Table of Contents
- How do I know if my business has bad credit?
- How to get a business credit card with bad credit history
- How to choose a business credit card if you have a bad credit history
- Pros and cons of business credit cards if you have a bad credit history
- Am I eligible for a business credit card with bad credit history?
- How to check your business credit report
- How to apply for a business credit card if you have a bad credit history
- Alternatives to business credit cards for bad credit history
- How to improve your business credit score
- Business credit cards for bad credit FAQs
Just because you have a poor business credit history (or perhaps no credit history at all), that doesn’t mean your business can’t benefit from all the advantages of business credit cards.
Your business has its own credit score – distinct from your personal credit score – which tells lenders how reliable your business is as a borrower.
Lenders run a credit check before issuing a business credit card, so it can be harder to get accepted if you are a new business or if you or your business have a bad credit history. However, if you’re confident that you can afford to meet the repayments, and believe that a company credit card would benefit your business, you have three main options:
- Check your business credit score and take steps to improve it
- Sign a personal guarantee, which makes you personally liable for your business’s debt
- Apply for a business credit card for businesses with bad credit history.
How do I know if my business has bad credit?
Your business credit score is a measure of the creditworthiness of your business. In other words, it indicates how reliable your business is as a borrower. Business credit scores are expressed as a number between 0 and 100.
An excellent business credit score (80+) tells lenders that your business is a safe bet and is highly likely to repay any loans or credit. Scores between 40 and 80 indicate that there is medium risk in lending to your business. Low scores (below 40) indicate your business is a risky borrower.
If your business establishes a history of being financially responsible and reliable (say, by taking out a business loan and repaying it on time, or by clearing your business credit card balance each month), your business credit score will tick up.
On the other hand, late repayments will harm your business credit score. Your business credit score can also dip temporarily when lenders carry out ‘hard’ checks on your credit file. Repeated checks over a short period could send a signal that your business is desperate for credit. Using a high proportion of the credit available to you can hurt your score as well.
You can check your business credit score with credit agencies like Experian. While it’s free to check your personal credit score, you may have to pay for a copy of your business credit report.
How to get a business credit card with bad credit history
Business credit cards for new businesses
New businesses may not have any credit history at all, which can make it slightly harder to access business credit.
If your business hasn’t yet had a chance to build up a good credit history, lenders may also consider your personal credit rating when deciding whether to approve your business for a credit card.
You may also be asked to provide a personal guarantee as part of your business credit card application. This is a promise that you, personally, will pay any debts if your business goes under.
Even if you and your business are separate legal entities, a personal guarantee will hold you liable for unpaid business debts. For lenders, this removes some of the risk from lending to a newly-established business without a strong credit history.
Business credit cards for businesses with bad credit
If your business is well established but still has a bad credit history, this could make it trickier to secure business funding on good terms.
However, you may still be able to access a business credit card specifically for businesses with bad credit.
Furthermore, there’s no set credit score that you need to be approved for a card – so while your score may be too low for one provider, it could be acceptable to another. Just know that funding is generally available on the best terms for businesses with a strong credit history.
If you find a willing business credit card provider, you may still need to sign a personal guarantee. Alternatively, you could take some time to improve your business credit score and only then consider applying for a business credit card.
How to choose a business credit card if you have a bad credit history
When considering which credit card is best for your business, you should think about the following:
- APR and interest rate: The APR represents the total yearly cost of borrowing money – including fees and interest. Consider the APR of any business credit card before you apply.
- Cardholder fees: Some business credit cards come with annual cardholder fees. If you think you’ll get a lot of use out of the card, or if the card comes with benefits or rewards, the fee could be worth it. But you could be better off shopping around for a fee-free business credit card.
- Rewards and perks: You can earn rewards for regular business spending with rewards business credit cards. These rewards could include cashback, loyalty points, or money off your statement. However, such cards could be tricker to get if your business has a weak credit history.
- Personal guarantee: A credit card provider could ask you for a personal guarantee to reduce the risk of lending money to your business. You could end up having to settle business debts with your own money, so think carefully before signing one.
