Business credit cards

Learn more about how business credit cards work, their benefits and drawbacks, and why alternatives like Soldo are proving increasingly popular.

“With Soldo, we’ve cut spending in half. We can control what people spend – and they actually like it. We’ll never go back to the old credit card!” Polly

“Expense forms are old hat! Invoices are captured at the point of sale by the cardholder and it all flows beautifully from there.” Ian Jarvis

What is a business credit card?

A business credit card lets employees pay for work expenses without having to spend their own money.

It works the same way as a personal credit card, and generally has the name of one person embossed on it. But it’s registered to the business itself, and credit repayments are made from the company account. The application process is also a little bit different from personal cards (more on this in the FAQs), and any fraudulent activity isn’t covered by the Consumer Credit Act.

Business credit cards are available to everyone from sole traders to major corporations. The deal you get will vary depending on the size of the business and its credit rating, and some banks may only offer you a card if you have an account with them.

How do business credit cards work?

Like a personal credit card, a business credit card comes with limits, minimum monthly repayments and interest rates.

A credit limit is the maximum amount your business is able to spend using the card in a given month or year, A minimum monthly repayment is the amount you need to pay back towards the overall balance not to incur interest. Your interest rate is determined by the provider and sometimes on the type of purchase you make, and determines how much you need to pay on top of what you borrow.

Interest rates are the main expenses involved in business credit cards, along with annual fees (though not all providers apply these). You may also need to pay for late payments, cash withdrawals, usage abroad, inactivity and when you exceed credit limits.

What are the benefits of business credit cards?

    • Happy employees: They won’t have to spend their own money to pay for business expenses.
    • Suitable for expenses of all sizes: The only cap on how much you can spend is your credit limit.
    • A controlled cash flow: It will be easier to monitor and manage your business spending.
    • Improves your company’s credit score: You’ll have a more diverse credit profile, meaning it will be easier to secure finance in the future.
    • Reveals your company spending: You’ll get monthly card statements for each card showing how much you’ve spent that month.
    • Extra protective measures: Some business credit cards provide independent credit protection, and safeguard you against employee misuse and fraud.

What are the drawbacks of business credit cards?

      • Requires a good credit score: If your business is new, you might not have established a credit rating and may struggle to get a credit card with favourable rates and limits. The same is true if your company’s credit history is rocky.
      • Risk of misuse: With business credit cards, there’s no way to police your employees all the time, and you can only review your team’s spending at the end of the month.
      • One card for multiple employees: If you’re concerned about misuse, you aren’t likely to have lots of credit cards in circulation, and your employees will need to share one between many of them.
      • Expense reconciliation: The money for expenses may come directly from the company account, but your team still need to remember to submit physical receipts to the finance department for reconciliation.
      • Risk to your credit score: If you fail to keep up with repayments, not only can interest and late fees start to add up, your business credit score is at risk, too. If you’re personally responsible for your business credit, your score may suffer as well.
      • No consumer credit protection: If you make a purchase of up to £30k and something goes wrong, your provider won’t refund you.

What’s the alternative to a business credit card?

Prepaid cards for business are a cost-effective, flexible and adaptable alternative to business credit cards, and they’re our speciality at Soldo.

You can fund a prepaid card in seconds with as much cash as you like. To make sure no one overspends or carries out fraudulent transactions, you can add limits to each card and create bespoke rules – where they can and can’t be used, and on what. In short, no matter how many cards you share out, you have complete control.

Every penny employees spend is automatically uploaded to a payment control dashboard in real time. Staff won’t need to manually submit their expenses, and your admins can automate their reconciliation. Plus, they can export all this data and more in a couple of clicks, turning raw data into actionable insight.

There are no credit checks when you apply for Soldo, so you’re not at a disadvantage if you’re a new business or a sole trader. Likewise, your personal credit rating is never at risk: the only limit to what you can spend is the amount you choose to put on the card.

Frequently asked questions

What kinds of business credit card are there?
There are lots of business credit cards on the market to choose from, each of which comes with its own set interest rate and credit limit. But they may also offer their own unique benefits, including:

      • 0% purchases: You won’t need to pay interest on the money you spend, generally up to a predefined amount or for a certain length of time.
      • Cashback: You may get back some of the money your business spends in a year.
      • Shopping and discounts: You may get vouchers or discounts with certain vendors as you build up reward points.
      • Air miles and insurance deals: You may be able to reduce the cost of business trips with cheaper airline tickets and travel insurance.
Which business credit card is best?
It depends what kind of business you are. If, for example, you’re a startup, NatWest or RBS business credit cards are a good choice. They both have no fees for the first year, an interest-free period of up to 45 days and a maximum credit limit of £10,000.

If you’re an SME, you might consider the Santander business credit card, which gives 1% cashback. It has an annual fee of £30 a year and an interest rate of 23.7% per annum, though there’s an interest-free period of up to 56 days if you pay your balance on time.

If you’re a large business or a corporation, you might look at the American Express business credit card. It doesn’t have any spending limits, annual fees or an interest rate (because you have to pay the outstanding balance in full each month).

How do I apply for a business credit card?
You can apply for a business credit card online, by phone, in a branch or by post. You’ll need to provide a number of business details, including:

      • Your company name and contact details
      • Your income and turnover
      • The number of employees you have
      • The date your business started
      • The countries you trade with

You may also need to provide some identification documents – bank statements etc. – and, if you’re a sole trader, a provider may take a look at your personal finances.

They will base their final decision on credit limits and interest rates – and perhaps whether you qualify at all – on a number of factors. This may be what they think your business can afford, your company’s assets and your business’s credit history.

Will business credit cards affect my personal credit?
It depends on the kind of business you run.

If you’re a sole trader, you and your business are considered one and the same and you’ll be liable for the debt you’ve taken on. If you’re in a business partnership, the liability for the debt will be split between the two of you. Any defaults or late payments are on you and will impact your personal finances.

But if you’re a limited company, your credit will be borrowed in the name of the company and you won’t be responsible for its payment. Late payments and defaults could lead to the liquidation of the company’s assets, but it won’t affect your own personal financial status.

As ever, check the terms on any deal you sign. They will make it clear where you stand. And if you’re ever struggling to cope with your business debt, you should seek advice straight away.

How do new businesses build credit?
Pay off your debt on time: This is undoubtedly the best way to establish a resilient credit score. Try not to exceed more than 25% of your credit limit, too, even if you pay off your balance at month end.

Take quick action if anything goes wrong: There are free business credit monitoring tools to keep you up to speed on your credit score. Pay close attention and you’ll be able to react if anything looks unusual.

Diversify your business credit report: You should expand your profile to include credit accounts from a variety of lenders. If you’re paying everything off on time, a more diverse credit file makes you a stronger business.

Create a consistent business identity: Make sure your business name, address and phone number are the same across all your correspondence, invoicing and marketing materials. This will help business credit bureaus keep accurate files on your company’s credit.

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