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If you have bad credit but want to start a business, you can find financing options out there for you even though the list of your choices may seem limited.
While there are very few business credit cards for bad credit, you can get a personal credit card that lets you pay for your company’s expenses and rebuild your FICO score. Once you’ve boosted your credit score a little bit, you can graduate from business credit cards for bad credit to ones that are rewarding and affordable for your business. And in the meantime, you can take advantage of the flexibility afforded by a prepaid business debit credit card that doesn’t require a credit check to qualify for.
We’ll help you find the right bad credit card for you, explain how to get a business card for bad credit with your personal history, and lay out exactly how secured credit cards work.
The only business credit card for bad credit on our list that’s specifically for businesses, the BBVA Secured Business Credit Card has a $40 annual fee (waived the first year), free employee cards, and a rewards rate of 1 CompassPoint per $1 spent on qualifying purchases with bonus rewards on the category of your choice.
Your credit line will be 90% of your security deposit, and the minimum deposit is $500. This is typical of a secured business credit card.
With a secured business credit card, you put down a cash deposit when you take out the card. You’ll usually be allowed to borrow up to a certain percentage of the deposit amount on the card (in the case of the BBVA Secured Business Credit Card, 90%). You can use a secured business credit card just as you would any other card—using it to make purchases and paying the issuer back each month. The act of doing this will help build your credit score. Plus, a secured credit card is considered a business credit card for bad credit because borrowers with lower credit scores can qualify. That’s because if you continuously aren’t able to make your credit card payments, the issuer has the security of the deposit you put down. You’ll never borrow more than the deposit, and the issuer can seize the deposit to recoup their losses.
Back to the BBVA Secured:
The BBVA Secured is the only card on our list with an annual fee, but it can be worth it if you need employee cards.
The others on this list are personal credit cards, so they don’t offer accounting support, integrations with bookkeeping software, and other business-specific perks. If you think you’ll graduate from a secured card within a year or if you value the convenience of a business credit card, BBVA is the right bad credit business credit card for you.
The Discover It® Secured Card isn’t technically a business credit card for bad credit, but this personal credit card still deserves to be on our list.
The Discover It® Secured Card – No Annual Fee is a twofer: In addition to no annual fee, it offers 2% cash back on up to $1,000 spent per quarter on gas and restaurants and an unlimited 1% cash back elsewhere.
As a nice anniversary gift, Discover will also match all the cash back you’ve earned in your first year.
Finally, there are no foreign transactions or over-the-limit fees, and no late fee for your first late payment.
It’s also friendly to cardholders looking to move up the credit ladder and graduate to better products in the future. Discover automatically reviews your account every seven months for potentially upgrading you to an unsecured account—taking a lot of the work out of monitoring your accounts for milestones where you’re eligible for better options.
What’s the downside to this credit card for bad credit?
You have to make a security deposit equal to your credit limit (minimum $200), which can be hard if you don’t have cash on hand. And unlike the BBVA card, it’s not technically one of the business credit cards for bad credit—so you can’t get employee cards or other business-friendly perks.
However, between the regular account reviews, no annual fee, and rewards, the Discover It Secured is one of the best bad credit options out there.
The Capital One Secured MasterCard makes our list of business credit cards for bad credit because it’s a good option if you don’t have the money to make a large security deposit upfront.
With most secured cards, your security deposit has to match your credit limit. With Capital One though, a deposit of $49, $99, or $200 (depending on your credit history) gets you a credit limit of $200.
Plus, the card has no annual fee, which is relatively rare among secured credit cards. If you’re looking to rebuild your credit but don’t have the capital for a large security deposit, the Capital One card might be your best option.
Not sure which of the best business credit cards for bad credit on this list would be a good fit for you? Check out this Q&A breakdown to help you decide.
If you’re working with bad or no credit, but you still want the convenience of a business credit card, look to the Bento for Business Prepaid MasterCard. In fact, credit checks are not required to qualify for Bento, so you don’t need to worry about your credit score at all.
