Are you a small business owner with a less-than-perfect credit history? Whether you’re trying to manage expenses, there are a variety of business credit cards for bad credit.
Finding the right business credit card can be challenging, especially if you’re trying to rebuild your credit. But don’t worry, and you’re not out of options! So if you need a business credit card but have bad credit, keep reading to learn about your five top choices.
What is a Business Credit Card and How Do They Work?
A business credit card is a type of credit card specifically designed for small business owners to manage their expenses and separate their personal and business finances. Business credit cards work similarly to individual credit cards because they allow you to make purchases and withdraw cash.
Still, they also offer unique features such as rewards programs and higher credit limits tailored to small businesses needs. For example, suppose you’re starting a new business or have little to no credit history. In that case, options such as credit cards for small businesses with no credit or guaranteed approval business credit cards may be more suitable for you.
Regardless of your credit history, having a business credit card can help you establish and build your business’s credit history, which can be crucial for securing loans and investments in the future.
5 Benefits of Business Credit Cards for Small & Medium-Sized Businesses
Small businesses have a lot on their plate, and a small business credit card can provide much-needed financial support. Here are five key benefits of using a small business credit card:
- Separation of personal and business finances: by using a separate credit card for business expenses, you can keep your personal and business finances separate, making it easier to track your business spending and maintain accurate financial records.
- Access to credit: a small business credit card can give your business access to credit that can be used for purchasing inventory, covering unexpected expenses, or making capital investments.
- Rewards programs: many small business credit cards offer rewards programs that allow you to earn points, cash back,k, or other incentives for your business spending.
- Improved cash flow: using a small business credit card, you can take advantage of credit card payments and deferred payment terms, which can help improve your business’s cash flow.
- Building business credit: regular and responsible use of a small business credit card can help build your business’s credit history, making it easier to secure loans or investments in the future.
In conclusion, having a small business credit card can provide valuable benefits and support to small and medium-sized businesses, making it an innovative financial tool in your business’s arsenal.
What Are the Different Types of Business Credit Cards?
Business credit cards come in several different types, each offering unique features and benefits for small and medium-sized businesses. Here are some of the most common types of business credit cards:
- Traditional Business Credit Cards: The most common type of business credit card offers a range of features such as rewards programs, low-interest rates, and flexible repayment options. They are ideal for businesses with good credit and a steady income.
- Secured Business Credit Cards: Require a cash collateral deposit and are designed for businesses with poor or limited credit. The warranty is collateral that can be used to pay off the credit card balance if the company cannot make payments.
- Store Business Credit Cards: offered by major retailers and provide rewards, discounts, and unique financing options for purchases made at the retailer.
- Business Charge Cards: These don’t have a pre-set spending limit and require the balance to be paid monthly. They are ideal for businesses that need to make large purchases and can pay off the balance in full each month.
- Business Fleet Cards: designed for businesses with a fleet of vehicles and allow for centralized billing and expense tracking for fuel and maintenance purchases.
- Small Business Credit Cards: specifically designed for small businesses and offer low fees, flexible repayment options, and rewards for business purchases.
When choosing a business credit card, it’s essential to consider your business’s specific needs and goals and compare each type’s features, interest rates, and fees to find the best fit.
Building Business Credit with Bad Credit: The Best Credit Cards
Capital One Spark Classic for Business
This business credit card is ideal for small business owners with limited or less-than-perfect credit looking to build or rebuild their business credit. It’s also suitable for those who need to make a one-time purchase and pay it off over time.
Rewards: No rewards program is offered.
Annual fee: $0 annual fee.
Regular APR: 26.99% (Variable) APR on purchases and balance transfers.
Balance transfer fee: $0 for the first 90 days after account opening. After that, a fee of 3% of the amount transferred, with a minimum of $10, applies.
Foreign Transaction fee: No foreign transaction fee.
Advantages:
- No annual fee.
- Low minimum security deposit.
- Ability to build or rebuild business credit.
- Flexible repayment options.
Disadvantages:
- No rewards program.
- High regular APR.
- Balance transfer fee.
Ink Business Cash Credit Card
Best for small business owners who spend a significant amount in categories like office supplies, internet/cable/phone services, gas, and restaurants and are looking for a card with no annual fee and generous cashback rewards. This card can also help business owners build their business credit.
However, due to the foreign transaction fee and higher regular APR, it may not be the best choice for businesses that frequently purchase abroad or have a high average monthly balance.
Rewards:
- 5% cash back on the first $25,000 spent in combined purchases at office supply stores and on internet, cable, and phone services each account anniversary year
- 2% cash back on the first $25,000 spent in combined purchases at gas stations and restaurants each account anniversary year
- 1% unlimited cash back on all other card purchases with no cap
Annual fee: $0
Regular APR: 14.74% – 20.74%
Variable Balance transfer fee: Either $5 or 5% of the amount of each transfer, whichever is greater.
