Expenses are something that every company will need to deal with, whether it is buying furniture for the office, booking a train ticket for business travel or signing up for a direct debit for a recurring online service. It is often easier and faster to use a credit card to pay for these things rather than going through the process of invoices and accounts.

Due to this, it makes sense of your small business to have a company credit card. Many people may use this card within the firm – you, your management team or any other employees that may incur expenses as part of their work.

As well as ease of payment, a company card has other perks. These include allowing you to separate personal finances from business finances; helping you keep tabs of expenses and helping you to build up your SME’s credit score.

However, as with any form of finance, there are things you should consider before committing to a credit card and when choosing a provider. We have detailed them in this blog to assist your search.

• Providers and pre-checks
• Credit card limits and fees
• Interest rates
• Additional benefits
• Keep track in your accounting

 Providers and pre-checks

Many providers now offer credit cards for small businesses. Providers include your traditional high street banks as well as alternative lenders. Each will have different spending limits, interest rates and other benefits, so it is worth spending time looking into each option and which may work best for your company’s needs.

Check what requirements each provider asks for in order to accept you for credit. Some may only be available to companies with a specific annual turnover. Others may require documentation regarding your credit history of up to two years, which can be problematic for new enterprises. Knowing what the checking processes are for the different providers may help you eliminate certain ones and refine your search.

Remember that, when applying for credit cards, you should avoid multiple applications to different providers. Doing so can lead to numerous credit checks on you, which can be harmful to your business credit score and can make it harder to be accepted for future financial support.

Credit card limits and fees

Many credit cards have a limit to how much you can spend using them annually. The threshold will vary by provider but can range anywhere between £500 and £50,000. The limit may also be decided by your business credit score, with a larger limit being given to companies deemed more reliable.

It is vital to have a rough idea of how much you will be spending each year on the card to determine what limit you will need. If you exceed the limit of your card, there could be consequences such as additional charges, reduction of your limit or a mark against you on your credit history. Your provider will detail the consequences of exceeding your limit and any fees.

You also need to be aware of any other charges related to your credit card. These could include fees in the result of late repayments or making a cash withdrawal with the card. Penalties might be in place for inactivity on your card or not spending the required amount as laid out by your provider.

Many business credit cards don’t have an annual fee. Some providers may not charge this for your first year. However, it is worth researching this beforehand to help you to account for the total cost of getting the card among different providers.

Some of the newer online providers appear to offer credit cards, but these can actually appear to the outside world as pre-paid cards and actually be declined. Credit limits can be quite small and whilst they might suit your business now, they may not be easy to increase in the future. So research the market carefully.

Interest rates

When selecting a credit card, consider the interest rate. The interest rate may vary depending on the kind of card you get.

If you choose a card that you will repay monthly, interest will not apply. If you select a card that you repay on an ad-hoc basis – allowing you to spread repayments out over time – there will be interest to pay.

When comparing different providers, look at the APR and the annual interest on purchases. Generally speaking, the lower these percentages are, the better. However, you should consider interest rates alongside other benefits of the card when making your decision.

Some providers will offer interest-free periods when you first take out the card, which can be beneficial for your business. However, take note of what interest rates you will face once this period ends, as it can cause your future repayments to take a sharp hike.

Additional benefits

Many providers will supply additional perks when you choose a credit card with them. This can include cash back on your purchases, discounts from particular providers or reward schemes, such as for airline miles. These benefits make for excellent incentives and can give a specific provider the edge if the interest rates and fees are similar between two.

Many providers also often protection on your purchases made using the card. This can protect your business against fraud and misuse by employees, which can offer additional peace of mind.

Other benefits that can be attractive – or that you may even require depending on your business needs – include the ability to use your card abroad. Most credit cards will allow you to do this but at steep costs. If you plan to use your card while outside of the UK, aim to find a provider that offers lower interest rates and withdrawal fees for doing so.

You should also consider if you can multiple copies of the card if you are planning for your staff to use them, and any costs associated with this.

Keep track in your accounting

Once you have your credit card in place, you should monitor your spending in the same way as you would with your standard business accounts. This is particularly poignant if you are not the only member of the company using the card.

By tracking your credit card expenditure, you can ensure they are accounted for as part of your business’s overall outgoings and make sure you do not exceed the limit set by your provider.

This will also help you to identify any unnecessary payments made on the card, which may need to be cut, monitor cash flow and analyse increasing costs within your business.

If you need assistance on getting a business credit card, including choosing a supplier or improving your business credit score ahead of application, we can help.