If you run a limited company there are a few clear benefits to getting a business credit card. As well as giving you access to short-term finance, a limited company credit card may offer perks like rewards and cashback, and could help you to streamline your accounting process – building your business’s credit score in the process.
Should I get a limited company credit card for my business?
A limited company credit card could help to ease any short-term cash flow issues, and it’s often more straightforward to apply for a credit card instead of a business loan.
Provided you have registered your business, have a business bank account, and can pass a business credit check, the application process is usually quick and straightforward – and you may get a decision on your application in minutes.
However, you will be charged interest unless you clear your balance in full each month, and some providers also charge annual or monthly fees. If you don’t manage your card well you could also damage your business’s credit rating, so it’s important to consider if you can afford to repay what you borrow.
» MORE: Do I need a business credit card?
What are the benefits of business credit cards for limited companies?
Using a business credit card can be a convenient way for limited companies to manage cash flow. This could be useful when waiting for clients to pay, or if you need to spread the cost of a large expense.
Many providers will also give you the option to have additional cards for employees, and you can usually apply spending controls to give you more control over your outgoings. Given that most also offer integration with accounting software and expense management tools, this can help to reduce the time you spend on admin and make it easier to keep track of your business expenses.
How to choose the best business credit card for a limited company
Before you apply for a new credit card for your limited company, consider the following to help you find the one that best suits your business’s needs.
APR
Check the APR to find out how much you will be charged in interest if you don’t clear your credit card balance in full each month.
Credit limit
If your business is well established and has a good credit rating you could be eligible for a high credit limit, but you may not know for sure until your application has been approved. Where possible, use the provider’s eligibility checker before you apply, as this may give you an indication of whether the credit limit you will be offered will suit your requirements.
Fees and charges
Check if your provider charges a monthly or annual fee, and whether this applies to each cardholder. If you regularly travel for business, look for a card that doesn’t apply foreign transaction (FX) fees.
Expense management and accounting software
Some limited company credit cards offer expense management tools and integration with accounting software. This can make it much easier to keep track of your business spending.
Introductory offers
Look out for introductory offers for new customers, such as a reduction in fees for the first year or a higher rate of cashback for a limited period. Consider how you plan to use the card, and which of these would be most valuable to you and your business.
Cashback and rewards
When you spend on your limited company credit card, your provider may give you the opportunity to earn cashback and rewards, including Air Miles. Always check that the rewards on offer are useful to you, and bear in mind that their value may be quickly cancelled out by interest unless you clear your balance each month.
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Pros and cons of limited company credit cards
Advantages
- A limited company credit card can help you to manage your business’s cashflow and cover short-term expenses.
- Many limited company credit cards include expense tracking and management tools and integrate with accounting software, making it easier to track your expenses.
- You can often add additional cards for employees, and can set personalised spending controls.
- Some limited company credit cards reward your spending with cashback or reward points, including Air Miles.
- Managed well, a limited company credit card may help you to build your business credit score.
Disadvantages
- You may be charged an annual or monthly fee, which could apply to each cardholder.
- You will need to pay interest unless you clear your balance in full each month – this can quickly add up, making this an expensive way to borrow.
- Limited company credit cards aren’t covered by Section 75 of the Consumer Credit Act, which protects purchases between £100 and £30,000 if something goes wrong. However, some business credit card providers do offer both fraud and purchase protection.
- You could hurt your business credit score if you overspend or don’t keep up with repayments.
- Depending on your provider, you may be charged foreign transaction (FX) fees if you travel for work and use your card overseas.
» MORE: How do business credit cards work?
Am I eligible for a limited company credit card?
As the owner of a limited company, you are legally separate from your company. This means you aren’t personally liable for any business debts and your business’s credit history is entirely separate from your personal credit report.
If your business has been trading for a while, you’ve probably had the chance to build a credit history, which means you have a better chance not only of your application being accepted, but of being offered a higher credit limit and competitive APR.
Bear in mind that some lenders do have certain restrictions and may also require you to have a minimum business turnover, as well as a good credit history.
