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business credit cards
Business credit cards can offer your company access to funds at short notice, providing you with cash flow flexibility that supports you as and when you need it. Familiar to most, business credit cards are an effective part of your overall business funding strategy.
Understanding them and how they fit into your wider financial structure will enable you to make the most out of both credit cards and other funding products. Clifton Private Finance are here to help.
How Does a Business Credit Card Work?
A business credit card works in a similar way to a personal credit card - only it’s tied to the company and not the individual. As a simple form of a revolving credit facility, a business credit card:
- Provides instant access to funds as-and-when needed
- Has a credit limit that dictates maximum spending
- Incurs interest based on the borrowing balance, calculated daily and compounded monthly
Business credit cards are unsecured borrowing, which means providers focus on your business credit history to determine suitability, credit limits, and interest rates. A strong credit profile will result in lower-cost, higher-value business credit cards, while spotted histories or newly formed companies will find limited options with larger interest rates and lower maximum limits.
Business credit card providers often add incentives to give business owners a reason to choose their card over others. These can be as simple cashback offers, the traditional air miles and other travel-related rewards, or brand discounts through partnerships. While these incentives can provide additional enticement, it is always worth prioritising company credit card selection based on the true business cost, which means focusing on:
- Fees - most business credit cards will have an ongoing monthly fee as standard.
- Interest rates - these can vary wildly based on credit card provider and intended use.
- Interest-free periods - 0% introductory periods can save hundreds, and even thousands of pounds.
- Credit limits - the power offered by a greater credit limit is often more important than secondary perks.
- Business integration - consider the administrative cost of the card, and how its setup meets your business requirements.
The Potential Impact of a Business Credit Card for Your Company
Business credit cards are relatively easy to get, with a range of providers who will consider companies across the spectrum of financial positioning and credit scores.
However, business credit cards are not without impact on your business and should be considered carefully before use.
Overreliance
Perhaps the single most damaging effect a business credit card can have is that it becomes a crutch to businesses, rather than a flexible tool. If you do not have a clear structure and timetable for repaying your credit, overuse of a company credit card can lead to struggles.
Higher interest rates
Because business credit cards are unsecured, they tend to have higher interest rates than other forms of personal or business finance. Exploring your other options can help by ensuring you get the right type of finance that suits your needs.
Unnoticed ongoing fees
Even when unused, business credit cards may incur a fee. Dormant credit cards can sit in the background and create an unrealised problem for the future. It’s important that you manage your credit cards efficiently.
Credit score impact
If you are late with your business credit card payments this will be noted on your credit report, affecting your ability to get finance in the future.
6 Great Alternatives to Business Credit Cards
At Clifton Private Finance, our advisers will discuss the full picture of your business funding needs. Together we can explore a range of funding choices that can help your business bank account by keeping interest low and monthly payments manageable. Some other finance products that may be suitable either alongside a business credit card, or in its place, include:
1. Unsecured Business Loans
An unsecured business loan can be quickly obtained and will place a substantial lump sum in your business bank account to give your business the capital it needs.
Unsecured loans share application similarities with many business credit cards, focusing primarily on your company credit score for lender evaluation; however, the structured repayment and single fund release means they can represent a lower overall cost.
Your Clifton Private Finance adviser will compare the long-term costs of an unsecured business loan against that of a business credit card to help you make an informed decision.
Loans may be best when:
- You need money for a single purchase or investment.
- A set monthly repayment structure helps your cash flow.
- The size of the sum needed is greater than initial credit card limits.
2. Secured Business Loans
A secured business loan is one that uses existing business assets as collateral for the loan. With a range of asset-based finance available, a structured loan isn’t limited to businesses that own property. Specialist loans exist that can be secured with machinery, high-value equipment, or intangible assets such as accounts receivable.
The advantage of a secured business loan is that it provides guarantees to the lender, which results in lower interest rates, higher loan maximums, and the potential for longer terms and lower monthly repayments.
