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How to get a business credit card with bad credit
Getting a business credit card with bad credit is difficult, but not impossible.
A business credit card can provide your company with a flexible way to borrow funds when you need them.
While the most competitive cards typically require an excellent credit score, it’s still possible to obtain a business credit card if your credit history is less than perfect.
Find the right credit card for your business
Can I get a business credit card with bad credit?
You can get a business credit card with bad credit, but you won’t qualify for the cards with the best rates and perks. Instead, you might qualify for a business credit card specifically tailored to those with poor credit. These tend to come with higher interest rates and fees, smaller credit limits and fewer benefits.
When deciding whether to offer you a credit card, lenders carry out a hard credit check to assess how well you’ve managed credit in the past. As part of their assessment, they also consider your business’s overall financial health, including revenue and existing debt, as well as your trading history.
If your business has only recently started trading, it’s unlikely to have much of a business credit history, in which case the lender will probably look at your personal credit score to see whether you’re a reliable borrower.
This is also the case if you’re operating as a sole trader, because your personal and business finances are not separate and you won’t have a company credit score.
Be aware that a lender may require you to sign a personal guarantee as a condition for obtaining a credit card. This makes you personally liable for repaying the debt if your business can’t.
Why should I get a business credit card for bad credit?
There are several reasons why you might want to consider applying for a business credit card. For example:
It can help with cash flow management, enabling you to borrow funds when you need to cover expenses, even if cash flow is tight
You can track and monitor business expenses, which can be helpful when filing your tax return
You may be able to give additional credit cards to your employees, helping you to track staff expenses with ease
If you use your card carefully — paying back the balance on time each month and never exceeding your credit limit — you can start to improve or establish your business credit score
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How to check your business credit score
Before you apply for a business credit card, it’s sensible to check your business credit score. You can do this with one of the main business credit reference agencies in the UK – Credit Passport, Experian, Equifax, Creditsafe and Dun & Bradstreet.
Visit your chosen agency’s website and enter your company name and Companies House registration number to verify your identity and access your information. Many agencies offer a free trial service, but you may have to sign up to a subscription service if you want regular access.
While personal credit scores usually range from 0 to 1,000, business credit scores typically range from 0 to 100. A score of over 80 is generally considered excellent, meaning you shouldn’t have any problems securing credit.
Those with a score of between 40 and 80 may have to supply additional information about the business, particularly if the score is at the lower end. Businesses with a score of below 40 may find it much more difficult to secure credit.
How to improve your credit score
If you check your business credit score and discover it’s on the low side, there are plenty of steps you can take to improve it.
1. Pay your bills on time
A timely payment history is one of the biggest factors in business credit scores, so set up standing orders or Direct Debits to automate bill payments and ensure you don’t miss any.
2. File accounts in full
Filing full accounts rather than abridged or micro-entity accounts should have a positive impact on your credit score. This is because it provides more information about your company’s financial health.
3. Monitor your credit record
Checking your credit report on a regular basis helps you spot errors or inaccuracies. If you find a mistake, contact the relevant credit reference agency to ask to have it corrected, so it doesn’t affect your chances of getting credit.
4. Space out credit applications
If you’re rejected for a business credit card, resist the urge to apply again straight away. Space out applications by three to six months. Too many applications in a short period of time can make you look desperate for credit.
It’s also sensible to use an eligibility checker before you apply in full. This uses a soft credit search that doesn’t impact your credit score and shows how likely you are to get a particular credit card.
5. Inform HMRC of business changes
If any of your business information changes, whether that’s a new business address or a change of structure, you must inform HMRC and Companies House immediately.
Alternatives to business credit cards
There are plenty of alternative finance options if you don’t want to use a business credit card. These include:
Business loans – A business loan lets you borrow a lump sum of cash that you repay in monthly instalments over a fixed term
Business overdrafts – If you have a business bank account, it may include a business overdraft that you can dip into whenever required. Just be aware that interest rates are generally high
Merchant cash advances – Only suitable for businesses that make a lot of card sales each month, a merchant cash advance lets you borrow a lump sum that you then repay through a percentage of your card sales
Invoice finance – You can borrow up to 95% of the value of your customers’ invoices with this option. You then repay this amount to the lender once your customers have paid up
Asset finance – If you need to cover the cost of equipment or machinery for your business, asset finance lets you pay for it in instalments. At the end of the agreement, you might own the asset outright, return it or have the option to buy it