Business Credit Cards: The Safety Net for Cash Flow

21 Jul 2022

Cash is king for businesses, but it doesn't always flow steadily – especially in times of economic uncertainty. A business credit card can be a short-term safety net when cash is tight, or your business needs to cover an unexpected cost. Here's what to expect. 

Business Credit Cards: The Safety Net for Cash Flow

How do business credit cards work?

business credit card works in the same way as a personal one: you use it to purchase goods or services and pay it off later. Some cards come with the bonus of rewards, such as air miles, discounts, cashback or insurance. 

Credit cards help businesses – large and small – to manage their cash flow. Some business owners use credit cards to track company expenses more efficiently. If you're considering applying for a business credit card, you should be confident that your company will be able to repay what it spends according to the terms of the credit agreement. 

What can I use a business credit card for?

You should use your business credit card for company purposes only. What you buy will depend on your situation, but here are a few things you could use the funds for:

  • Travel expenses

  • Office expenses

  • Employee expenses

  • Purchasing equipment

  • Paying invoices

  • Entertaining clients

How do business credit cards work?

Your business credit card lets you borrow a set amount from the card provider. Business credit cards usually have higher credit limits than personal ones, and your company's limit will depend (to a large extent) on its income and credit rating. 

If you repay the money before a specific date, you won't have to pay interest. Failing this, you'll have to pay interest on the funds borrowed. Like your credit limit, your business credit card's interest rate will depend on your company's income and credit score.

If you've got a good credit score, you can expect your Annual Percentage Rate (APR) to be lower. The APR is how much it costs you each year to borrow money, and it reflects any fees you have to pay and the interest rate. Remember that business credit cards usually have higher APRs than their counterparts. Prepare for additional fees like late payment penalties and – potentially – an annual membership fee. 

Here are a few things you can benefit from when you take out a business credit card:

  1. Cash flow safety net

A credit card can boost your working capital when you need it most. It can also help you when budgeting because you'll have a set number of days to pay it off before you start paying interest on what you've spent.

2. Separate business and personal finances

Separating your personal and business finances can be a more effective way of handling your finances, and a business credit card can help you do this.    

3. Business expense management

Tracking employee expenses is often more accessible with a business credit card. Instead of receiving personal expense claims, you can issue additional cards to relevant staff members. 

4. Improved credit rating

Providing you pay off the funds in full and on time, having a business credit card can boost your business' credit rating. This could make it easier for your business to get approved for different types of funding in the future. 

Business credit card rewards

Some business credit cards offer the following rewards:

  • Cashback

     – some credit cards pay a percentage of what you spend, e.g. up to 5% in restaurants or cashback on tax return payments.

  • Discounts

     – you might be eligible for discounts in specific shops.

  • Reward points – these can be exchanged for cash, vouchers or air miles.

  • Insurance

     – some cards include complimentary travel insurance. 

  • Fee-free transactions abroad

     – fee-free withdrawals and spending can be helpful if you or your team travel internationally for work regularly. 

  • 0% interest on purchases

     – depending on the card you opt for, you might benefit from zero interest on purchases for a set period (typically several months). 

Business credit card alternatives

While business credit cards can be a significant cash flow safety net for SMEs, you might find yourself in a situation where another type of business finance is more appropriate. 

For instance, while you can use your business credit card to buy equipment for your business, you might find that your limit isn't high enough to cover the total cost. Instead, equipment leasing or another type of asset finance might be more suitable for your needs. 

Instead of buying an item, equipment leasing lets you rent the equipment you need to run your business for a fee. It allows you to access items that could, if purchased outright, put a strain on your cash flow. You can lease various items, from coffee machines and fridges to vehicles and computers.

If you require a quick cash injection to cover a cash flow gap or want to renovate or buy additional stock for your business, a merchant cash advance could be worth considering. The amount of funding you're eligible for is based on how much your business makes through its customer payment terminals. 

The funds, plus a fee, are repaid via your customers' payments until the loan is repaid in full. 

Find alternative finance

How do I apply for business finance?

Funding Options helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options can introduce applicants to a number of providers base b d on the applicants' circumstances and creditworthiness, with all quotes being subject to status and income.

Our award-winning platform, Funding Cloud(™), accurately and quickly matches businesses with the right lender and finance option for their needs. From unsecured business loans to revolving credit facilities and a merchant cash advance, we work with over 120 lenders offering dozens of lending products. Apply for funding in minutes - our record from application to credit approval is just 20 seconds, and cash in the bank within as little as 18 minutes. 

Apply today to get the funding you need to plan, trade and grow with confidence.

Get started

Joe Morley
Joe Morley

Head of Unsecured Lending

Joe has worked in the alternative lending space since 2015. During this time he has helped hundreds of SMEs access millions in essential funding ranging from long-term asset-backed lending to short-term unsecured revolving credit lines and beyond. In his role, Joe manages and supports a large team of Credit Finance specialists.

Business Credit Cards

Check your eligibility with our online form without affecting your credit score.

Get a business credit card

Subscribe to our newsletter today

Sign up for the best of Funding Options sent straight to your inbox.