Broadly speaking, you will need to meet the following eligibility requirements:
- Your business must be registered as a limited company in the UK
- You have an active business bank account
- You will need to pass the provider’s credit check.
How to apply for a limited company credit card
It’s usually straightforward to apply for a limited company credit card online. You may also be able to apply over the phone or, depending on the provider, in person at a branch of the relevant bank.
Most providers will encourage you to check your eligibility before you apply, which gives you an idea of how likely you are to be accepted. This reduces the risk of an unsuccessful application, which could hurt your business’s credit score.
You will need to supply the following information so that the provider can run a credit check:
- Your name, address, date of birth and contact details
- Your business’s legal name, registered address and company registration number
- Your average monthly turnover
- Your bank details
If you apply online you may get an instant decision, although it could take a week or two longer if the lender needs more time to confirm your business details.
Once approved, your physical card should arrive in the post within a few days. Some providers also issue a virtual card that you can use immediately.
» MORE: How to apply for a business credit card
How to use a limited company credit card
The following five tips will help you to make the most of your limited company credit card:
1. Clear your balance every month
You can expect to have an interest-free period each month, typically lasting up to 40-50 days. If you pay in full, and on time, you won’t be charged any interest. This saves you money on interest, prevents you from building up debt, and helps to boost your business’s credit score.
2. Stay within your credit limit
Overspending not only increases the chances of ending up in debt, it could also damage your business credit rating if you use more than 30% of your available credit. You may also be liable for overlimit fees if you max out your card.
3. Maximise cashback and rewards
If your limited company credit card offers cashback or rewards, make the most of introductory deals or promotional offers. Don’t forget that these benefits may be cancelled out by interest charges if you don’t clear your balance in full each month.
4. Check for fees and charges
These vary between providers but may include foreign transaction fees, annual charges, ATM fees and overlimit or late payment fees. Check which of these apply to your account and try to avoid them.
5. Avoid cash advances
Using your limited company credit card to withdraw cash at an ATM, also known as a ‘cash advance’, is best avoided as it’s an expensive way to borrow. Some providers charge a cash advance fee, but even if they don’t, you may be charged a higher rate of interest than the standard purchase APR from the day the transaction is made.
Alternatives to limited company credit cards
If you run a limited company, there are several alternatives to business credit cards.
Business charge cards
Although you use a charge card much like a credit card, the main difference is that you will need to clear the balance in full each month. You won’t be able to spread the cost of expensive purchases over time, but you may have access to a higher credit limit – which could be useful if you need to fund a large expense.
Business bank accounts
A business bank account typically gives you access to an overdraft facility, which can give you some extra financial flexibility.
Business loans
A limited company business loan can provide a lump sum of money that you then repay in monthly installments, plus interest.
Invoice finance
Instead of waiting for clients to pay, invoice finance allows you to access money that’s tied up in unpaid invoices, helping you to maintain cash flow.
Limited company credit card FAQs
Yes, it’s possible to get a limited company credit card as long as your business is registered in the UK, you have an active business bank account, and you pass the provider’s credit check.
Some business credit card providers don’t charge an annual fee, but many do – and you may need to pay an annual fee to access the most generous cashback or rewards programmes. Before you apply it’s important to calculate how much you could earn from rewards or other perks, as the value of these benefits will be quickly cancelled out if you pay interest on your balance.
Yes, a limited company is legally separate from the business owner so has its own credit score. This is true of all businesses, but sometimes a provider will look at your personal credit score or ask for a personal guarantee if your business hasn’t been trading for long or doesn’t have a good credit history. This means you will be personally liable for your business’s debts.
You can check your limited company credit score from a credit reference agency such as Experian or Credit Safe. You can sometimes access your business credit report via a free trial, but a monthly charge may apply.
The best way to build credit is to manage credit responsibly and build a positive payment history. Registering your business as a limited company and opening a business bank account will also help. It’s wise to check your business credit score regularly so that you can take steps to correct any mistakes before they impact your business’s score.
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