If you are looking to make a more significant capital investment, or if you have existing assets that can be leveraged to provide you with preferential terms, a secured asset-based loan is a strong alternative to a business credit card. Speak with your CPF adviser to learn more about the options available for your business.
3. Secured Revolving Credit Facilities
A revolving credit facility is a dedicated credit line that provides funding support and flexibility, allowing you to draw down funds as you need them, and repay them without set monthly rigidity. A business credit card is a form of revolving credit facility.
Specialist secured revolving credit facilities are larger, more powerful funding options than a standard business credit card, though they work with a similar structure. Just as a secured loan typically has a lower interest rate than an unsecured one, a secured revolving credit facility may be extremely competitive when compared to a business credit card.
Secured revolving credit facilities can be developed to properly meet your business requirements, providing a customised structure that aligns with your business model. A specialist lender will understand your industry and the unique challenges that your business faces, and adapt the facility on offer to best fit your business. Generally, secured credit facilities have:
- A lower interest rate than a generic business credit card
- Higher credit limits than credit card providers offer
- Greater administrative support than business credit card apps
- Better customisation to your business model and income flow than off-the-shelf business credit cards
Discuss secured revolving credit facilities with your Clifton Private Finance business finance adviser to learn how a tailored credit option could benefit your business.
4. Asset Finance
If you are looking to a business credit card to provide the funds needed to buy a new business asset - such as a piece of specialist machinery or a new van - then asset finance is likely to offer a superior deal.
Designed to provide real flexibility and options when it comes to asset purchase, specialist asset finance provides low-cost funding alongside structured support. It can be used for a wide range of purchases or leasing needs including:
- Company car purchases
- Obtaining specialist equipment
- Short-term temporary building leases
- Large-scale van fleet contracts
- IT infrastructure upgrades
- Renting top-quality plant machinery for single projects
- Vehicle finance with integrated maintenance agreements
For companies looking to gain access to the latest machinery, equipment, or vehicles, asset finance provides a suitable alternative to a business credit card. Speak to a CPF specialist to learn more.
5. Invoice Finance
Invoice finance represents a range of cash flow finance products that are suitable for B2B businesses, leveraging unpaid invoices (accounts receivable) to provide funds.
Invoice finance can be set up as a loan, a revolving credit facility, or as a factoring process to suit your business.
For B2B companies struggling with meeting everyday business expenses because of long and inflexible invoicing terms with clients, invoice finance offers a reprieve. With a more focused structure and potentially lower interest rates than a business credit card, invoice finance is a more targeted, specialised funding solution that may be more suitable for your current business situation.
Your CPF adviser will be happy to talk to you about invoice finance and how early adoption of an invoice discounting or factoring revolving credit facility might give your company the support it needs to maintain smooth cash flow no matter what payment delays occur, either now or in the future.
6. Merchant Cash Advance
Companies with a history and stable income track record of credit or debit card transactions often look to merchant cash advance (MCA) to provide cash flow support and liquid capital. With a tailored repayment structure that rises and falls in line with your card machine takings, MCA lifts the pressure from your cash flow, covers business expenses, and solves seasonal challenges.
An alternative to a business credit card for B2C businesses, MCA is a lot easier to manage, avoiding the potential problem of debt spiralling.
Explore your merchant cash advance options by speaking to your Clifton Private Finance adviser today.
Explore Your Business Finance Options with Clifton Private Finance
If you’re considering a business finance for your company and would like to discuss the options with a specialist, then contact us at Clifton Private Finance.
We are a fully independent, whole-of-market business finance broker with the experience you need to examine your personal and business expenses and suggest a range of alternatives. Together we will find the best funding solution for you.
We offer:
- A holistic overview and understanding of your business finance needs
- Access to the full UK marketplace of specialist lenders
- Tailored funding solutions that match your exact business requirements
- Full comparison of options to explore rates, fees, and finance terms to find the best deals for you
- Comprehensive support with application and documentation
Contact Clifton Private Finance now to discover the range of options available and secure fast financing that will boost your business today.
