Business Credit Cards for Bad Credit


(NB If you want to know about small business loans with bad credit click here.)

Each year, roughly 600,000 businesses are launched. This shows that for many, part of the American Dream is entrepreneurship. For those with bad credit, however, the prospect of business ownership often seems more like a fantasy than something that is actually feasible and attainable. Business credit cards for bad credit often seems too good to be true.

Bad credit can hurt your chances for raising money, but there are still financial resources out there for those of you with bad credit, as long as you are willing to look for those opportunities. Most of the time, the options for financing aren’t as heavily advertised as those for businesses and individuals with good credit, if they are advertised at all. There are a few places to look, though, and hopefully find a viable option to finance your business.

Loans and Microloans

The best place to start a search for financing is through loans guaranteed by the Small Business Administration (SBA). These loans are designed to match lenders with borrowers with less than perfect credit, guaranteeing 90 percent of the loan if the borrower defaults on the loan. These loans do require a credit check, but they also look at such factor’s as the business’s viability and collateral. Collateral is not required, though, as the SBA will not decline guaranteeing a loan based only on the lack of collateral.

Microloans are sometimes more attractive and more easily attainable. These are smaller loans, typically less than $20,000, and are often geared towards borrowers with poor credit scores. A microlender solicits small donations and investments from a lot of people, and then funnels that money into loans for businesses.

Business Credit Cards

For many businesses, a business credit card is the best financing option for bad credit. These cards can often be acquired even with bad credit, and there are also prepaid options to consider. Interest rates will be higher than credit card offerings for businesses and individuals with favorable credit, but this is going to be the case with any financing option for a business or person with bad credit.

Several major credit card companies offer options for bad credit. The Capital One Spark card, for example, is a reasonable card for businesses that do not have good credit. Credit limits are often low, but if you pay the bill steadily and on time, Capital One will regularly increase the credit limit. Prepare for an APR of at least 22.90 percent, but the card does not (at the time of publication) carry an origination fee or an annual or monthly fee for the first year. After the first year, the annual fee is $59 per year.

One method to consider to repair your business’s credit with a credit card is a secured credit card. For these cards, you provide a security deposit that the card issuer can use to pay your debt if you fall behind. For example, you might make a $500 deposit, and get a credit card that has a $500 credit limit. Sometimes, you might even get a credit limit that’s higher than your deposit. These cards are not the same as prepaid cards, mind you; they’re actual credit cards with monthly bills that you have to pay.

Another option is a low-limit card. These cards often come with a  credit limit in the $300 to $500 range, but processing fees and annual fees can eat up a large chunk of your available credit. These cards should, therefore, only be used as a last resort. They do report on-time payments to the credit bureaus, though, so they can be considered as a means of building or repairing credit when all else fails.

Another option is the PEX prepaid Visa card. This card works just like a Visa card, but does not require a credit check. You load the card through an ACH transfer from your business banking account, and can have multiple cards on the same PEX account. This is a good option for pre-authorizing employee spending, but setting spending limits and approving specific merchant categories. PEX also allows transactions to be exported to QuickBooks, allowing for fast and easy accounting.

Improving Your Business’s Credit

The next step, of course, will be to improve your business’s credit so you can qualify for other financing options in the future. Even if you or your business have bad credit, you can repair your business credit rating by reviewing the damage and taking steps to rectify it.

One of the most important steps is to establish successful vendor and supplier relationships, by setting up a business account any time you can. When the bill arrives for the line of credit, make sure you pay it before the due date. If these vendors report your good payments to credit agencies, you’ll see your business credit rating improve.

The next step is to make debt payments a priority. While it’s important to have cash on hand for your business operations, take any steps you can to pay down your debt and repair your business credit.

You’ve Rebuilt Your Credit—Now What?

Once you’ve repaired or rebuilt your credit, it is important to maintain your business’s good credit. Monitor your business credit regularly by having your accounting team check your credit as often as economically possible; you’re entitled to a free credit report every year, but you might also find options for monitoring your credit that are worth the monthly or quarterly fees. As your credit continues to improve, you’ll have more and more options for financing your business’s ongoing operations.

Once you get out of the woods, just make sure you make those payments every month on or before the due date. Credit can make a huge difference in the success of your business, since the ability to quickly raise funds for expanding operations or new projects can be the key factor deciding whether or not you are able to land that new contract. You don’t want to have to suffer through the painful process of business cards for bad credit again, so keep that credit rating up once you get it repaired!