What is a business credit card?

For many businesses, having a business credit card is an important way to access finance.

A business credit card is a financial tool that provides short-term financing solutions for your business, helping you manage your company's expenditures efficiently.

Similar to personal credit cards, business credit cards also have a predetermined spending limit.

The versatility of business credit cards allows you to cover various business-related expenses.

These can range from purchasing office supplies to covering travel costs.

Consequently, a business credit card can be an essential asset in maintaining smooth and efficient business operations.

In this article we’ll explain what a business credit card is, the advantages for your business of using a credit card, and how your business can apply for one.

As with all financial decisions, it’s a good idea to first seek independent, specialist financial advice before deciding which finance product is right for you and your business.

What is a business credit card?

A business credit card is specifically designed for corporate use as opposed to personal use.

These cards play a crucial role in managing a company's finances.

Available to businesses of varying sizes, these credit cards offer numerous benefits.

Specifically for small business owners, utilising a business credit card can serve as an effective method to distinguish their personal expenditures from their business-related costs.

This separation is particularly beneficial for maintaining accurate bookkeeping records and simplifying tax preparation processes.

While business credit cards operate similarly to regular credit cards, there are some notable distinctions.

Primarily, the borrowing limit on a business credit card generally tends to be higher as it is based not only on your personal income but also on your business revenue.

Furthermore, timely repayments on a business credit card can contribute positively to the credit history of your business.

This enhanced credit profile could potentially facilitate easier access to loans or other lines of credit in the future.

What are the different types of business credit card available?

Business credit cards often offer a variety of features designed to benefit your business operations.

These can include:

  • 0% Interest on purchases: This feature allows you to make purchases and pay them off over a specified period without accruing any interest.
  • Cashback rewards: Certain cards offer cashback, which means you receive a percentage of your yearly spending back into your account.
  • Air miles: Some business credit cards reward you with air miles or points for every purchase made. These points can later be redeemed for flights, providing potential savings on business travel.
  • Other rewards: In addition to cashback and air miles, some cards offer rewards that can be exchanged for shopping vouchers, discounts, and other perks.
  • Travel-friendly cards: If your business involves frequent international travel, it might make sense to consider credit cards designed for this purpose. They typically provide lower fees on foreign transactions, making them an economical choice for businesses operating globally.

What can you use a business credit card for?

Business credit cards can be utilised to make a variety of purchases that you would typically cover with a regular credit card.

These could include:

  • managing office expenses
  • acquiring business equipment
  • purchasing furniture
  • hosting client entertainment
  • settling invoices
  • covering travel costs.

Additionally, if your financial situation allows for swift repayment, a business credit card could be a viable alternative to a short-term loan for making substantial purchases.

What are the benefits of using a business credit card?

Here are some key benefits and strategies for managing your business finances:

Efficient cash flow management

By managing your cash flow effectively, you can ensure that you have sufficient funds to cover your expenses even when awaiting incoming payments.

For instance, if a customer's bill payment is pending, you can still afford to make necessary purchases.

Use of extra cards

Providing multiple employees with cards linked to a single account simplifies the payment process by consolidating all expenditures into one bill.

This not only streamlines accounting but also improves financial control.

Streamlined work expenses

Utilising a credit card for work expenses eliminates the need for tedious expense forms and reimbursements to employees.

This can save considerable time and administrative effort.

Itemised statements

Credit cards provide itemised statements for each card, allowing you to monitor spending across the company, within departments, or by individual employees.

This fosters transparency and accountability in spending.

Simplified accounting

Using card statements instead of traditional receipts and paperwork makes accounting more straightforward.

These statements can be easily downloaded into specialist accounting software or Excel for further analysis and reporting.

Emergency Funding

A credit card can serve as a reliable source of emergency funds, providing immediate access to money when needed.

This can be particularly useful in unexpected situations or financial crunches.

What businesses can apply for a business credit card?

Business credit cards are a financial tool available to various types of businesses, from sole traders to individuals managing the finances of larger corporations.

However, eligibility often depends on specific criteria set by the card provider.

Typically, your business needs to meet a minimum income requirement to qualify for a business credit card.

Furthermore, certain cards might be exclusive to specific types of companies.

Banks often tailor their product and service offerings based on the size of your business.

For instance, they may offer different business credit card options for:

  • Start-up businesses
  • Companies with a turnover of up to £2 million
  • Companies with a turnover exceeding £2 million
  • International businesses

To apply for a business credit card in the UK, you must be at least 18 years old and reside in the UK.

Additionally, your business should be registered in the UK.

Some card providers also necessitate that you open a current account with them to access their business credit card services.

How do you apply for a business credit card?

Applying for a business credit card can be done in various ways - online, via phone, or by visiting a physical branch of the card provider.

However, the application process may vary depending on the provider's policies.

Certain providers may require you to already have an account with them before you can apply for a business credit card.

If you're a new customer, some might insist on a phone application to provide a more personalized service.

When evaluating your application, the credit card company will consider several factors:

  1. Affordability Assessment: The provider will assess your business's financial health and its ability to manage credit card repayments.
  2. Company Assets: The value of your company's assets can influence the decision. This gives the provider a sense of your business's financial stability.
  3. Business Credit History: Your business's credit history plays a crucial role in the decision-making process. A good credit history indicates responsible financial management, which is attractive to credit card companies.

What credit limit can my business receive?

The credit limit on a business credit card represents the maximum amount your business can owe on the card at any given time.

The determination of this limit is primarily based on your business's financial health and credit score, not your personal financial situation.

A robust credit history for your business typically results in a higher credit limit and potentially lower interest rates.

This is because a strong credit history signals to card providers that your business is likely to manage its debts responsibly.

Supplementary cards for employees can also be part of your business credit card plan.

These supplementary cards often provide the flexibility to set individual credit limits for each cardholder.

This feature allows you to control how much each employee can spend monthly, helping manage business expenses effectively.

What protection does a business credit card offer?

Business credit cards offer a unique set of protections compared to personal cards.

Notably, Section 75 protections are not applicable on business credit cards.

Despite this, various card providers offer a range of safeguards to ensure your business financial security.

Remember though, the specific offerings may vary between different card providers, so it's crucial to thoroughly review the terms and conditions of each card before making a decision.

Online guarantees

These guarantees offer protection against fraudulent online use of the card.

If your business card details are used fraudulently online, the provider will typically cover the cost.

Misuse Insurance

This insurance covers any unauthorized or inappropriate use of the card by employees.

It offers a layer of protection against internal fraud or misuse.

Extra Fraud Insurance

In addition to misuse insurance, some providers offer extra coverage for any form of fraud or misuse.

This ensures that your business is protected from all potentially fraudulent activities.

Travel Insurance

Some card providers also offer complimentary travel insurance.

This can cover medical expenses, accidents, and lost luggage during business travels.

This added benefit can help save costs and provide peace of mind when traveling for business.

Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.

Making business finance work for you

Our Making business finance work for you guide is designed to help you make an informed choice about accessing the right type of finance for you and your business.

Read the guide to making business finance work for you

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