With features like prefunding employee cards, an easy-to-use app and dashboard, and automatic integration into your bookkeeping software, Bento makes it easy to control and track employee spending across as many cards as your business needs. To create your credit line, you’ll hook up your Bento card to your business bank account to easily transfer funds directly onto the card.
On the surface, secured credit cards and prepaid business cards look pretty similar. But here’s where they differ: rather than paying a monthly bill to a credit card company as you would with a line of credit, when you use a prepaid card your expenses are deducted directly from your bank account. You won’t carry a balance from month to month, which means the Bento can’t help you build your credit.
So, Bento is best used in tandem with a secured credit card. That way, you can build your credit score and take advantage of Bento’s features.
Many small businesses, especially newly founded ones, can’t provide the three to five years’ worth of sales and revenue that some lenders require for traditional business loans.
Luckily, owners of those businesses can apply for credit cards and be evaluated based on their personal credit score—that is, they can borrow based on their own track record of regular payments and low debt-to-credit ratio.
However, when you sign up for one of these cards, you’re personally guaranteeing it: You used your personal credit score to get the card, so any unpaid debts are yours to cover, not the company’s.
If your business goes bankrupt or you miss payments on the card, your personal credit score will suffer.
In spite of the risk, however, a business credit card can provide flexible and affordable small business financing.
If you have good credit, you can apply for a business credit card based on your high FICO score. However, you do expose your personal finances to the risks of owning a business. If you’re unwilling to take that risk, or if you personally have less-than-stellar credit, a business credit card for bad credit might be the only option for you.
Keep in mind that if you choose a secured business credit card like the BBVA Compass, your usage might not be reported to consumer credit bureaus.
This can be a benefit if you’re worried about missing payments on the card, but if you think you can pay your debts on time and keep your debt utilization low, you’re better off with a personal secured card that builds your own credit score while also financing your business.
We mentioned the mechanics of secured credit cards above, but let’s walk through these types of credit cards in more detail.
Secured credit cards are meant for people (or businesses) with poor credit who want to build a solid history of on-time payments.
When you’re approved for a secured credit card, you have to put down a security deposit that you’ll borrow against.
Typically, your deposit is equal to your credit limit—for example, if your credit limit is $500, the bank requires a $500 security deposit.
From there, you can use your secured card like a regular credit card. You make purchases with “borrowed” money from the bank, and you (ideally) avoid interest charges by paying your balance in full every month.
Your security deposit can’t be used to pay off your credit card balance—instead, it’s held by the bank as collateral in case you go into default.
It may seem strange to make a security deposit equal to your loan amount, but it’s a way to show banks that you’re a responsible borrower. If you make on-time payments and use the card wisely, your credit score will improve, and you’ll get your security deposit back when you “graduate” to an unsecured card.
These business credit cards for bad credit are great options for new business owners who don’t have stellar credit but need capital (as all businesses do) to grow their businesses.
However, just like any other credit product offered to bad credit borrowers, these bad credit business credit cards come with steeper interest rates, penalty fees when you can’t pay, and almost always have annual fees.
Eventually, you’ll want to graduate to lower-APR, no annual fee, and more rewarding business credit cards.
You can do this by following best borrowing practices with business credit cards for bad credit.
Remember to always pay your statement in time each month—or early, if possible. If you have a hard time remembering to pay your balances, set a reminder in your online banking app or on your calendar so you don’t forget.
After that, it’s important to keep your credit utilization ratio at or below 30%. This means that, at any given time, you’re never borrowing more than 30% of your total available credit. If you had a credit limit of $1,000, you’d want to never have more than $300 of balance on your card. Credit bureaus associated a high credit utilization ratio with borrowers who default on payments, so your credit score will thank you if you pay attention to your debt-to-credit ratio.
After time and with good borrowing behavior, your credit score will increase so that you can move on to better credit products for your business.
The above options are just a few different types of business credit cards for bad credit and other similar products. If you’re ready to start building your credit score, use these options for stepping stones to better options!
Apply for these credit cards