownership in your company when you apply for a new business credit.

A new federal rule that takes effect May 11 will require banks and credit unions to collect the names of anyone who owns at least 25% of the business — directly or indirectly — when that firm seeks to open a new account.

This means the next time you apply for a business credit card, you may be asked to fill out additional paperwork if you share ownership, requiring you to disclose the name, date of birth, address and Social Security Number of each business partner with at least a quarter stake in the company.

“The basic message for small business owners is they’re going to need to have a little bit more information at their fingertips,” says Troy Dye, Capital One’s Spark Card Business CMO.

This rule is aimed at thwarting money launderers. Here’s the explanation from the Financial Crimes Enforcement Network, or FinCEN:

“Covered financial institutions are not presently required to know the identity of the individuals who own or control their legal entity customers (also known as beneficial owners). This enables criminals, kleptocrats, and others looking to hide ill-gotten proceeds to access the financial system anonymously. The beneficial ownership requirement will address this weakness and provide information that will assist law enforcement in financial investigations, help prevent evasion of targeted financial sanctions, improve the ability of financial institutions to assess risk, facilitate tax compliance, and advance U.S. compliance with international standards and commitments.”

Beyond collecting the information, banks also have to attempt to verify that what you disclose is true. You may be asked to supply “documentary verification,” like a driver’s license (or a photocopy of one) for each so-called beneficial owner.

Dye walked me through a demonstration of Capital One’s online application changes. At most, this should add a minute or two to your application process, particularly if you’ve gathered your partners’ personal information prior to filling out the application.

One other important note: At least in the case of Capital One, the issuer will only pull the credit of the person applying for the card. That means you don’t have to worry about getting flagged if one of your co-owners has some credit dings.

How to Know If You Have Beneficial Owners

This new rule certainly will apply to your company if you have multiple direct owners with at least a 25% share. But it also applies if your company is owned in part by another firm or entity in which investors in that firm indirectly own 25% of your business.

For purposes of the rule, a beneficial owner also includes “a single individual with significant responsibility to control, manage, or direct a legal entity customer, including an executive officer or senior manager….”

This rule won’t apply to you if you’re a sole proprietor.

Some Credit Situations Are Exempt

Going forward, whenever your business applies for a bank loan or a business credit card, you’ll be asked to disclose any beneficial owners. There are two relevant situations where this won’t apply:

  • During point-of-sale credit applications, which includes store credit cards. “The point of sale exemption is provided for retail credit accounts opened to facilitate purchases made at the retailer because of the very low risk posed by opening such accounts at the brick and mortar store,” FinCEN says.
  • When financing the purchase or lease of equipment. “The exemption is intended to cover business equipment such as farm equipment, construction machinery, aircraft, computers, printers, photocopiers, and automobiles that a business purchases or leases.”

H/T: Nav

The Business Platinum Card® from American Express

Aside from the 120,000-point welcome bonus, Amex recently made huge improvements to the Business Platinum Card, including the fact that you will now earn 50% more points on purchases of $5,000 or more (up to a cap amount), earn 5x on flights and eligible hotels at Amextravel.com and cardholders will receive an up to $200 annual airline fee credit each calendar year (enrollment required).

Apply Now
More Things to Know
  • Welcome Offer: Earn 120,000 Membership Rewards® points after you spend $15,000 on eligible purchases with your Card within the first 3 months of Card Membership.
  • Plus, 0% Intro APR for 12 months from the date of the account opening on purchases eligible for Pay Over Time. After that, your APR will be 14.24% to 22.24% based on your credit worthiness and other factors as determined at the time of account opening.
  • Get 5X Membership Rewards® points on flights and prepaid hotels on amextravel.com.
  • Earn 1.5X Membership Rewards® points on eligible purchases in key business categories, as well as on purchases of $5,000 or more everywhere else. Cap applies.
  • Unlock over $1,000 in value per year for statement credits on select purchases with your Card, including up to $400 with Dell Technologies, up to $360 with Indeed, up to $150 with Adobe and up to $120 on wireless telephone purchases. Enrollment required.
  • $200 Airline Fee Credit: Get up to $200 in statement credits per calendar year toward baggage fees and more at one qualifying airline.
  • $179 CLEAR® Credit: Use your Card and get up to $179 back per year on your CLEAR® membership.
  • Access to more than 1,300 airport lounges across 140 countries and counting with The American Express Global Lounge Collection®. More lounge options than any other credit card on the market as of 8/2020.
  • $595 Annual Fee ($695 if application is received on or after 01/13/2022).
  • Terms Apply.
  • See Rates & Fees
Intro APR on Purchases
See Pay Over Time APR
Regular APR
14.24% - 22.24% Variable
Annual Fee
$595 (10/14-1/12/22)
Balance Transfer Fee
N/A
Recommended Credit
Good, Excellent
Terms and restrictions apply. See rates & fees.

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.