- Credit limit: If your business or personal credit history isn’t great, you may only be able to access a business credit card with a low credit limit. If you use your card responsibly, you may be offered a higher credit limit in the long run.
- Employee spending controls: If you’re looking for expense cards for your employees, some providers give you, as the primary cardholder, controls over how much your employees spend.
- Eligibility checkers: Repeated ‘hard’ checks are likely to temporarily harm your business credit score. If you’re worried about how applying for a business credit card could affect your credit file, use the free eligibility checkers on providers’ websites. These generally involve ‘soft’ checks which won’t harm your business credit score.
Pros and cons of business credit cards if you have a bad credit history
Advantages of business credit cards for bad credit
- Separate your finances: In the same way that opening a business bank account can keep your personal and business savings separate, a business credit card could help you ringfence your business expenditure. This should make it easier to stay on top of business outgoings, and it could save you a headache when it comes to filing your annual tax return.
- Control over spending: Whether the business credit card is for you or for your employees, you can benefit from spending insights and controls.
- Help with cash flow: Even if you intend to pay off your card in full each month, business credit cards tend to come with an interest-free payment period of up to 56 days. This can ease the pressure on your cash flow.
- Build your credit score: In time, as you use your business credit card responsibly, your business credit score will improve. This may make it easier to access small business finance in the future.
Disadvantages of business credit cards for bad credit
- Cost of repayments: If you don’t clear your business credit card balance in full each month, you’ll have to pay interest on what you owe. This is generally an expensive way to borrow. If you build up debt on a credit card, it can be hard to pay it all off.
- Fees and charges: Business credit cards tend to charge for ATM withdrawals, and many come with fees for using the card abroad. Keep an eye on the small print to make sure you won’t be charged extra for features your business needs.
- Personal guarantee: If you sign a personal guarantee as part of your business credit card application, you could find yourself personally liable for business debts.
- Credit score considerations: If your business struggles to repay the money it has borrowed, your business credit score will suffer – and your personal credit score could be affected as well.
- Payment protections: While business credit cards generally come with some safeguards against fraud and misuse, they don’t benefit from the same robust consumer protections as personal credit cards.
Am I eligible for a business credit card with bad credit history?
A poor credit history will probably make it harder to access business finance on the best terms. This is true for business loans as well as business credit cards.
Generally, the business credit cards with the best rewards, lowest interest rates and highest credit limits will be reserved for those with a strong credit history.
However, even with a poor credit score, your business may be able to access business credit cards – including cards specifically designed for businesses with bad credit. Your personal credit score could also be checked as part of your application, and you might be asked to provide a personal guarantee to make your business less risky in the eyes of lenders.
When shopping around for a business credit card, keep an eye out for the free eligibility checkers offered by many providers. These could give you an indication of whether your business is likely to be approved for a credit card without having to carry out a ‘hard’ credit check.
Regardless of your credit history, you’ll also need to meet the standard requirements before taking out a business credit card:
- You’ll need to be 18 or older and a UK resident.
- You must commit to using the credit card for business purposes only.
- You must have authority to borrow on behalf of your business.
- Your personal and business credit scores must be good enough to pass a credit check.
- You may need a business bank account, if applicable to the provider.
- You may need to provide a personal guarantee.
How to check your business credit report
You can check your personal credit score for free with the major credit agencies. However, you might have to pay or subscribe to see a copy of your business credit file.
On the Experian website, this usually costs £24 per month + VAT, although new customers may be able to access a free trial.
How to apply for a business credit card if you have a bad credit history
You can check your eligibility for a business credit card using the free online eligibility checkers offered by many credit card providers.
When you’ve found a card which looks right for your business, you can apply directly to the provider. They’ll probably ask for some personal and financial information, as well as info about your business. You might need to provide a personal guarantee as part of your application.
Your prospective lender will then carry out a ‘hard’ credit check on your business credit file. They could check your personal credit history as well.
‘Hard’ checks show up on your credit file and can temporarily harm your credit score. Avoid making lots of applications for credit in quick succession, as this could hurt your credit score and signal to lenders that your business is desperate or in financial difficulty.
