While fairly common across the pond, lenders don’t usually offer secured credit cards to businesses in the UK.
So, what are your options if your business’s credit score is less than ideal?
What are secured business credit cards anyway?
Secured business credit cards work just like regular credit cards, but require you to put down an initial cash deposit, which will then become your credit limit.
As this takes away pretty much all the risk for lenders, you’re often able to get one even if your business is very new or your credit score isn’t great.
At the same time, using a secured credit card helps you grow your business credit score and lets you earn rewards on your spending.
Alternatives to secured business credit cards
But let’s not dwell too much on what we can’t get. Even though a secured credit card is not an option, there are other types of business finance that could be available to you.
Unsecured business credit cards
This will sound very obvious, but are you sure you can’t get a standard unsecured business credit card? Some lenders may have looser criteria than others and may be willing to accept your application.
Just make sure you check your eligibility before proceeding with a complete application, so that there’s no impact on your credit score. Initially, you might have to settle for a low credit limit and a high interest rate, but if you pay off your bill in full every month, your business credit score will gradually improve and you will become eligible for a more competitive deal.
A business line of credit is the flexible version of a business loan. You can borrow what you need and when you need it up to your credit limit, and you’ll only pay interest on what you actually borrow.
Some lenders offer secured lines of credit, which may be a good solution if you don’t qualify for the unsecured version of it. Unfortunately, unlike with a credit card, you won’t usually benefit from any interest-free days.
Merchant cash advance could be a good idea for borrowing one-off. It’s quite similar to a business loan, so you get a lump sum from the lender at the very beginning, but instead of paying it back in fixed monthly instalments, you pay it back as a percentage of your card sales. This way, how much you have to pay back depends on how much you actually earn.
You’re charged a flat fee and no interest, so it doesn’t really matter how long it takes you to pay back the loan. As repayments are taken directly from your card terminal (before they even reach your account), your business credit score is less of an issue. Borrowing this way will definitely be more expensive than using a credit card, so you have to weigh the pros and cons carefully.
Invoice financing allows you to borrow money using your unpaid invoices as collateral. In practice, the lender advances the money your clients owe you in exchange for a fee, which gives you some financial breathing space and can help with cash flow issues.
Again, as it’s a secured form of finance, your credit score won’t matter as much. However, it is quite expensive, so you should see if you can qualify for a cheaper solution first.
If you’re the owner of a small business, you may be able to get a business credit card even if your business credit score isn’t great (for example, because you’ve only been in business for a few months) by signing a personal guarantee.
With a personal guarantee, you agree to personally take responsibility for any debt accumulated on your business credit card. It isn’t an ideal solution, because if something goes wrong with your business, it will impact your personal finances and your personal credit score.
On the other hand, it may be cheaper than other forms of business finance and can allow you to build up your business credit score. You can always switch to a business credit card with no personal guarantee later on.
It depends on a number of factors, including whether you signed a personal guarantee. If you own a small business, the answer is usually yes, whereas if you’re an employee of a fairly big business and you’ve been given a corporate credit card, the impact will usually be minimal.
If your business is quite new, it is likely that the lender will look at your personal credit report to decide whether you qualify for one of their credit cards. You may then be asked to sign a personal guarantee.
Securing your loan or your credit card means that if you don’t pay back your debt, your lender is allowed to take whatever collateral you’ve put down (property, cash, invoices, etc.) as compensation. Secured finance is less risky for the lender, so it can be available to applicants with bad credit, but you need to think carefully before proceeding because if you don’t pay back your loan, your collateral might be repossessed.
Finder survey: What aspects of a business credit card matter most to Brits when choosing one?
Response
I would not choose a business credit card
33.33%
Don't know
20.74%
The APR
18.12%
Whether there's a monthly/annual fee
17.05%
Provider reputation
13.57%
Customer service
12.5%
Whether there are perks/points or cashback
12.31%
Whether it offers extra tools and support for businesses
12.02%
Additional employee cards available
7.75%
Other
0.1%
Source: Finder survey by Censuswide of Brits, December 2023
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Valentina Cipriani was a writer at Finder UK. She wrote news, features and guides about banking and credit cards, helping people to improve their financial lives. She holds an MA in International Journalism. See full bio
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