Foreign transaction fee: 3% of each transaction in U.S. dollars
Advantages:
- $0 annual fee
- Generous cashback rewards
- Ability to build business credit
- No cap on the unlimited 1% cash back on all other purchases
Disadvantages:
- Higher regular APR compared to some other business credit cards
- Foreign transaction fee
- The 5% and 2% cashback rewards have a combined spending limit of $25,000 per year.
BlueVine Business Line of Credit
It is ideal for small business owners who need access to quick and flexible funding without the need for collateral. It’s also a good option for businesses with a bad credit history, as BlueVine is known for approving companies with lower credit scores.
Nevertheless, It’s important to remember that the higher APR and the fact that it’s limited to domestic use may not be ideal for all businesses.
Rewards: Not applicable, as this is a line of credit and not a rewards card.
Annual fee: No annual fee.
Regular APR: BlueVine’s APR starts at 13.99% to 24.99%. The actual APR you receive will depend on your creditworthiness and other factors.
Balance transfer fee: Not applicable, as this is a line of credit and not a balance transfer card.
Foreign transaction fee: Not applicable, as this line of credit is for domestic use only.
Advantages:
- Flexible line of credit: With BlueVine, you can draw funds as needed and repay over time. This gives you the ability to manage cash flow and handle unexpected expenses.
- Quick approval process: BlueVine’s approval process is fast, with funds available as soon as the next business day.
- No collateral required: unlike a secured business credit card, you don’t need to provide collateral to ensure this line of credit.
Disadvantages:
- Higher APR than traditional business credit cards: BlueVine’s APR starts at 13.99% to 24.99%, higher than conventional business credit cards.
- Limited to domestic use: this line of credit is only available in the U.S.
Fundbox Business Line of Credit
The Fundbox Business Line of Credit is a good option for small businesses looking for a flexible funding source for unexpected expenses or opportunities. It is not a traditional credit card and does not offer rewards, but it is a quick and convenient way to access funds as needed.
Rewards: None
Annual fee: None
Regular APR: Based on the creditworthiness of the business and the outstanding balance
Balance transfer fee: N/A
Foreign transaction fee: N/A
Advantages:
- Provides a flexible line of credit for businesses, allowing them to draw funds as needed and repay over time
- The fast approval process, with funds available as soon as the next business day
- It can help businesses with cash flow management and can provide a source of funding for unexpected expenses or opportunities
Disadvantages:
- Higher APR compared to traditional credit cards
- May have higher fees compared to conventional credit cards or loans
- The amount of credit available is based on the business’s creditworthiness, so companies with poor credit may have a lower limit.
Wells Fargo Business Secured Credit Card
This business credit card is suitable for undersized business owners who are skimming to build or rebuild their credit but may not be eligible for an unsecured business credit card. By making on-time payments and using the card responsibly, business owners can help improve their credit and eventually graduate to an unsecured business credit card with better terms and benefits.
Rewards: N/A
Annual fee: $25
Regular APR: 19.74%
Balance transfer fee: N/A
Foreign transaction fee: 3% of each transaction in U.S. dollars
Advantages:
- Provides a credit line to business owners with bad credit
- No rewards program to complicate the usage of the card
- Low annual fee compared to other secured business credit cards
Disadvantages:
- High APR compared to other industry credit cards
- Requires a security deposit to secure the credit limit
- A foreign transaction fee is higher than other business credit cards
The Home Depot Business Credit Card
It is an excellent option for businesses that make frequent purchases at The Home Depot, but it may not be ideal for companies that don’t shop there regularly. The card’s high rewards rate for Home Depot purchases and lack of an annual fee make it a unique choice for businesses in this category.
Rewards:
- 5% off everyday purchases at The Home Depot
- 2% off purchases made at gas stations, restaurants, and office supply stores
- 1% off all other purchases
Annual fee: $0
Regular APR: 26.99%
Balance transfer fee: N/A
Foreign transaction fee: N/A
Advantages:
- High reward rates for purchases made at The Home Depot can result in significant savings for businesses that frequently make purchases at the store.
- No annual fee means the card has no ongoing cost to use.
- The ability to manage multiple cards for employees allows for better control over business expenses.
Disadvantages:
- A high regular APR means the card can be expensive if businesses carry a balance.
- The rewards rate for purchases made outside The Home Depot is low, meaning businesses may need another card for non-Home Depot purchases.
- It is limited to only businesses that make purchases at The Home Depot, which may not be ideal for companies that don’t shop there regularly.
OpenSky Secured Visa Business Credit Card
This secured credit card requires a security deposit, but approval is guaranteed as there is no credit check. The card reports to all three credit bureaus and has a low annual fee, making it an affordable option for those working on improving their credit. However, the high regular APR and lack of a rewards program may not be ideal for all users.
