Monthly Archives: March 2017

Credit Cards for Bad Credit

Credit mishaps happen for a number of reasons, and perhaps one has happened to you. The good news is that there are a few business credit cards for bad credit which will give you the chance to build your business credit so that you can qualify for credit increases or new cards without having your personal credit called into question. (Solid business credit scores can open a number of other doors as well).

To save you time, we’ve put together a list of what we think are the best business credit cards for bad credit available to business owners.

For business owners looking to build their business credit, another option is a secured business credit card. A secured card requires a security deposit that can be used to pay your debt if you default. This is a way for credit card companies to minimize the risk of a bad credit borrower. Secured cards usually allow borrowers to charge up to the amount of their security deposit (below you’ll see a case where that isn’t quite true).

 

Our Top Picks:

 

1. Wells Fargo Business Secured Credit Card

Pros:

  • Rewards: 1% cash back or 1 point for every dollar spent: your choice. $50 annual fee after the first year to enroll in rewards program
  • Low interest: Prime rate + 9.90% APR
  • 21-day grace period on purchases

Cons:

  • Annual fee: $25
  • $50 annual fee after first year to enroll in rewards program

The Wells Fargo Business Secured Credit Card allows cardholders to secure a credit line between $500 – $25,000, depending on how much you are willing to deposit. With this card, the amount of your credit line is equal to the amount you deposit. This card has a very low interest rate and the annual fee is low at $25. The only big drawback is that cardholders who wish to earn rewards points on their purchases will have to pay an annual enrollment fee of $50.

 

2. BBVA Compass Business Secured Visa Credit Card

Pros:

  • Low interest: 16.49% (or WSJ Prime + 12.99%)
  • Rewards: 1 point for every dollar you spend. Choose your own categories in which you’d like to earn double or triple points.
  • No rewards enrollment fee

Cons:

  • Annual fee: $40
  • Only 90% of your deposit will be available as a credit line

The BBVA Compass Business Secured Credit Card works similar to the Wells Fargo Secured Credit Card, however your credit line will only be equal to 90% of your deposit amount. There is a higher annual fee at $40 per year, but there is no fee to enroll in the rewards program. Additionally, the annual fee for the first year is waived. The rewards for this card include double or triple points in the category of your choice, which is a great perk for business owners who spend a large portion of their credit on one category, such as gas or groceries.

 

Keep In Mind…

Secured business credit cards or business credit cards for bad credit can be good options for business owners with poor or fair credit who need a small amount of capital now. Even with a low credit limit, these cards can help you build business credit Before you apply, here are couple things you’ll want to do:

  • Know and monitor your credit score. You can monitor your personal and business credit score with a free Nav account.
  • Make sure a business credit card is the best option for you, and look into business loans if you think a loan might be a better financing option for your business.

Business Owners Use Credit Cards

Business credit card issuers usually are most interested in the owner’s personal credit scores, income and credit qualifications. Nav’s MatchFactor can help you understand which cards you are most likely to qualify for. It uses a proprietary algorithm to help you understand your likelihood of qualifying for specific cards. It’s free with a Nav account.

 

How do business credit cards impact my personal credit scores?

Most issuers don’t report business credit card activity to the owner’s personal credit cards unless they default. (This chart shows how major credit card issuers report to personal credit.) However, since issuers check the owner’s personal credit reports when evaluating these applications, there will be an inquiry on one of the owner’s personal credit reports. Inquiries shave just a few points off credit scores, and after a year they generally don’t count.

 

Can a new startup qualify?

Generally, you can get a business credit card as soon as your business is established, as long as you meet the issuer’s credit and income requirements. Again, most issuers will look at the owner’s personal credit qualifications when evaluating an application.

 

Does my business have to have a certain amount of revenue to qualify?

Typically, no, as long as your personal income is sufficient to qualify. And if you aren’t drawing a paycheck in your business, you may use income that’s available to you to pay the debt, such as a spouse or partner’s income.

 

How can I get higher limits?

Issuers are often eager to extend higher credit limits to customers who qualify and may consider your request in as little as six months after you get the card. When you request a larger credit line the issuer may review your past activity on the account to create an internal score. For example, they may look at factors such as: How much do you charge? Do you pay on time? Do you always carry a balance or do you sometimes pay the card off? They may request updated information about your income as well. Keep in mind that issuers may review your credit and that may create a hard inquiry.

 

Should I spread expenses over several cards or use one to the max?

There can be a number of advantages to spreading your purchases over several credit cards.
The first is that you’ll keep accounts active, so your issuers are less likely to close the account. (Tuck a credit card in the back of the drawer and your issuer may decide to close the account for lack of activity.) Even a small regular purchase on a card may be enough to keep your account open.

Next, you may be able to maximize rewards. For example, let’s say you have one card that earns 3x points for purchases in a certain category, such as office supplies, so you use that card for all purchases you make at office supply stores. You have another card that earns a higher level of cash-back rewards at gas stations so you use that card when fueling up. And perhaps you have a cobranded airline card that gets you free checked bags when you fly, so you use that card for travel. By using multiple cards, you are able to make the most of your rewards.

Line of Credit Explained

n order to stay afloat, small businesses need a constant supply of cash to keep up with recurring expenses and the cost of growth opportunities.

But finding that constant supply is hard. In fact, 50% of small businesses have experienced cash flow problems, and 1 in 5 business owners experience recurring cash flow problems.

There are a number of ways to deal with the inconsistent revenue and costs associated with running your small business, and one of the best options is a business line of credit. A business line of credit is a flexible, often low-cost way to cover short-term financing needs such as purchasing inventory and making on-time payroll.

How does a business line of credit work?

A line of credit, or revolving line of credit, is a flexible loan option for businesses. Businesses are allocated a specified maximum amount of capital available to them through a lender based off certain factors such as current cash flow and business credit rating.

The business then decides when, if, and how they would like to use that capital. Interest will be charged only when you decide to pull money from the line. You will have a specified repayment period, but, like a credit card, there is no penalty for paying early (in fact, it is encouraged).

Although interest is only charged once you use the line, there may be a monthly maintenance fee for letting your line of credit sit unused. Check with your bank or lender to see if that is the case for any line of credit you are considering.