Published

August 11, 2022

What is a Business Credit Card?

A business credit card is a credit card held by a company rather than an individual. It can be used to make purchases and pay invoices much in the same way as a personal credit. It also offers a company a longer period of time to make full repayment and therefore can help the cash flow of a business. 

What are the Benefits of a Business Credit Card?

  • Reduction of Administration: Employees using cards may cut down administration as their expenses will all been in one place. 
  • Separation of Expenses: A business credit card will allow the separation of a personal and business finances, so there’s less administration work and a separation of the two entities which is easier for accountancy purposes.
  • Building a Company Credit Score: Much in a similar way to a personal credit card this can help improve a business’s credit rating, as long as the business pays the credit card balance in accordance with the credit card lender’s requirements. This provides a history of the business’s payment history, and it’s ability to make and keep up payments for future lenders to see. 
  • Manage Cashflow: Business credit cards essentially provide a revolving credit facility which you can use as long as the credit limits and payment terms are being met. Some credit providers will not charge interest for up to 60 days allowing longer time periods to repay purchases. 
  • Other Benefits: A business credit card may also come with additional benefits such as cash back on some or all purchases, insurance offers, and potential discounts. 

Who Can Get a Business Credit Card?

Business Credit cards are available to companies of all sizes, from start-ups to much larger corporations and institutions. The card will be in the name of the business, however there will always need to be an employee or director on each card. 

Although it may be possible to get a business credit card as a start-up business, due to the lack of a financial track record, the rates available to the business may be higher than after the business has built up a longer trading history. 

How do Business Credit Cards Work?

Business credit cards work in exactly the same way as personal credit cards.

They allow a credit facility for the business to use up to a certain limit. As time passes, and the credit card company deems the business to be a reliable borrower, these limits can increase. However this also works to the contrary when the business fails to make payments. 

If they are looking to reduce the amount of interest that they have to pay, businesses can pay the outstanding balance in full each month. If this is not possible, then they must pay the minimum monthly payment. Otherwise this will be reflected on the business’s credit report and have a negative effect on their credit rating. 

Some credit card providers will charge different amounts depending on the type of transaction that is being carried out. This may be foreign purchases or cash withdrawals, which may incur higher levels of interest.

Realise that although the business is the borrower of the credit facility, many small business facilities require personal guarantees in the agreements, and therefore as a director of the business you may be held personally liable for any debt that is not repaid.

Choosing a Business Credit Card Provider 

There are multiple different providers of business credit cards in the United Kingdom. These range from your bank, to other providers who solely provide business credit cards. When choosing a provider you may was consider if they offer the following

  • The ability to integrate the card with accountancy software.
  • No FX charges.
  • Rewards, such as air miles.

When making comparisons between one business credit card provider and another it is important to consider all of the following: 

  • Annual fees 
  • Extra charges and fees for cash withdrawals if you intend to draw out cash regularly using the credit card 
  • Interest charges and additional fees and charges should you not make the minimum payment on time. 

As each of these can vary significantly between one provider and another it is vital to compare each of these charging points and make an overall comparison. 

How Do I Apply for a Business Credit Card?

The process is often quite simple and applications can be very quick. Typically a number of the providers now have online applications and can make decisions in very short periods of time, allowing you access to the credit limit within days.

During the application process you will typically be asked for the following information: 

  • Company name and trading and registered address
  • Type of business 
  • Type of industry and sector that the company operates in 
  • Number of years of trading 
  • Number of employees 
  • Countries you trade with 
  • What the card will be used for? purchases / expenses etc 

You will also be asked to provide certain personal information such as: 

  • Full name
  • Date of birth
  • Home address for the last three years
  • Telephone and email address

How Do Business Credit Cards Compare to a Standard Business Loan?

Here are just some of the benefits that a business credit card can offer you: 

  • Interest is only payable when you use the facility and do not pay back the outstanding capital within a certain period of time. You also have the benefit of being able to pay a minimum monthly sum which may be higher however you can manage payments according to cash flow.
  • Business credit cards may be easier to apply for than business loans and may require a shorter trading period. 
  • Business credit cards can also offer some types of protection as they are covered under Section 75v of the consumer credit act. This ensures that the provider is responsible for the service that they provide and if this is breached you can make a claim under the Consumer Credit act. 

Provide‘s matching capabilities make it easy to compare different business credit card providers to ensure you are getting the card that is right for your business with the best possible rates.

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