Rewards: None
Annual fee: $35
Regular APR: 19.14%
Balance transfer fee: N/A
Foreign transaction fee: 3%
Advantages:
- No credit check is required for approval
- A secured card makes it easier for those with poor credit to be approved
- Reports to all three credit bureaus, helping to build or rebuild credit
- A secure card with a low annual fee
- Option to increase credit limit based on payment history
Disadvantages:
- High regular APR
- A foreign transaction fee of 3%
- No rewards program
- No balance transfer option
Sam’s Club Business Mastercard
The Sam’s Club Business Mastercard best suits businesses that frequently purchase gas, dining, and travel. With its generous rewards program, companies can earn significant cash back rewards, which can be redeemed at Sam’s Club. However, the high variable APR and limited redemption options may not be suitable for all business owners.
Rewards:
- Earn 5% back on gas purchases, 3% back on dining and travel, and 1% back on all other purchases.
- No annual limit on rewards earnings.
- Cash back earned can be redeemed at Sam’s Club.
Annual fee: $0
Regular APR: Variable 16.40%
Balance Transfer Fee: $5 or 3% of the amount of each transfer, whichever is greater
Foreign Transaction Fee: None
Advantages:
- No annual fee.
- Generous rewards program for gas, dining, and travel purchases.
- No foreign transaction fee.
- Cash back rewards can be redeemed at Sam’s Club.
Disadvantages:
- High variable APR.
- Limited redemption options for rewards, as cashback can only be redeemed at Sam’s Club.
- The rewards program is geared towards those who frequently make gas, dining, and travel purchases, which may not be suitable for all business owners.
The Impact of a Low Business Credit Score
A bad credit score for a business is typically considered a score below 600 on the FICO scale, which lenders widely used to assess the creditworthiness of borrowers. This score can reflect past payment history, credit utilization, length of credit history, and other factors that determine the financial health of a business.
With a low credit score, a business may face difficulties obtaining loans, lines of credit, or credit cards with favorable terms, leading to higher interest rates, security deposits, or rejection of applications altogether. This can be particularly challenging for small businesses as they rely heavily on credit to finance their operations and growth.
A bad credit score can result from several reasons, including missed or late payments, defaulting on loans, high credit card balances, and excessive credit applications. Repairing a bad credit score may take a concerted effort to pay bills on time, reduce debt, and avoid new credit inquiries.
In summary, a bad credit score for a business can hinder its financial health and growth and requires a diligent effort to repair and improve.
Obtaining a Business Credit Card Online or Offline with These 5 Tips
Applying for a business credit card with a poor credit score can be challenging. However, with these five tips, you can increase your chances of obtaining a credit card online or offline:
- Check Your Credit Report – Before you apply for business credit cards, obtaining a copy of your credit report and reviewing it for errors is essential. Dispute any inaccuracies, and make sure that your credit history accurately reflects your financial situation.
- Build Your Business Credit – A business credit score differs from a personal credit score. To build a strong business credit profile, ensure your business is registered and your name and address are listed correctly on the credit report.
- Focus on the Right Card – Look for business credit cards that cater to businesses with poor credit. Also, consider secured credit cards that require a security deposit, as they tend to have lower credit score requirements.
- Consider a Co-Signer – if you have a trusted business associate, friend, or family member with a good credit score, they may be willing to co-sign on a business credit card application with you.
- Apply for a Personal Loan – If your business struggles with a poor credit score, consider applying for a personal loan to help finance your business. However, remember that private loans often come with higher interest rates and may not offer the same tax benefits as business credit cards.
Navigating Alternative Business Funding Options
As a business owner, having access to credit can be crucial for managing day-to-day expenses, making purchases, and financing growth. However, traditional business credit cards may not be an option for those with poor credit. Luckily, there are alternative financing options available for those in this situation. Here are a few to consider:
- Business Line of Credit: A business line of credit can provide access to a pool of funds that can be drawn upon as needed. Unlike a traditional loan, you only pay interest on the funds you use, making it a flexible option for managing cash flow.
- Business Grants: Some organizations offer business grants to entrepreneurs and small business owners. These grants can fund various expenses, such as equipment purchases, marketing efforts, etc.
- Invoice Factoring: Invoice factoring allows businesses to receive immediate payment for their outstanding invoices rather than waiting for 30, 60, or even 90 days. The factor advances the funds and collects the amount directly from the customer.
- Merchant Cash Advance: A merchant cash advance provides a lump sum of cash in exchange for a portion of future credit card sales. This option can be a quick solution for businesses facing a temporary cash-flow shortage.
- Equipment Financing: if your business requires specific equipment to operate, you may be able to secure financing for that equipment, even if you have a poor credit score.
Each option has advantages and disadvantages, so it’s essential to weigh the pros and cons carefully before deciding. Seeking the advice of a financial advisor can also help you make an informed decision.
Concluding the Search for Bad Credit Business Credit Cards
In conclusion, having a bad credit score as a business owner doesn’t mean you’re out of options for obtaining a credit card. With the various alternatives available, such as secured credit cards, business credit lines, and cards with lenient approval criteria, it’s possible to find a solution that works for you and your business needs.
It’s essential to research and compare the options available, considering the terms, fees, and benefits, to make an informed decision that aligns with your goals and helps you grow your business. Whether you’re starting a new venture or looking to improve your financial situation, the right credit card can be a valuable tool that supports your success.
