Business credit card alternatives: What are my options?

It might seem like the obvious choice to get a business credit card, but for many businesses, it might not suit. Here we'll discuss some of the excellent alternatives to a credit card that a business can utilise to access credit facilities

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Business credit card alternatives: What are my options?

Alternatives to a business credit card

If you've been looking into business credit cards but are unsure if they're the right solution for your business, it's worth researching the alternatives too.

Many alternatives are available, some similar to business overdraft alternatives. Some focus on flexibility, which is the main appeal of a business credit card, while others are more suitable for more significant investments in medium-term growth. Here are a few of the best alternatives to business credit cards:

Revolving credit facilities

A revolving credit facility is an excellent alternative to a business credit card. You can borrow the required money when you need it, pay it back, and if you need it, you can borrow more. This can continue for the agreed term of the revolving credit facility. This gives a small business more flexibility when borrowing money to decide how much to borrow and pay back each month. Contained within the payment terms, a lender will specify how quickly you need to make repayments after withdrawing funds.

An example of a revolving credit facility

Juniper Ltd takes out a new revolving credit facility capped at £10,000. Straight away, they withdraw £3,000 to cover an outstanding supplier invoice. With the remaining £7,000, they plan to purchase a new machine and will repay the £10k plus interest over the following six months. After six months, they will have access to the full £10k again.

It's worth highlighting that you don't have to use the maximum amount available, and you'll only pay interest on what you use.

Benefits of a revolving credit facility

  • Readily available cash flow

  • You do not need to apply for a new loan each time you need cash

  • Less interest repayable when compared to a credit card

  • Lower interest rates

  • Easy and flexible repayments

Get a Revolving credit facility

Unsecured loans 

An unsecured loan might be attractive for businesses that don't have a demonstrable trading history or operate in an asset-light industry. The main reason is that you don't require collateral or a security deposit. In place of putting up assets, borrowers will be eligible based on their credit score and sales.

In times of uncertainty, businesses might prefer not to offer security, or if a company is growing fast and needs business finance quickly.

With a host of different lenders on the market able to offer unsecured loans up to £250,000, this presents an opportunity for businesses with bad credit who still need funding. 

Benefits of an unsecured loan

  • Less risky borrowing option because there's no danger of losing any assets

  • More flexibility than secured loans

  • Qualifying criteria for unsecured business loans are less stringent

  • Larger loan amounts can be applied for

  • Since the lender does not require extensive paper, a small unsecured business loan takes less time to be issued

Get an unsecured loan

Merchant cash advance

Businesses that have decided against a business credit card might find a new form of funding enticing: the merchant cash advance. This novel funding source is based on the monthly average card customer receipts via card payment terminals. A business owner must pay back the advance plus a fixed fee using an agreed percentage of daily credit/debit card taking until repayments are made in full. This is ideal if you are looking to expand your business, need to renovate or buy stock for your business, and are finding it hard to raise the capital required. 

Merchant cash advances are well suited to SMEs that need urgent capital to cover everything from cash flow gaps to unforeseen purchase opportunities. Bear in mind that this type of financing can force a borrower to pay representative APR (all charges in addition to the interest rate) that can be in the triple digits. APR can be either fixed or APR variable. So what's the difference between fixed APR and variable APR? A fixed APR generally doesn't change over the life of the merchant cash advance. This may make budgeting manageable because of a more predictable rate.

Benefits of a merchant cash advance

  • A quick decision from a lender

  • Suitable for businesses with no demonstrable trading history

  • Flexible terms and amounts

  • Easier cash flow management

  • Competitive interest rates

Get a merchant cash advance

Invoice finance

Another alternative to business credit cards is invoice financing. Lenders make it possible for you to get paid faster for completed work, advancing you most of the value immediately. If your business has a lot of different customers, it might be suited to invoice financing.

As one of the best ways to manage cash flow problems and clear accounts receivable quicker, invoice financing is a proven way to ensure your business can navigate turbulent market conditions and react to unexpected opportunities.

Benefits of invoice finance

Invoice finance carries both pros and cons. Some of the advantages include:

  • The main advantage of invoice discounting, as it's sometimes referred to, is that you have more control over accounts receivable and can raise cash quickly for your business.

  • Compared to other types of funding, invoice financing has a quick turnaround.

  • As invoice financing is an unsecured business loan, you won't have to offer up any fixed assets from the company.

  • Invoice discounting can help reduce debtor days, which means small businesses can realise growth opportunities and prevent cash flow shortages.

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Another alternative to using a business credit card is a business overdraft, which can give you access to additional spending power without the need for a loan. This is effectively a line of credit on your business bank account, and interest will only be charged on the overdrawn amount. You have flexibility when you pay back a business overdraft to reflect your cash flow situation. However, your bank can demand repayment when it chooses and may charge a fee from the overdraft facility

You can increase or reduce your overdraft limit if your credit score remains healthy and your history of making repayments is not called into question.

Benefits of an overdraft

  • Rates of approval are higher than other lending facilities

  • The approvals process is straightforward 

  • Can pay off debts when cash flow is positive

Get a business overdraft

What is a credit line?

A credit line is another business credit card alternative, fast becoming widely used in the UK as a source of short-term funding. They work similarly to credit cards because you have a credit limit and must make an agreed minimum payment each month. The difference between the two is that in place of a physical card, you withdraw the cash directly into your bank account, and interest is only paid on the drawn-down amount rather than the agreed credit limit.

Steps involved in taking out a new credit product

  • Do some research

  • Get a quote

  • Make an application

  • Application is approved or declined

  • Sign a contract

  • Use the funds 

  • Make repayments in line with your contract

How do I get a business credit card alternative?

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 trade, plan, and grow with confidence.

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Alternatives to a Business Credit Card

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