Business Credit Cards for Bad Credit

Well over half a million new businesses launch every year, but for those who have bad credit, the prospect of getting a business up and running may seem like little more than a dream. It’s true to say that most banks and lenders will prefer their borrowers to have a squeaky clean credit record, although there are still many options available to those of you who have bad credit.

The first step prior to applying for any type of credit is to check your credit status. This will give you the opportunity to see exactly how lenders view you. Your credit report can be ordered for free on an annual basis from any of the 3 credit reference agencies – Equifax, Experian and TransUnion. Once you have a copy of your credit report to hand you can determine which items have given you bad credit, and then you can deal with these accordingly.

Having bad credit will typically restrict what type of finance may be available to you, and this is especially true if you are looking to borrow money for business purposes. With that said, the Small Business Administration (SBA) can specifically help business borrowers with bad credit attain a loan. In fact, the SBA will generally insure a loan for up to 90% if the borrower defaults. Therefore, a lender is likely to view this as a viable risk.

Perhaps one of the most common credit accounts that business people with bad credit apply and get approved for is a credit card. Credit cards are known as an ideal way to rebuild and re-establish one’s credit, by ensuring that all monthly payments are made on time and that the outstanding balance always remains under the credit limit.

There are various lenders which offer business credit cards for bad credit, although they will typically impose certain terms that can be deemed as less favorable. For a start, credit cards generally have higher interest rates charged on an outstanding balance, and this is likely to increase if you have bad credit. The vast majority of credit cards will typically have an ongoing APR in the region of 12%-16%, but if you have bad credit you can expect this to be significantly higher than 20%.

Most credit cards will offer a grace period whereby no interest will be charged on any purchases. This is often 56 or 60 days, after which time interest will begin to accrue on your account. Unfortunately, if you are looking for business credit card with bad credit, this option will probably not be available to you, thus meaning you will be charged interest from the day you make any purchases.

Bad credit business credit cards will usually also have a number of fees that you may not find with a standard credit card. This may involve you having to pay an origination fee, an annual fee or a monthly maintenance fee. It is extremely important that you read the terms and conditions in order to understand the fee structure of any particular credit card.

You may also find that the credit limit offered on this type of card is far less than you may expect. A lender will typically view you as a high risk if you have bad credit, and therefore you are likely to be faced with numerous obstacles such as these. You should also be able to obtain a cash advance from a business credit card for bad credit, which is very much the same as taking out a cash loan. However, the interest charged on cash advances will generally be very high, so please be wary before taking this route.

Business owners who have bad credit may be better off looking into a secured credit card. This works in much the same way as a traditional credit card, although you get to choose your credit limit. Secured credit cards will require you to make a security deposit and your credit limit will typically match this amount. This works in the same way as a debit card, and therefore if you have no funds available on your card you will not be able to spend any money.

This is a fantastic way to build up your credit score, as you can only spend money that you have deposited, but as long as you make your monthly payments on time you will be creating a good payment history with that lender. This in turn will eventually be reflected in your credit report and credit score, and may help you to obtain an unsecured credit card in the future.

Most banks and credit card issuers have come to realize that not everyone is going to have perfect credit, and this is exactly why there are some very specific products in the market that are only available to people with bad credit. Owning and running a business is no different and so owning a bad credit business credit card may be easier than you believe. They are perfect for your everyday business needs, and most business credit card issuers will even consider giving a credit card to sole proprietors and entrepreneurs.

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