Credit Cards And Credit Lines For Businesses

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It is possible to get low interest business credit for $50,000 to $250,000! These are perfect for startups, companies in high-risk industries, or those who cannot prove cash flow (required for cash advances) or collateral (required for asset-based lending) as a condition for approval. There are several benefits of this product. Unlike loans, you only pay on the portion you have used, not the entire amount of credit extended. You can get credit cards that only report to business credit reporting, not consumer, agencies. This is a major benefit because 30% of the FICO consumer credit score is based upon utilization.

You can use business credit cards as much as you want with no adverse effect on your consumer credit score. The 0% rate on business credit card is a huge benefit for startup businesses or those with limited revenue, because the payments are much lower. The 0% rate is only offered for a limited time, typically 6 to 18 months. However, there are ways to get around this: call the creditor and ask for an extension of the 0% rate; or open more card accounts after the 0% rate expires and transfer the outstanding balances onto the new cards at 0%. Keep in mind that these are business credit cards, NOT credit lines.
A true business credit line will issue you a debit card. This acts much like a credit card, but most credit lines do not offer a 0% rate. However, they DO allow for cash out at the same rate of the line. Conversely, credit cards will offer cash advances but charge a large cash advance fee, typically in excess of 20%.

Business Credit Cards

To get 0% business credit cards, a lending source, which is separate from a bank or card issuer, assists you with getting credit cards. Utilizing a lending source allows you to get more than you could get on your own because they are experts in getting credit cards and work on your behalf to get as much credit as possible for you. Banks or credit issuers will give you ONE card (not multiple) for an amount close to your highest revolving limit. Applying at multiple banks or credit issuers results in denials because they will not issue approval to individuals who submit new credit applications en masse to many different lenders. In addition, banks not only require good personal, business, and bank credit, but also make applicants provide proof of revenue and profits by submitting tax returns and P/L statements. This process may result in perhaps obtaining one card, but no loan and no credit line.
On the other hand, your lending source, or the company you hire to secure credit for you, applies all at once to get you up to 5 of the best cards with the highest credit limit possible. On your own, you may be able to get two cards at maximum, so going this route can result in getting 5 times the credit. Whereas banks usually do not report to business credit reporting agencies, these companies DO.

Types Of Cards

There are two types of cards: personal, which report to consumer credit reporting agencies; and business, which do not. Either way, the amount you can get depends on your personal credit quality. Because it is unsecured, meaning that no security, assets, or collateral will be held by the issuer, outstanding personal credit is a must. You need a score > 650 for personal cards and > 700 for business cards, and you must meet the following criteria on your credit report:

  • no bankruptcies, unpaid judgments, or tax liens
  • no credit counseling
  • no late payments in at least 12 months
  • no active outstanding unpaid collections
  • at least one bank card with a 3-year history or $3,000 limit, plus car loan or mortgage (if no car loan or mortgage, TWO bank cards)
  • balances < 30% of the credit limit (lower percentages equate to higher approval)
  • low utilization of credit
  • <= 5 inquiries with each credit bureau in the last six months

Credit approval is based upon the credit limits of your existing accounts. You will typically receive an amount slightly higher than your current limits and can be > $50,000. Having partners increases the potential for higher approved amounts.

There are fees associated with every type of loan program. Expect to be charged 9% to 12% “success-based” fees. In most instances, the fees are rolled in; an invoice will arrive for each card after you receive it. However, some sources will charge the fees up front; these may not get you the best credit limits. Even if you have questionable credit, some creditors will allow you to enter the program if you pay up front, in the guise of assisting you with repairing your credit in order to qualify at some point. However, according to the Credit Repair Organizations Act, it is illegal to charge up front when providing credit repair, and you have certain rights with respect to credit repair.

It is difficult and time-consuming to repair bad credit. Thankfully, other programs are available to obtain funding even if your credit is less than stellar. You have the option to use a credit partner, who may be a family member or friend who allows your business to use their credit to get money. This person may or may not want compensation in return. Using a partner can allow you to get more funding; however, this requires a personal guarantee from you, and as such, will not be considered a true business credit account. Keep in mind you and/or your partner will be personally liable in the event of default.

Best Sources

Determine the best sources, i.e., the ones which will get you the most funding in the least amount of time and are legitimate. Once you apply, the source will contact you within 24 hours. Be sure to specify what you need and if you have a credit partner. Make sure you have access to all three credit reporting agencies – Equifax, Experian, and TransUnion – as this gives you the most potential for approval. After reviewing your credit, the best sources will quickly contact you with an estimate of what you can expect to be approved for. If you agree to the terms, the source will begin the application process for you and will receive approvals and/or negotiate denials on your behalf. You will receive cards one to two weeks from initial approvals. If negotiations are necessary, the process will take extra days or weeks. If approved quickly, it will take less than three weeks from application to receiving credit cards.

Once you have received the cards, a good source will also assist you with contacting the issuers to increase your credit limits. They will use the other issuers as competition, a strategy to get an issuer to make a better offer than its perceived competition. Contact the source after six months to repeat the process and get even more credit limit increases. Keep in mind, however, that this results in inquiries on your credit, which can potentially adversely affect your score and consequently harm your ability to get more credit.