How to Get a Credit Card for Your Business if You Have Bad Credit

by Alexandru Tanase Jan 11, 2023

Table of Contents

1. How to use business credit cards
2. You should be familiar with the following credit card terms
3. Advantages of a Business Credit Card
4. Keep business and personal finances separate
5. Improve business creditworthiness
6. Make business acquisitions
7. Optimal business credit cards for individuals with Bad Credit
8. Check your Credit
9. Research eligibility requirements
10. Think about these cards if you have bad credit
11. Business credit cards without security
12. Business credit cards with guarantees
13. Alternatives for financing a business
14. Final thoughts

Small business owners can benefit greatly from business credit cards. Responsible credit card use can assist entrepreneurs in financing business needs and building a stronger business credit history. Some credit cards even provide rewards and benefits such as cash back and travel discounts. However, if you have poor or no business credit or a bad personal credit score, finding the right card can be difficult. In this article, we'll look at business credit cards for people with less-than-perfect credit.

How to use business credit cards

Revolving credit is what business credit cards are. When a borrower is approved for a business credit card, the issuing bank or lender approves them for a maximum credit limit. Cardholders can then use the card to make purchases or withdraw cash as long as the total balance does not exceed the credit limit assigned to them. A monthly statement is mailed or emailed that shows the card balance, finance charges, and the amount of the minimum monthly payment due. Each monthly payment must at least cover the minimum payment to maintain good standing with the credit card company.

Small business credit cards operate in the same way as personal credit cards, but card activity on a business credit card has no effect on your personal credit score, available credit, or individual debt. Because the credit is revolving, the borrower can use the card again once the balance is paid off. Business credit card companies typically keep credit lines open until the borrower cancels the card or defaults on the payment agreement.

You should be familiar with the following credit card terms:

Before you start looking for the best business credit card, make sure you understand the terms listed below. Many of these terms are likely to come up during the application process or while reviewing the financial documents that come with your new credit card.

Annual percentage rate (APR)- the annual fee paid by a small business for the privilege of borrowing money and keeping the credit line open.

Annual fee- A flat fee, typically between $25 and $500, is charged to the cardholder as a service charge once every 12 months to maintain the credit card account.

Fraud liability- or zero fraud liability is a policy that credit card companies offer to customers as a safeguard against card theft or loss. 

Balance transfer- occurs when a borrower transfers debt from one credit card to another, startup funding for small business, or Personal loan in USA to a newer credit card.

Interest rates- a monthly fee charged to the borrower expressed as a percentage of the balance.

Grace period- According to the Credit CARD Act of 2009, the amount of time following a purchase before interest charges apply must be at least 21 days.

Security code- A 3-4 digit number that appears on your credit card as additional security, also known as the card verification value (CVV). 

Late fee- If the minimum payment requirement is not met by the due date, a late payment fee will be charged in accordance with the card agreement's terms.

Advantages of a Business Credit Card

Obtaining a business credit card is a significant step toward becoming a financially savvy entrepreneur. Aside from increasing consumers' purchasing power, there are other advantages to opening a credit card account.

Keep business and personal finances separate.

Personal credit cards can be used to cover business expenses, but this is not a good idea. This complicates bookkeeping, results in inaccurate financial reports, and creates a personal liability that must be repaid regardless of whether the business can afford it. Applying for and being approved for a business credit card is an excellent way to ensure that your business finances are kept separate from your personal finances.

Improve business creditworthiness

Having an open credit line, such as a business credit card, is an excellent way to improve your company's creditworthiness. Major credit card companies, such as Bank of America, and some credit issuing retailers report credit card activity to credit bureaus, so paying off the card balance in full each month or making a payment greater than the required minimum payment will boost your business credit score and appear positively on your credit report.

Make business acquisitions.

The small business owner won't ever have to pass up a great deal or postpone making that big purchase because they have a business credit card with available credit. Business credit cards can be used by entrepreneurs to pay their utility bills, buy supplies, start marketing campaigns, order computer hardware and software, and sign up for business services.

Optimal business credit cards for individuals with Bad Credit

Although they might not get the same benefits or sign-up bonus offers as those with better credit, applicants without established business credit history or with poor personal credit history can still be approved for business credit cards. Consider following these steps to find the best business charge card for your needs if you are worried that you won't be approved for a business credit card because you have bad credit or are a new business owner in your first year of operations.

Check your Credit

You must rely on your business credit score when requesting a business credit card. The credit card provider will also check your personal credit score, also known as your consumer credit report, if you are a startup business owner or have no business credit. It's a wise idea to review both your personal and business credit reports before deciding which business credit card to apply for.

Scores for business credit range from 0 to 100. Higher scores represent sound financial condition. Business credit ratings of 80 or higher are regarded as good or excellent. Most lenders and financial institutions view business credit scores below 64 as bad credit, and between 65 and 79 as fair. Get a copy of your company's credit report from Experian Small Business to check your business's credit.

