Depending upon your business needs, and your credit worthiness, a business loan or line of credit may not be an option for your business. A secured business credit card, on the other hand, is fairly easy to qualify for and may have rewards such as cash back. It will also allow your business to build up its credit score which should help secure additional financing in the future. When you’re starting a small business, it’s a good idea to look into this option before you even open your doors so that you have access to the funding you’ll need when you need it.

What is a secured business credit card?

A secured business credit card starts with a deposit from you. Depending upon the amount you give the bank, your credit card will allow access to 90%-100% of that money. You may be wondering why you would want to do business that way if you already have the cash on hand. In fact, if you make your payments on time, the bank will increase your credit limit beyond the deposit amount and you’ll also be building your business’s credit history, allowing access to other financing in the future. If you don’t pay the balance on time/at all, the bank can use the deposit you offered as collateral, so there is no risk for them.

What are the benefits of using this kind of credit?

The benefits here are in the credit you’re building for your company and the security that it offers you. By having a separate business account, you’re safe from personal liability if your business is ever sued since you did not comingle funds. These accounts often also offer rewards similar to other kinds of credit cards which can help earn more money for your business if you’re paying the bills on time. The best part is the relationship you’ll create with the lender, who may be willing to extend other financing to you in the future.

Are there any risks involved?

Much like building your credit is a great benefit, if you feel unsure about your ability to pay the balance, you could hurt your business by opening an account. You’ll want to be 100% sure that you can manage the debt before you open any kind of credit card. Additionally, these cards do have interest associated with them, so unless you can pay most of the balance each month, it may not make good financial sense to open an account.