Alternatives to business credit cards for bad credit history
If you need to cover a large expense or if your business needs capital to grow, you have other options besides a business credit card:
Business loans
Business loans can provide access to growth capital on a longer term basis than a business credit card. Although your business will have to pay back the entire loan with interest, you may still be able to access capital on better terms than with a business credit card. Your business credit score will also affect your chances of accessing a business loan.
Start up business loans
These loans are designed for businesses in their early stages. This means lenders are less likely to be deterred if your business doesn’t have much credit or trading history.
Business bank accounts
The overdraft facilities offered by many business bank accounts can provide access to short-term capital. Just know that not all business bank accounts offer overdrafts, and those that do tend to charge an arrangement fee for this service.
Invoice financing
If you sell to other businesses, invoice financing could help your business unlock some of the money tied up in unpaid invoices. You might be able to borrow on the strength of your unpaid invoices or sell your unpaid invoices at a discount. This can offer access to short-term capital, although you’ll end up with less money in the long run than if you simply wait for your customers to pay.
How to improve your business credit score
You can improve your business credit score by being a responsible borrower. Borrowing money and repaying it on time – whether through a business credit card or with a business loan – will gradually improve your credit score.
To help your business credit score, you should also:
- Borrow only as much as you need.
- Use eligibility checkers to reduce the risk of unsuccessful applications.
- Avoid applying for multiple lines of credit in quick succession.
- Keep an eye on your business credit file to check for mistakes (and correct them as soon as possible).
- File your company accounts in full and on time every year.
If your business has multiple debts, it could help to consolidate them. This may make it easier to pay back what you owe which, in turn, could improve your business credit score.
Business credit cards for bad credit FAQs
Credit card providers will sometimes consider your personal credit score as well as your business credit score when deciding whether to lend to your business.
Your personal credit score is more likely to come into the equation if your business hasn’t been trading for long or doesn’t have a strong credit history. If you’re a sole trader, your personal credit score is more likely to be considered when you apply for business credit.
Your business credit score is distinct from your personal credit score. However, your personal credit score could be a factor for credit card providers when deciding whether to lend to your business.
If you fail to make repayments on your business credit card or use the card irresponsibly, your personal credit score could be affected.
Certain types of business credit cards are more likely to require a strong credit score. These include business charge cards and many business credit cards with rewards.
If your business credit score isn’t great, you might want to consider a more basic business credit card or a specialist business credit card for bad credit.
Having a bad business credit score will generally make it harder to access finance on good terms. However, you can still get a business credit card with bad credit.
Take advantage of the free eligibility checkers offered by card providers to find the business credit cards you’re most likely to be eligible for. Expect to be asked for a personal guarantee as part of your application, and don’t bank on being offered a huge credit limit if you’re accepted.
A business might have no credit history if it hasn’t been trading for a long time. If a business has no credit history, lenders won’t know whether the business is a reliable borrower or not. In the absence of a business credit history, lenders may place more emphasis on your personal credit history.
If a business has a bad credit history, this means the business may have struggled to repay its debts in the past. A bad credit score signals to lenders that the business isn’t a reliable borrower and poses a higher risk. This will make it harder for the business to access credit on good terms.
Credit checks are often talked about as being either ‘soft’ or ‘hard’.
‘Hard’ credit checks are carried out by lenders after you’ve applied for credit. These credit checks appear on your credit file and may harm your credit score – particularly if lots of ‘hard’ checks are carried out in quick succession.
‘Soft’ credit checks involve a preliminary review of your credit file to get a sense of whether you or your business would be eligible for a financial product. When you use a credit card eligibility checker, this is likely to involve a ‘soft’ credit check.
Unlike ‘hard’ checks, ‘soft’ credit checks don’t show up on your credit report and won’t affect your credit score.
Your business has its own business credit score, which tells lenders how reliable your business is as a borrower.
The credit score associated with your business is distinct from your personal credit score, which is an indication of your creditworthiness as an individual.
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