Business credit cards

There are few quicker ways to finance your business than with business credit cards. Loaded with a fixed credit limit, and with flexibility around when and how much you repay, there’s no wonder why this is one of the most popular ways to fund your business.

Business credit cards can give business owners a whole host of benefits, including:

• Improving cash flow and spreading costs
• Simplifying bookkeeping by organising expenses
• Quick to arrange
• Boosting your business’s credit profile
• Interest-free credit if you repay the balance in full each month

Get your business credit card

Applications are undertaken by our business credit card partner, Capital on Tap.

Who can get business credit cards?

Before we dive into the nuts and bolts of business credit cards, you need to understand whether your business will be eligible for this form of credit. Typically lenders will consider:

• Business credit cards for Limited Companies, sole traders and partnerships
• UK-based companies
• Business credit cards for bad credit
• Business credit cards for start-ups

Am I eligible for a business credit card?

A credit card is a typical example of unsecured borrowing. So, as with a personal credit card, the lender’s decision will be based on the client’s creditworthiness. What it needs to be sure about is that the company will be capable of making the monthly payments. Therefore, the lender will place a lot of reliance on your company credit rating as well as your personal credit score.

However, business credit cards are the easiest form of finance to be approved for*, with 97% of applications being accepted. (*SME Finance Monitor, Q4 2018. Joint highest acceptance rate, along with Leasing)

How much do business credit cards cost?

Business credit cards will usually come with a mix of costs. To get the most out of the facility with the least cost, you need to understand the costs and how best to use the card. Typically costs may include:

• Interest rates: this is usually the main cost, and it is fairly standard that card providers will give a period of interest-free spending (i.e. 1 month interest free), followed by an interest cost if you do not repay the balance within that period.
• Annual fees: some providers levy a fee, some don’t.
• Other fees: such as late payment fees, cash withdrawals and balance transfers.

How to apply for business credit cards

Applying for a business credit card is typically a quick and easy job. Lenders tend to keep this process simple. Whereas other types of funding require multiple documents and take time to arrange, cards are different. An application should only take minutes, and you should receive a decision often within a few hours. Expect to apply online, and be ready to provide details for:

• Company name
• Monthly turnover
• Trading start date
• Personal details, such as date of birth and address

Keeping expenses simple

When employees incur frequent business expenses, for example through travel, hospitality, and fuel costs, business credit cards makes a lot of sense. You can easily track expenses and cross reference against receipts. An additional bonus is that business credit cards can be treated as an allowable expense for tax purposes. (However, always double check with your accountant as tax rules can frequently change.)

Managing cash flow

Business credit cards can be seen as a rudimentary form of revolving credit. The card can be used to pay suppliers and to meet other operating costs in the short term. These costs can then be spread over the following weeks and months. Above all, repayments are extremely flexible. You can decide to repay in full each month to avoid any interest costs, or you can just pay the minimum amount to help preserve your cash flow for the month.

Reaping the rewards

In personal banking, credit card companies attempt to seduce potential clients with points and rewards by linking up with schemes like Nectar and Tesco Clubcard. Exactly the same strategies are used in the business world, and there is an opportunity to cash in. Obviously, the average business is less interested in getting money off groceries. However, tie ins with hotel chains and airlines can result in some major reward benefits. There is nothing like an upgraded flight or hotel room to get the best performance from a sales manager! If it can be attained at zero cost to the business, then all the better.

Business credit cards for bad credit

You might think business credit cards are not an option for a business with a poor credit rating. However, this is not necessarily so. Lenders will often vary the credit limit and interest rate in order to accept an application that might otherwise be turned down. They may offer a relatively low credit limit at a higher interest rate. But the upside is that as long as the balance is paid off on time every time, there is no better tool for sending your credit score on an upward trajectory. You’ll just need to ensure that you have no unsettled CCJs against your business in the last 12 months.

Business credit cards for start-ups

While start-ups typically only have a few options when it comes to raising finance, business credit cards are one of the best ways to get you off the mark. As credit card lenders assess both business and personal credit scores, it may be that your personal credit score is good enough to get approved. Providers are often flexible in how they assess applications. They may be able to provide a modest credit limit. Or they could approve a limit with a higher interest rate.