The reading level for this article is All Levels
Getting a line of credit for your business can be a lengthy process if you have bad credit. Business credit cards follow a slightly different set of rules than personal credit cards, and acquiring them is a multi-step process that, if done correctly, can greatly help your business while protecting your personal credit from business foibles.
The first step is to separate your business from your personal credit. This requires the registration of your business with a Federal EIN number, which creates a separate tax identity for the business. Next you have to create a separate bank account and telephone line in the business’s name, and create a file for it with the three major business reportin bureaus (Dun & Bradstreet, Experian, and Business Credit USA). Finally you will want to start engaging in lines of trade with vendors in the business’ name to start building business credit.
Now you can begin the application process. This may be tricky, since of the 500 or so business credit cards out there only about 60 are willing to approve credit cards to new businesses. The application process for one of these new credit cards takes a bit longer, approximately 20 days. (Because the credit card companies are issuing credit to a fictitious entity that is no longer directly linked to the person, they have to be much more cautious.) However, once the process is done, even with your bad credit business credit cards become available. Make purchases with the credit cards and pay them off in a timely fashion to build credit, much like you would with personal credit. Business credit is slower to build than personal credit, because it is largely dependent on the profitability of the company, not just timely payments. Once you have begun building business credit, you can also apply for business lines of credit and small loans.
If you find your business credit struggling, another fortunate option is cash advances, which allow you to borrow money even if you have a bad credit business credit card. Cash advances enable you to borrow money from merchants without documentation of your credit. Borrowing is instead based on future credit card sales, so as long as your business is meeting a certain minimum of purchases every month, this is another available option.