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Securing the funds to launch a business can be challenging. If you have bad credit or limited credit history, then the challenge is going to be even more of a hardship than usual. Even if you have credit challenges, financing remains a crucial step in building a business.
Fortunately, a secured card can allow you to rebuild your credit to establish a credit history so you can start getting funding for your business while also helping you ensure that the next line of credit that you need is easier to obtain.
Here’s everything you need to know about secured business credit cards.
What is a secured business credit card?
A secured business credit card is a credit card for businesses that the cardholder guarantees with a deposit to the credit card company. If the card’s balance isn’t paid, the deposit is applied to the balance. Think of it as a blend between a debit and a credit card that also helps you improve your overall credit.
Secured business credit cards are a good option for anyone looking to build or rebuild their credit score. Using a secured credit card is an option for individuals or businesses that cannot obtain approval for a loan or credit card.
Benefits of a secured business credit card
A secured business credit card can be beneficial in several ways:
- Using a secured loan or credit card can rebuild personal or business credit over time.
- Startups and small businesses may not have a sufficient credit history and using secured credit cards can help build a new credit history.
- Business owners with poor personal credit can rebuild their credit with secured cards or loans.
- Employees may be added to the account to make purchases for the business.
- Similar to regular business credit cards, secured cards may have rewards.
- With consistent and timely payments, your credit will slowly be rebuilt.
- The longer you have the card and use it, the better your credit will become.
Can you get a secured credit card for a business?
A secured credit card can be obtained by an individual for either themselves or their business. Once you’ve been approved for a secured credit card, you’ll need to deposit funds into your secured account which will be used as collateral for the credit.
The deposit will depend on your credit application and will vary depending on the criteria that the lender you working with has. If your credit currently is not looking very well when you apply, you can expect your deposit to reflect this accordingly, as your lender will deem your situation to be riskier to them. For example, you may be required to deposit at least $1,000 with one lender, but required to deposit $1,500 with another.
In most cases, your deposit amount will be your credit limit. Keep in mind that using less than 30% of your available credit is a good way to build your credit score. Just make sure that you're utilizing your credit, since some lenders don't like to see your utilization remaining at 0% the entire time you have the line available to you.
How to get a secured business credit card
While the steps might vary slightly from lender to lender, here are the typical steps to get a business credit card:
- Find the lender offering the card with the best terms for your business.
- Look for cards with no annual fees, rewards, relatively low APR, or 0% introductory APR.
- Make sure the card issuer reports to business credit bureaus like Experian Business, Equifax Small Business, and Dun & Bradstreet so your business credit will be built. This is especially important, as not all secured credit cards report to the major bureaus mentioned above.
- Apply online or in person. If your credit score isn't great, applying in person might be a way to help you, as you can build a relationship with your potential lender. This can sometimes be the difference between being approved or denied.
- Make the required deposit for the card’s collateral.
- Start paying your balances and building your credit by using your card and paying it in full every month.
Your credit score will gradually increase as long as you pay your balance in full every month, on time. Since on-time payments and having good credit utilization are some of the biggest factors in increasing your credit score as quickly as possible, this is extremely important to consistently do every month. After some time, you will see your credit score increase, allowing you to upgrade to an unsecured credit card.
Building your business credit with the Ramp business charge card
If you have bad credit or not enough credit history, you may have struggled to get approved for traditional credit. However, your business has other options. A secured charge card can be your solution. Ramp can help you get started with a secured business charge card for your business in minutes. Plus, there's no cost to start getting your credit fixed and no annual fees.
Here are a few additional benefits to using the Ramp card:
- Get rewards such as unlimited 1.5% cash back on all cards.
- Get approval for 10 to 20 times higher limits than traditional cards.
- Use first-class software to integrate your accounting and workflows for your convenience.
- With live support, our experts are always ready to help right away if you have any issues.
- Ramp gives you 5-in-1 software: cards, expenses, bills, accounting, and reporting in one.
- Download the Ramp Mobile App to access your cards, expenses, and transactions.
Ramp can have your business earning rewards and building credit in minutes. Contact us today to get started.
Unlike credit reporting requirements for personal credit cards, major secured business credit cards report to business credit bureaus such as Experian Business, Equifax Small Business, and Dun & Bradstreet.