Access to extra cash can be a lifesaver for a small company, and a business credit credit can meet that need flexibly.
Not all business account providers offer one, and those that do have different eligibility criteria. Then there are credit card companies like American Express that do not offer current or bank accounts, with their own application criteria too.
We have a look at the requirements of applying for a company credit card in the UK, as well as alternative forms of credit that may be more suitable.
What is a business credit card?
A business credit card works like a personal one, except it can only be used for business purposes. This is a condition you agree to during sign-up.
As with credit cards for private individuals, a company credit card is a form of revolving credit you spend with a card and repay partially or in full through a monthly billing cycle. Based on past credit history, you get a credit limit which is the maximum that can be owed at any point.
A periodic bill states the minimum repayment due by a set date that month, but it is always recommended the business pays the bill in full – or as much as possible – to avoid the high interest that credit cards always accrue in the longer term.
First of all, credit cards in the UK would require your business to be registered in the UK too. Most sizes and sectors of business are accepted, but each credit card has a different set of criteria for applicants.
Some credit card providers only approve limited companies registered at Companies House. Others also accept sole traders registered at HMRC and other entities such as limited liability partnerships (LLPs). Applicants must in any case apply as a business, since the card is strictly for business use only.
A minimum turnover may be required, for instance £24k+ per year for the Capital on Tap Business Credit Card.
High street banks – Royal Bank of Scotland (RBS), Santander and Metro Bank included – tend to consider only their existing business or commercial account holders.
To be eligible for a business credit card, the applicant typically needs to be a:
- Director, owner or majority shareholder of the business
- UK resident
- At least 18 years old
On top of this, you cannot have a recent county court judgement (CCJ) or individual voluntary arrangement (IVA) and you must have a credit rating that falls within the acceptable range requirement by the credit card company.
Your company needs to have a buildup of acceptable credit history already, so new businesses cannot apply. Typically, a soft credit check is performed to determine whether e.g. there’s any bad credit.
If the company’s financial history is too short or unsatisfactory, the owner may also need a high enough personal credit score so they can personally guarantee the repayment of debt.
Alternative credit options
Neobanks usually don’t offer a credit card for business (except for Cashplus that also has a credit builder feature), so options are limited for those who don’t bank with Barclays, NatWest or another high street bank.
In addition, not everyone can get a credit card, or you could benefit more from another solution. It is therefore worth considering the following alternative credit options.
Business overdraft: Some banks offer an overdraft for business accounts, which is the allowance of negative account balance up to a specified limit. This does not need to be repaid according to a schedule, like credit cards require. Instead, it is more like an extra money reserve for when funds have run out temporarily.
– Available at high street banks, Starling Bank and Cashplus Bank.
Business cash advance: This is a type of short-term loan where repayment happens via a fixed % rate deducted from the card transactions processed in the business. Repayment typically needs to conclude within 3-12 months, but the amount repaid every month differs proportionally with card takings.
– Available via payment providers like PayPal, account providers like Cashplus, and specialised lending platforms.
Business loan: To get a loan, your company has to meet a range of eligibility criteria that can be stricter than those of a credit card. However, loan amounts can be high and have a long-term repayment schedule to suit the affordability of the company.
– Available via high street banks, Starling Bank and specialised lenders.