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If you own a small business then you will likely be bombarded with adverts and leaflets for competing business credit card offers, each claiming to be the best option for your type of enterprise.
Skip ahead to the top 5 credit cards
Do small businesses need a credit card?
As a small business owner, your path to growing your business will involve many important decisions, one of which will be whether or not to get a business credit card for your company. Let’s dig into the benefits and drawbacks of having a business credit card to better understand how it might be a good decision in the long run to get one.
Many business credit cards will offer a range of benefits and rewards for loyal customers and businesses that spend regularly on their company card. This may take the form of a points system that can be redeemed through purchases or gift cards, or through useful freebies for your business such as accounting software.
Often the system of rewards for business customers will be structured a little differently to those of a personal credit card, with greater emphasis on rewards and benefits that suit your company such as business travel, office supplies or software.
Build credit score
One of the major benefits of responsibly using a credit card for your business is that it can help build up your company credit score. This means that in future, you may find it easier to borrow money from major banks to help grow and expand your business, with easier access to future credit and better rates of borrowing.
You should, however, be wary that if you fail to pay your credit card bills on time, then your credit score will be negatively affected.
Using your company credit card to make purchases makes the process of tracking your company spending a little easier, with monthly reports and all your outgoings in one place.
Eases cash flow
Because credit, by its nature, means that day to day you are not spending your company’s own money, you are less dependent on maintaining a steady and even cash flow each week. As long as you’re able to pay your monthly credit bill, then the card helps you even out your cash flow and manage larger purchases each month.
Fees and interest
The nature of credit means that every option for a business credit card will involve some element of interest on your repayments, except for charge cards that have ot be paid off in full each month. This does mean that in the long term, you will have to repay more than you borrowed in most circumstances. However, many card issuers offer periods of zero-interest for repayment within a specified timeframe.
Not every business credit card application will require this, but the smaller and newer your business, the greater the chance you will be required to offer a personal guarantee to secure your business credit card. In simple terms, this means that by taking out the credit card, you will personally be liable for any debts to the card issuer should your company default.
Less purchase protection
Unlike personal credit cards, which offer a high degree of purchase protection, most business credit cards do not offer much in the way of protection for purchases. This can leave business owners with difficulty returning goods, correcting billing errors or reversing fraudulent charges made to a credit card.
How to choose the best card for your business
There are three primary areas to consider when picking your business credit card.
This is one of the big areas in which the best business credit cards differentiate themselves. Always check out what is known as the representative APR (annual percentage rate of interest) to see how much interest you would be charged, on average for a year of borrowing, excluding any interest-free repayment periods. This can vary significantly depending on the card you choose.
Annual fees are another area where you could save money. Some card issuers will not charge any fees at all for their service, but you can expect to receive less in the way of benefits and rewards if you opt for a zero-fee card.
Cashback and benefits
The flip-side of the annual fee question regards what benefits and rewards you can receive by being a user of a specific credit card. You will usually find that the rate of APR, the annual fees and rewards and benefits trade off each other in the different offers you will find across the market.
The top 5 cards for small businesses
Low rate of representative APR – Barclaycard
The Barclaycard Select Cashback card offers one of the lowest rates of representative APR (variable) on the market at 21.9% amongst cards that do not charge an annual fee. The Barclaycard Select cashback also does not require a personal guarantee.
|Rewards||Free access to FreshBook’s accounting software|
|10% cashback on AXA Health business health insurance|
No fees and high credit limit – Capital On Tap
The Capital On Tap Business Credit Card is one of several options in the market that includes no annual fees at all, and is specifically geared towards small and micro businesses.
|Credit limit||up to £150,000|
|Rewards||1% cashback or Avios points|
|Up to 66% off AA Business Breakdown Cover|
Sustainably made – Cashplus
The Cashplus business credit card is the only business credit card out there that is made entirely from sustainable, recyclable plastic, as well as offering a whole host of other benefits, including 56 days’ interest free credit and no annual fees.
|Rewards||1% cashback on purchases|
Ease of use in Europe – Metro Bank
The Metro Bank Business Credit Card prioritises ease of use for small business customers. If you need to conduct any business in Europe, you’ll not have to pay any transaction fees in the continent, and if you misplace your card, you can walk out of a Metro Bank branch with a new one that day.
|Credit limit||Not specified|
|Benefits||Free transactions in Europe|
Member benefits – American Express
The American Express Gold Card comes with some of the most extensive member rewards and benefits of all the major business credit cards.
|Representative APR||N/A - Amex is a charge card|
|Annual fee||£175 (£0 in first year)|
|Credit limit||Not specified|
You earn 1 membership point for every £1 spent on your card or any employee cards on your account, plus 10,000 points for every quarter you spend £20,000 or more. You can redeem points on:
- Gift cards for employees to spend at House of Fraser, M&S, Laithwaite's Wine, Molton Brown, and SpaFinder Wellness 365
- Statement credit to boost your bottom line
- Business travel with British Airways, Marriott Bonvoy, and Virgin Atlantic
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This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer.
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