You might find it challenging to secure a business loan or a business credit card if your credit score is low — but that doesn’t mean you’re out of options.
One workaround is applying for a secured business credit card. Not only will this give you access to working capital, but it will help you improve your credit score along the way. We have 3 cards in mind.
What Is a Secured Credit Card?
A secured credit card is a way for small business owners with a low credit score to gain access to a credit line. To qualify, you have to make a deposit, which dictates what your credit limit will be. The deposit is held by the credit card issuer as security and isn’t applied toward your purchases. However, if you’re unable to pay, the deposit will serve as collateral.
How a Secured Business Credit Card Works
When you apply for a secured business credit card, the issuer will likely require you to link your checking or savings account. This way, the lender can easily deduct the initial deposit they need to approve you. In some cases, you may be able to transfer the money after you’re approved.
Once issued, a secured credit card works similarly to other business credit cards. That said, secured credit cards can often, in spite of initially appealing teaser rates, have high APRs in addition to late fees. Because the secured credit card is not a prepaid card, you’ll be required to make regular payments, regardless of your collateral deposit.
You can use a secured business credit card to purchase office equipment and fund other company expenses. You may also be able to get a cash advance or balance transfer, though additional fees and higher interest rates will likely apply.
In some cases, if you pay on time consistently, the credit card company may increase your credit line above your deposit.
As with other credit cards, while there may be an annual fee, there can be rewards for frequent users. Different credit card companies offer different perks, so find one that gives rewards best suited for your needs.
Assuming you’re able to make payments on time and the issuing entity reports payment activity to the appropriate credit bureaus, you could use a secured business credit card to rebuild credit and improve your personal and business credit score.
Additionally, if you’ve been consistent and timely with your payments, you could request the lender convert your account to an unsecured account and return your deposit. Your deposit may also be returned if you decide to close the account, your account has no balance and it is in good standing.
How to Get a Secured Business Credit Card
You can apply for most secured business credit cards online or by heading to the nearest bank branch near you.
Banks have different requirements. But outside of your personal information, you likely must submit the following:
- Legal business name, address and telephone number
- Date when the business opened
- Social Security number or business tax identification number
- Type of ownership
- Number of business owners
- Gross annual revenue
Who Offers Secured Business Credit Cards?
Many banks offer secured business credit cards. Some banks will require that you have an existing account with them to qualify.
Here are 3 of the best secured credit-card business opportunities:
1. Wells Fargo Business Secured Credit Card
The Wells Fargo Business Secured Credit Card is ideal for businesses trying to rebuild or re-establish their business credit. It’s also a good option for small business owners who have little-to-no credit history.
Many features make this credit card stand out:
- For starters, there is no annual fee. Wells Fargo removes any foreign transaction fees. You can view your spending reports online and get up to 10 employee cards.
- You can get up to 1.5% cashback for every dollar spent, credited quarterly.
- Or you can earn 1 point for every dollar spent. And when you get to $1,000 in a monthly billing period, you’ll receive 1,000 bonus points. You can then redeem those points for airline tickets, hotel accommodations, car rentals and cruises.
- Users can borrow anywhere between $500 to $25,000 depending on how much you deposit.
- Interest rates are the prime rate plus 11.90% on purchases, and the prime rate plus 20.74% on cash advances. There is a grace period of 25 days on purchases.
- Wells Fargo reports your usage behavior to the Small Business Financial Exchange, which can impact your business credit rating.
Note: Wells Fargo doesn’t send reports to consumer business bureaus, so this card will not help build or rebuild your personal credit history.
You can use Wells Fargo Business Online to manage your account and make transfers. There’s an automatic payment feature that ensures you don’t miss your payment due date.
Additionally, the card itself has a chip technology that protects you against fraudulent transactions. You also can set up an alert every time someone uses the card.
2. BBVA Secured Visa Business Credit Card
The BBVA Secured Visa Business Credit Card has many benefits, but this card is only available to those living in Alabama, Florida, Arizona, Texas, New Mexico, Colorado and California.
- You can borrow as much as 90% of the money you deposited. The more you put in, the larger your credit limit would be.
- There’s no annual fee for the first year ($40 a year afterward).
- Earn 1.5 points for every dollar you spend on qualified purchases. However, BBVA gives you 2 times the points for purchases made at gas stations and restaurants. You receive 3 times the points when you make purchases from office-supply stores.
- There is a 16.24% APR (varies based on the prime rate) for purchases and balance transfers. Cash advances have an APR of 25.24% and are also subject to the prime rate.
To qualify, you’ll open a Secured Credit Card Savings account with an opening deposit of $500. You can deposit in $100 increments.
You can apply for employee cards, which come at no additional cost. Additionally, you can set spending limits for each employee. The bank records all purchases so you can review them after.
There is a penalty fee if you’re unable to pay on time. For a statement with a previous balance that’s less than $100, the fee is $19. If it’s $100 or more, it will be $39. If the penalty APR is in effect, the fee will go up to $49.
Because the credit card is a Visa, you’ll enjoy some perks:
- Visa Liability Waiver Program — Protects you from losses incurred through the misuse of your card up to $100,000
- Auto Rental Collision Damage Waiver Program — Provides collision, damage and loss insurance when you rent a car using the BBVA card
- Purchase Security and Extended Protection — Includes 90 days of insurance for most things you buy, protecting against theft, loss or fire
- Travel and Emergency Assistance — Takes care of emergency services, such as ticket replacement and medical or legal referrals
- Travel Accident Insurance — Provides insurance coverage up to $500,000 for travel accidents associated with transport purchases made with your credit card
If you enroll your BBVA Secured Visa Business Credit Card with Visa SavingsEdge, you can shop at participating merchants and save 15%.
3. Metro Credit Union Visa Secured Business Card
If you don’t have an established credit history, consider Metro Credit Union’s secured card. To qualify, you’ll first need to open a savings account with this financial institution. Funds from your account will guarantee your credit.
Your monthly payment will be 3% of your total new balance or $25.00, whichever is greater. That is in addition to outstanding unpaid fees and charges, any previous unpaid payments and amounts over your credit limit.
- Credit lines from $1,000-$25,000
- $45 annual fee
- Cash advance, balance and purchase APR of 13.90%
- Cash advance fee of $0.95
- Overlimit fee of $10
- Foreign transaction fee of 1%
- Penalty rate of 3%
- Late payment fee of 10% of principal balance when a minimum payment is 15 days overdue