The boom in small and home-run businesses has increased the demand for business credit card accounts. Credit cards of any form are the most popular way of managing finance. However, business expenditure needs to be kept separate from a business manager’s personal finances although managers of small businesses are likely to be the individuals making the application for a business credit card account and, in the outset, the credit score of the applicant will have a direct impact on the interest rates and credit limit that their company can expect.

The first place you start is with the word ‘credit’. A business credit card is a simple way of managing the finances of your business, separately from your personal expenditure. However, as the owner of a small or mid-range business, the type and amount of credit you can apply for can be dictated by your own personal credit score. Once you have the card or cards, the company can then begin to build up its own credit history, which will then impact either positively or negatively on future credit, according to how well the account is managed. Ultimately though, the person who has applied for that business credit card account is the person who will be liable for any repayments that the business cannot afford to make. So, the best starting point for any business manager wanting to apply for business credit is to check their own personal credit rating. This can be by applying online or through the post to one of the three major credit analysts: Hyperion, Exquifax or Experion. These data houses will hold records of your own personal spending and credit history and issue you with a credit score, accordingly. Needless to say, a lower score will make it harder for you to obtain credit and a higher one will make it easier.

The next thing to consider is what ‘credit’ means, in business terms. Put simply, it is the opportunity to borrow a fixed sum of money that is then repaid over an agreed period of time with a sum of interest for the service. If your business is already up and running, you should have a good idea of its income and expenditure and then be able to make a reasonable calculation as to how much credit the company actually needs. If your business has been trading for less than 2 years, you may want to seek financial advice to discover how much you reasonably need and, given that you are a relatively new customer, how much you can reasonably expect to apply for.

As with corporate business cards, standard business cards also come with associated loyalty reward schemes that can be very useful to small businesses; deals on hotels, car rental and road mileage can help with reducing outgoings.

Should your company make repetitive purchases of certain items, such as headed notepaper, it can be a good idea to obtain a purchasing card; this will help to reduce unnecessary paperwork and invoices, as these cards operate with just the use of the account number and not the actual card itself.

Where corporations can be approached by financial institutions, small businesses have to apply for credit. It can help the application if it is made to an institution with which the small business manager already has an account. This way, the credit card company can then more quickly assess the credit history of the individual. If it is good, application is more likely to be approved. However, if the individual has a negative or poor credit rating, that can have consequences for that person’s business credit card account application - credit limits are likely to be lower and interest rates are likely to be higher. A business credit card account, in terms of a small business, is a way of keeping the manager’s personal spending separate from the expenditure of their business. Yet, as with a personal credit card, a business credit card account , it has to be managed sensibly in order to maximise the available benefits: repayments must be made on time, as the incurring of any penalties cannot only impact upon the business, but also upon the credit score of the small business manager.

Tags: Business

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