Let's face it, getting a business credit card can be difficult if you're a startup founder with bad credit. But fret not, because this doesn't mean you're entirely out of options! In this article, we'll discuss how you can still secure a business credit card even if your financial history is less than perfect. Learn about the various strategies, providers, and tips that can help you find a business credit card that suits your unique situation – without compromising your startup dream. So, buckle up and let's explore your options!
Business Credit Cards For Startups With Bad Credit Table of Contents
Understand the Credit Evaluation Process
Before diving into the available business credit card options, it's essential to understand the credit evaluation process. Lenders will assess the following factors:
- Credit Score: The most crucial factor taken into account when evaluating your creditworthiness is your personal credit score. If you have a low score, it could signal that you're a high risk for lenders.
- Business Credit History: Lenders will also look at your business's credit history, which includes payment history, outstanding debts, and credit utilization.
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Debt-to-Income Ratio:
This measures how much debt you currently have compared to your income. A high ratio is a red flag for lenders.
- Collateral: Lenders might require collateral to secure the credit card, especially if you have bad credit. Assets such as real estate, equipment, or inventory can be used as collateral.
Secured Business Credit Cards
The most common type of business credit card for startups with bad credit is a secured credit card. Here's what you need to know about secured cards:
- How They Work: To obtain a secured business credit card, you need to deposit a certain amount as collateral. This amount typically ranges from 50%-100% of the credit limit you desire.
- Benefits: Secured credit cards offer various perks like low-interest rates, rewards programs, and in some cases, no annual fees. Additionally, they allow you to build or improve your credit score if used responsibly.
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Providers:
Some popular providers of secured business credit cards include Wells Fargo, BBVA Compass, and Metro Credit Union.
Alternative Lenders
In recent years, several alternative lending companies have emerged that specifically cater to individuals with poor credit. Some examples of these lenders include Kabbage, BlueVine, and OnDeck. While they might come with higher interest rates and fees, they could be your ticket to obtaining a business credit card that fits your needs.
Improve Your Personal Credit Score
Another option is to focus on improving your personal credit score before applying for a business credit card. Consider the following:
- Make Timely Payments: Consistently paying your bills on time is the most effective way to improve your credit score.
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Reduce Debts:
Work on paying down your outstanding debts, which will lower your debt-to-income ratio – making you more appealing to lenders.
- Credit Utilization Ratio: Keep your credit card balances low relative to their limits to improve your credit utilization ratio.
Business Credit Cards For Startups With Bad Credit Example:
Meet Jane, an entrepreneur with a brilliant startup idea. Unfortunately, her personal credit score is far from perfect – which is holding her back from obtaining a business credit card. Jane decides to explore her options and stumbles upon a secured business credit card offered by a reputable bank. After depositing $2,000 as collateral, she successfully obtains a credit card with a credit limit of $2,000. Jane then uses the card responsibly, consistently paying her bills on time and maintaining a low credit utilization ratio. As a result, her credit score gradually increases, and she's able to access better financing options for her startup down the road!
There's no denying that having bad credit can make it challenging to obtain a business credit card for your startup. But remember, all hope is not lost! With options such as secured cards and alternative lenders – or by improving your personal credit score – you can still find a suitable business credit card that aligns with your entrepreneurial goals. So, keep your head up, explore your options, and make that dream a reality! If you found this guide helpful, don't hesitate to share it with fellow entrepreneurs, and be sure to check out other Flik Eco content for more valuable tips and insights!
