Apply for an Unsecured Business Credit Card First

As a business owner or entrepreneur just starting out, getting financing may be difficult, especially when credit market conditions are tight, as they are right now. You may think that your only option is to apply for a secured business credit card account. Don't. As long as your personal and business credit histories don't have any serious negative items on them, you should try for an unsecured business credit card before applying for a secured account.

Here's how a typical secured business credit card account works: you supply the bank with collateral in the form of cash. Your credit limit is set to whatever your collateral deposit is, so if you deposit $10,000, your business credit line will be $10,000. The bank may or may not pay you interest on your deposit, and the only time you'll be able to access the collateral deposit is if and when you close the account.

An unsecured business credit card, on the other hand, works like a consumer credit card in that the bank does not require any collateral. The bank sets your credit limit based on your income, your personal and business credit history, and other factors like current credit market conditions. If you default, the bank will do its best to ruin your personal and business credit ratings, but it won't have any right to take your house, car or any other personal asset.

Initially, with an unsecured business credit card account, the assigned credit limit may be small. Don't let this discourage you. You'll need to be patient and build your company's credit rating by paying all your business-related bills on time. After about two years, you'll probably get an automatic credit line increase. If you don't, ask for one. If you don't get one, or if you aren't happy with the one your bank has given you, then apply for a new, unsecured business credit card account at another bank. If you decide to apply for 2 or 3 more cards, that's fine too, just remember to spread out your applications so that you don't appear desperate for funds; apply every 6 months or so. Spreading out applications will also keep your company's credit rating healthy.

If you apply for one or more unsecured business credit card accounts, and your applications are rejected, you can always apply for a secured card as a backup plan. Only in one or two very limited circumstances will an application for a secured business card be rejected, like if you've recently declared bankruptcy.

If you're looking to get access to $100,000 or more, then you'll need to apply for an old fashioned business loan or a business line of credit. Be prepared to offer some sort of collateral, or to accept a lien on your business and/or personal assets.

American Express offers unsecured business credit lines from $10,000 to $100,000. The business credit lines offered by American Express are very attractive because the application process is simple -- as easy as a credit card application -- and American Express is a highly reputable, global brand.

Once the credit rating of your business has been well established, obtaining financing will become much easier. Moreover, once your business has aged and is trusted by banks and other creditors, most lenders will only require a check of your business credit rating when you apply for credit, as opposed to checking both your personal and company ratings. It may take 10 years to build a superlative business credit rating, but it's worth the wait.