Business Cards, often known as corporate credit cards, are an excellent way for businesses to easily obtain additional money when they are required. They're excellent for controlling cash flow, tracking expenses, and spreading costs, among other benefits.
A corporate credit card can be used to manage cash flow short-term expenses in instances where working capital is insufficient, effectively acting as a revolving credit facility. Whether you need to pay a supplier, renovate, purchase additional inventory, or just require working capital, a company credit card can serve as an emergency loan – providing the limit is sufficiently large. Additionally, you can watch and manage staff spending, which is beneficial for firms that incur regular expenses as a result of their daily operations. Numerous credit cards also allow business owners to set spending limitations for individual employees, which helps them stay on top of their spending.
Table of Contents
How do they work?
A business credit card, like a personal credit card, is issued against a business account rather than a personal bank account. A business credit card will provide you with a credit limit based on your business's credit score, which establishes the agreed maximum limit on the card.
When shopping for a business credit card, you may focus on the interest rate that applies if the balance is not paid off in full each month. There are a few additional points to consider, for example, the majority of lenders offer an interest-free period on corporate credit cards. This implies that you will only be charged interest on the balance owed if you surpass this term. The standard duration is 45 days, however some jurisdictions allow up to 90 days.
Qualifications for Business Cards
As long as your firm has been registered and you have begun trading, you should be eligible for a credit card.
Due to the fact that company credit cards are a form of unsecured lending, the criteria and restrictions are quite severe. As such, they are frequently employed for convenience by creditworthy businesses. As with all unsecured lending, the lender is most concerned with your credit rating, trading history, revenue, and profit.
Credit check & Business Cards
The thing is, you will always be subject to a credit check, as none of the lenders offer business credit cards without conducting a credit check. Lenders may be hesitant to grant you a business credit card if you have a poor credit score.
However, this does not mean you cannot obtain one. Certain lenders may initially provide you a relatively modest credit limit, but if you repay the cash on time, you can improve your credit score – and thus qualify for a greater credit limit or better interest rates later on.
Rates of Interest on Business Credit Cards
Business credit cards can be costly if the outstanding balance is not paid in full each month, as interest rates are greater than on personal cards. Credit card interest rates are typically between 15% and 25%.
Numerous suppliers offer interest-free periods on business credit cards, which may be a significant benefit to firms; therefore, you should absolutely check to see whether yours does.
Limit on Borrowing
This is the maximum balance that a credit card can have. Your credit limit will be determined by the creditworthiness of your business and will often range between £1,000 and £10,000.
Initially, lenders may provide you a relatively modest credit limit because you are a new customer and they are unsure of your payment history. If you have a track record of being a responsible customer, the supplier may grant you a bigger credit limit.
For New Businesses
When applying for a business credit card, it's natural to shop around for the best deal. However, with so many alternatives, it can be tough to know where to begin. Why not utilize our platform to compare the various business credit cards available to your business?
Improve Credit Score
Yes, you may boost your business credit score by consistently paying your credit card bills on time. By doing so, you may qualify for additional financing in the future as a result of demonstrating your business's trustworthiness to the lender. It also works the other way around, as defaulting on repayments can have a detrimental effect on your business's credit.