Struggling with a low credit score and thinking it's impossible to get approved for a business credit card? Think again! In this article, we'll explore the world of business credit cards specifically designed for those with low credit scores. We'll dive into the different options available, the benefits they offer and how to choose the best one for your needs - all while keeping things simple and relatable for the average reader.
Business Credit Cards For Low Credit Scores Table of Contents
Why do low credit scores matter?
A low credit score can make it difficult to secure financing for your business, as lenders view you as a higher risk of defaulting on payments. This is where business credit cards for low credit scores come into play. These cards can help you build up your credit score while providing essential financial resources for your business.
Secured vs. Unsecured Business Credit Cards
When it comes to business credit cards for low credit scores, you'll typically find two main types: secured and unsecured.
- Secured credit cards: These cards require a security deposit, which acts as collateral in case of default. The credit limit is generally equal to the deposit amount. As you use the card and make payments on time, your credit score will improve, and you may eventually qualify for an unsecured card.
- Unsecured credit cards: Unsecured cards don't require a security deposit, but they may have higher interest rates and less favorable terms compared to secured cards. These cards are suitable for those who can't afford a security deposit or are looking for more flexibility.
Benefits of Business Credit Cards for Low Credit Scores
Business credit cards for low credit scores are not only useful for building credit but also offer several other benefits:
- Separate business and personal expenses: Using a business credit card simplifies bookkeeping and makes it easier to track business-related expenses, ensuring accurate financial records for tax purposes.
- Build business credit: By consistently paying off your balance on time, you'll gradually build a positive credit history for your business, improving the likelihood of securing future financing for your needs.
- Access to rewards: Some business credit cards offer rewards, such as cash back, points or miles, which you can use to offset additional business expenses.
Factors to Consider When Choosing a Business Credit Card for Low Credit Scores
When comparing different business credit cards for low credit scores, keep the following factors in mind:
- Annual fee: Some cards require an annual fee, which can add up over time. Make sure to weigh the benefits of the card against this fee to determine if it's worth it.
- Interest rate: Business credit cards for low credit scores typically have higher interest rates than those for higher credit scores. Look for the lowest possible APR (Annual Percentage Rate) while being aware of any promotional rates that may expire.
- Rewards & benefits: Compare cards based on the types of rewards and benefits offered (cash back, points, miles, etc.), and ensure they align with your business needs.
- Security deposit (for secured cards): Assess the amount of security deposit required, and whether it's an amount you can comfortably afford.
Business Credit Cards For Low Credit Scores Example:
Imagine John owns a small online store called "John's Tech Shop" and has a credit score of 580. He decides to apply for a secured business credit card to help cover business expenses and build his credit score.
John chooses a card with a $500 deposit requirement, a reasonable APR, and no annual fee. He uses his business credit card solely for business-related expenses, such as purchasing inventory and paying for web hosting.
By using the card responsibly, making on-time payments, and keeping his credit utilization low, John's credit score gradually improves. Additionally, he earns rewards points, which he uses to offset some of his business expenses.
Business credit cards for low credit scores can be your ticket to financial freedom – helping you build up your credit while managing your business expenses more effectively. Do thorough research, compare different options, and choose a card that aligns with your needs and future goals. And when you're ready to make the most out of your business credit opportunities, remember that Flik Eco is here to support you with expert information on a variety of personal finance topics. Be sure to share this article with fellow entrepreneurs and explore our other guides to achieve financial success!
