Small Business Credit

Lines of credit and loans for your small business

Small businesses need capital in order to be able to start up, but unfortunately, if a small business owner doesn't have a credit score in the business' name, it can be hard to get loans or grants to help the business start and thrive. In these cases, small business credit may be the best financial option available. In order to get the best interest rates, small business owners must build up their business credit score (which works differently than a personal credit score).

There are many types of small business credit options available from local banks, credit unions and other lenders. Learning about these options may help small business owners choose the best way to finance small business loans or other credit avenues to help their business thrive.

Types of Small Business Credit

To avoid refinancing down the road, small businesses may want to consider getting a small business credit card. Types of credit cards include:

  • Secured credit cards allow your business to achieve credit without any credit history. If you do go this route, do your research—it can be risky and require quite a lot of money upfront to be placed as collateral.
  • Small business credit cards are tailored especially for small businesses. These can help you build credit history while keeping the interest rates and fees low so that you can invest in your business and not your payments. However, again, this option can be risky and hidden fees, higher interest rates over time, and other hidden loopholes can bring unpleasant surprises later.
  • A small business line of credit may be the best option for a startup business, as a line of credit provides continuous financing. However, be prepared to be denied if your business has bad credit or no credit, as lines of credit are the hardest financial option to apply for and require excellent credit.
  • Bad credit small business loans are last-ditch options for those with bad credit who want to start a business. They often carry extremely high interest rates and may require money or collateral upfront. However, they are good for rebuilding credit, especially if the small business owner can prove that he or she is financially responsible. Refinancing can then be done to negotiate a lower interest rate or less risk to the business.

Before applying for any credit card or credit option, always read the fine print and run it by someone with financial expertise first. Speaking to your local SBA may be a good place to learn about small business credit options.

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