It’s difficult to get a business line of credit with bad credit, but it’s not impossible. You’ll just have fewer options and higher interest rates than someone with better credit.
There are lenders that offer business credit lines to people with young businesses and bad personal credit, such as Headway Capital and Kabbage. The credit limits just tend to be low and the APRs high. To qualify for these business credit lines, you’ll need a business that’s been in operation for at least 1 year, but preferably 2 years. Neither Headway Capital nor Kabbage requires a certain credit score for approval, but they do assess financial information (such as your business’s annual revenue) in the application process.
Technically, a credit card counts as a line of credit, too. So you might want to consider the Milestone Mastercard and Indigo Mastercard, both of which consider applicants with bad credit and offer at least a $300 credit line. Both of these cards’ annual fees depend on your creditworthiness, but every month you pay your bill on time is a positive mark on your credit report, and a step in the direction of good credit.
Still, there are a few reasons why a business owner would choose a line of credit over a credit card. Spending power is one, as business lines of credit can potentially offer a higher level of funding. Business lines of credit generally have lower APRs and more flexible payment terms than credit cards, too. But there are more credit cards for bad credit than there are business lines of credit.
With bad credit, you might be tempted to apply with more than one lender. But each application will create a hard inquiry on your credit report, which lowers your score a few points. Applying for more than one line of credit can also compound a hard inquiry’s negative effect on your credit score, so apply with care. It’s a good idea to check the lender’s website or call their customer service to see about checking for pre-approval, which doesn’t require a hard inquiry.
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