A business credit card can help you manage your business expenses better, fund short-term expenses and build your credit history. This article will guide you through the different types available, how they work and how to start an application.Get Card
A business credit card is a short-term business finance solution that enables you to manage your company’s expenses. Like personal credit cards, business credit cards come with a preset limit. You can use your business credit card to fund any business-related purchases, from office supplies to travel expenses.
You, as the business owner, apply for your card, and if you’re successful you’ll receive a credit limit based on your business’s financial health and creditworthiness.
Your monthly statements will include your transaction history and the minimum payment required. Unless you repay in full, interest will apply. Using a credit card responsibly can help you to build your business’s credit history and make it easier to get funding in the future.
As well as the APR (annual percentage rate) – the rate of interest charged for borrowing – you may also have to pay the following fees:
Monthly or annual fee
Late or missed payment charges
Charges for cash withdrawals
Charges for going over your limit
Foreign transaction fees
You might qualify for a business credit card if you’re over 18 and operate as a sole trader, limited company or partnership in the UK. Eligibility criteria varies. For instance, some lenders will want to see two years of accounts, while others require a minimum monthly revenue of £5,000.
As the account holder, you’ll be liable for the repayments. Missed or late payments can affect your personal score, and potentially make it harder to get personal credit.
Credit card providers will check your business's finances and credit profile when you apply for a business credit card. However, they may also review your personal credit history, especially if you’re a sole trader or have a short trading history.
If your business has bad credit, a specialist lender may be able to take a more holistic view of your business. They’ll want to see a business plan and evidence of how you’ve repaid other types of debt on time.
There are a few different types of business credit card to choose from. Understanding how each credit card type works can help you choose the best one for your business’ needs. Here are some options to consider:
Rewards business credit cards – Some business credit cards offer cashback on specific purchases or other rewards. However, keep in mind that rewards cards may also come with a fee after an initial period.
0% or low-interest business credit cards – Other credit cards offer low/no interest on purchases for an introductory period, e.g. one month. It’s important to know how much interest you’ll pay after this introductory period.
Travel business credit cards – If you travel abroad for work, you may want to find a credit card that doesn’t charge foreign transaction fees. (Foreign cash withdrawal fees may apply.) Business travel credit cards that offer perks such as reward points, lounge access, or travel insurance are also available.
Balance transfer credit card – A balance transfer enables you to move your debt to another business credit card provider. You might do this to take advantage of a 0% interest introductory offer, for example.
The perks that come with your credit card will depend on the credit card provider and product you opt for. Potential perks include cashback on purchases, no or low interest for a set period, air miles, free insurance or discounts at retailers.
As with any type of business finance, there are a few advantages and disadvantages to consider before signing up for a business credit card.
Convenient for day-to-day expenses
Separates personal and business purchases
Provides a cash flow boost
Improves the administration of employee expenses
Makes it easier to spend on business trips abroad
May come with perks to suit your business
Doesn’t affect your personal score (if repayments are met)
You’ll have to pay interest on missed repayments
You may have to pay a monthly or annual fee
Missed repayments can damage your business and personal credit score
Your credit limit might be low
Costs can build up if you don’t repay the balance in full each month
When comparing credit cards, pay attention to the APR, any interest-free periods, rewards and discounts, and any additional charges (such as cash withdrawal fees).
The best business credit card for your business will depend on your company’s needs and the industry you operate in. If you’re planning to purchase an item of equipment, for instance, and want to spread the repayments over a few months, a credit card with a low APR could be more suitable.
In contrast, if you’re planning to use the card for daily spending, a business credit card with an interest-free period might be worth considering. Funding Options can help you find what you’re looking for. We work with over 120 finance providers and can match you with the best business finance options for your needs.
If a business card isn’t the right funding solution for your company, there are lots of business credit card alternatives to choose from, including:
Designed for businesses that take customer card payments, a merchant cash advance enables you to borrow money and pay it back through a percentage of your customers’ card transactions. You’ll pay interest for as long as that money is owed.
A revolving credit facility lets you withdraw money, make purchases for your business, repay the borrowed amount and then withdraw it again when you need it. It’s one of the most flexible funding solutions on the business finance market today.
If you run a B2B business that sends invoices, invoice finance allows you to use your unpaid invoices as security for funding. So instead of waiting weeks or months to get paid, you can release up to 90% of the value of your invoices almost immediately.
If you’re looking to purchase equipment for your business, take a look at asset finance. It allows you to spread the cost of the purchase, or lease instead of buying. From machinery to kitchen equipment, there are a range of leasing options out there.
If you need some short-term funding to cover an expense while you wait for long-term funding to come through, a bridging loan could help. Bridging finance is usually associated with property purchases, but it can be used to fund things such as time-sensitive inventory deals or to cover expenses during an equity round.
You can apply for a business credit card online or at a business bank branch. You’ll need to provide information about your turnover, as well as other details relating to your business. Approval is usually quick and your card should arrive within a few working days.
At Funding Options, we can match you with credit card options from our panel of over 120 lenders. Start by telling us how much finance you need, what it’s for and how quickly you need it, and we’ll match you with options that are suitable for your needs. It’s free to apply and doesn’t affect your credit rating.Get a business credit card
Head of Commercial
Thomas Boyd is the Head of Commercial at Funding Options. Thomas started his career in the finance sector at LendingCrowd. His work over the past five years has focused on supporting the vibrant and growing community of SMEs across the UK.
Disclaimer: Funding Options helps UK firms access business finance, working directly with businesses and their trusted advisors. We are a credit broker and do not provide loans ourselves. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. We are also able to make insurance introductions. Funding Options may receive a commission or finder’s fee for effecting such finance and insurance introductions.
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