Akin to a personal credit card, a business account lender issues a business credit card for operational purposes. It grants one credit limit basing the business credit score instead of a personal one. In this account, one pays interest as per the credit card usage.
However, an owner must leverage the interest-free period to cut costs while applying for one. It implies you will only pay interest on the outstanding amount if you exceed the deadline. Usually, the interest-free period lasts for about 45 days to maximum-90 days.
How does a business credit card work?
Business credit cards work just like personal credit cards. A lender grants you a set credit limit for a month to cover your business-related expenses. You can choose to pay off the balance in full, make the minimum payment over the deadline, or an in-between solution.
The lender charges an interest rate every month. If you miss the credit card payment, the interest will grow incessantly. You may request an additional limit from the lender by ensuring responsible business credit card usage.
What can you use a business card for?
You can use a business card for multiple things like:
- Review business expenses
- Separate personal and business costs for easy accounting procedure
- Build the credit score of your business
- Leverage cashback and rewards for purchasing equipment
- A Convenient way to buy goods online or offline
- Leverage an interest-free period for affordable purchases
Business cards in the UK can be helpful in managing operations, among other things. Thus, it is an excellent way to bridge a payment gap and leverage the opportunity without going budget overboard. However, what if you need immediate funds to finance an overseas project? How will you get urgent funds with an exhausted business credit card limit?
A business loan for bad credit in the UK fixes the deal in the situation. Though this work almost similarly to business credit cards, they do not have any limits. You can borrow a substantial amount that you need for the purpose. If you have a good credit history and business plan, you may qualify for an affordable interest plan with the lender.
How can you get a business credit card?
Begin by comparing the best business credit card providers. Compare based on parameters like APR, interest-free period, interest rate, annual fee, associated costs, introductory deals or 0% deals, if any, cashback, or reward you can leverage. In some cases, to benefit from the rewards, you must be an existing customer. However, it may not always be the case. You may still fetch a profitable deal if applying for every first time.
You can apply for it either by hosting a face-to-face interaction or online. For approval, the business credit card provider may channel some credit checks.
Here are some details that you must provide to get business credit in the UK:
PERSONAL DETAILS
- Name
- Email Address
- Nationality
- Current residential address
- Annual personal income
- Employment status
BUSINESS DETAILS
- Legal business name or DBA
- Business officials set up address
- Business phone number
- Tax identification number
- Industry
- Turnover details
- Monthly and annual expenditure
- Business contact details
- Total company size
Apart from that, most lenders in the UK lookout for business operating history. They analyze annual revenue, existing debts, and monthly costs you incur. After that, the lender may ask you to provide bank and tax statement copies.
We perform the credit check and offer the deal accordingly. The higher the credit score, the better the deals and credit limit. The business soon receives a mail confirming that. The moment it confirms the agreement, the business receives the credit card.
What Happens If You Use a Business Credit Card for Personal Use in The UK?
Some credit card providers prohibit the use of business credit cards for personal purposes. In such a case, it could lead to several negative outcomes you would not like to deal with. Here are some circumstances that might follow you in case of using a business credit card for personal purposes:
1) Credit Account closure
In some cases, the lender may completely issue an account closure. However, it is the rarest case to encounter, but it still exists. If it does not close permanently, he may limit its usage.
2) Personal and business credit score suffers
These business credit cards generally come with a personal guarantee. It implies that the account holder must provide a sum, asset, or in-person guarantee by a business partner.
So, should a business default on a payment, the lender may rightfully seize the assets or cash pledged as a personal guarantee. It may potentially devastate the personal and business credit score.
Likewise, you may delay the business payment if you borrow an extended amount on a business card with a personal credit profile in a compromised state. It may also lead to a drop in credit scores.
In some cases, when you need urgent money without providing a personal guarantee over the loan, tap bad credit loans in the UK. It is available with no guarantor from a direct lender. In this, you can quickly meet your business requirement without having a third person to seal the deal. These are primarily for businesses dealing with bad credit profiles. When a business calls for immediacy, funds should flow seamlessly. Contact for more.
3) Complicated taxes
Merging your personal and business expenses with just a single business credit card can make you pay more toward the tax. The unclarity and the usage of business credit cards for personal use make it all the more challenging to calculate legal taxes.
In case you get the count wrong, you may incur serious penalties. Thus, check out a business loan for bad credit in the UK for long-term business requirements like equipment purchase, hiring costs, and expansion. You can find a suitable loan quote defining your requirements and affordability at the very portal. Yes, we provide business loans if you have an insufficient credit score. If your business stats, revenue figures, and recent credit management are satisfactory, you may get quick approval.
Bottom line
Instead of integrating your requirements with a business credit card, use it wisely. Business card management ensures hassle-free tax calculation and payment. Moreover, having a separate pot for business expenses makes it all the easier for you to manage liabilities and other needs.
Anna Johnson has more than 11 years of experience in direct lending industry of the UK. She is the Senior Content Editor at 24cashflow where she is leading a large team of loan experts. During her career, she has helped the loan aspirants to use the particular loans in the best way and improve their financial lives and status.
Anna Johnson is known for her in-depth research of the UK loan marketplace, as she has worked with many major lending firms in her career. During her educational phase, she has done a research on ‘Finance Fundamentals for Growing Business’.