The range of personal credit scores, also known as FICO scores, is 350 to 850. Banks, lenders, underwriters, and credit bureaus frequently adhere to a standard like this one from Equifax:

• 800-850 – Excellent credit
• 740-799 – Very good
• 670-739 – Good credit
• 580-669 – Fair credit
• 300-579 – Poor credit

Research eligibility requirements

You will be better able to sort through credit card offers by going over the additional eligibility requirements once you are aware of how your credit scores rank. When examining applications, credit card companies take into consideration a number of factors, such as:

Personal credit score- used in addition to or in place of business credit scores and obtained from your personal credit report.

Business credit history- appears on your business credit report and details payment history, open credit lines, and legal proceedings the business is involved in

Annual revenue- the profits made by the company over a 12-month period, as shown on financial statements and federal income tax returns.

Cash Flow- the flow of funds into and out of the business as shown on financial statements by revenues, expenses, and other financial transactions.

Employer identification number (EIN)- Credit card companies demand that a business be registered and have an EIN from the IRS before applying for a credit card in that business's name.

Time in business- To issue a business credit card, some card issuers may demand that it has been in operation for at least two years, as demonstrated by a business bank account.

Think about these cards if you have bad credit.

It does not necessarily follow that you won't be approved for a business credit card or Business credit service if your credit scores fall below the range considered good or excellent. Some business owners are shocked to learn they can get a business credit card with benefits like cash back rewards, discounts, introductory APRs that are low, and membership rewards. Consider the options below if you're a borrower with bad credit.

Business credit cards without security

No collateral, personal guarantee, or down payment is needed to open the credit line on an unsecured credit card. Small business owners with bad or no credit histories may be given business credit cards by some credit card companies. A lower credit limit or higher interest rates may result from opening an unsecured credit card account with poor to fair credit, but limits can be increased if you have a long history of on-time payments.

Capital One Spark Classic for Business- The Spark Classic card, which offers 1% cash back and no-fee employee cards, is fantastic for companies that don't qualify for credit cards with lower interest rates. For approved borrowers of the Spark Classic card, the annual fee is also waived.but it does demand full payment for all purchases at the time the statement is sent. There is a 1% foreign transaction fee in addition to no annual fee. Up to 7% in reward points are one of the Divvy Smart card's benefits.

Business credit cards with guarantees

For small business owners looking to establish their business credit, secured credit cards are a great option. These credit cards demand an opening deposit that usually equates to the credit limit. You'll get that deposit back once you've made on-time payments for several billing cycles, at which point the card will resume its regular use.

Wells Fargo Business Secured Credit Card- A secured credit card with excellent benefits like 1.5% cash back on eligible purchases and bonus points for each transaction when at least $1,000 is charged each month. A Wells Fargo business checking or savings account is a requirement for qualified applicants. 

OpenSky Secured Visa Credit Card ­– An excellent card for business owners with a bad credit history or those who have declared bankruptcy because there is no credit check involved in the approval process. Compared to other secured cards, this one has a $35 annual fee, lower interest rates, and a $200–$3000 security deposit requirement.

Central Bank Secured Credit Mastercard – opens a Mastercard with ID theft protection, airport concierge services, and global 24/7 customer service for a $500 security deposit into a savings account. 

Alternatives for financing a business

Although business credit cards are a fantastic source of financing for business owners, they are not the only option available. Consider working with a lending specialist at Wealth Builders 365 to investigate alternative financing options if credit cards are not a viable option given your financial or credit situation. You might be able to apply right away for one of the small business funding programmes listed below:

Short-term business loan- Term loans are a traditional form of financing where the borrower receives an upfront lump sum and makes monthly principal and interest payments to recoup the loan. Short-term loans are available as both secured and unsecured loans, with repayment terms of 36 months or less as the norm.

Business line of credit – Another form of revolving credit is a line of credit, where the borrower is authorised for a maximum credit line. The borrower can then use the line whenever they require business financing. Although lines of credit have higher interest rates than other financing options, they are a fantastic choice for business owners hoping to boost their credit rating. For approved business owners, such as this manufacturing company that was able to secure a $300,000 credit line in just 15 days, business lines of credit provide quick funding.

Final thoughts

A form of revolving credit, business credit cards function exactly like personal credit cards without having an impact on your personal finances. They enable business owners to buy the things they require, establish better credit, and keep business and personal expenses separate. When selecting a card issuer that has lenient approval standards or provides a secured credit card option, even small business owners with bad credit can be approved for a business credit card. Check your credit, learn about the card's features and requirements, and apply quickly online to get your business credit card or Business Credit Building Service started. Credit decisions are frequently given right away. Consider a line of credit or another financing option through Wealth Builders 365 if you have applied for a business credit card but were unsuccessful in getting it approved.