So, you’ve just set up your company and you’re looking to take out a business credit card so that you can keep your personal and professional finances separate. Chances are, you’ve come across the term ‘personal guarantee’, which leaves you directly liable to pay any expenses that your company is unable to. This can be a daunting prospect and you may be hesitant to take the leap without being fully informed.

That’s why we’ve put together this helpful guide, where we’ll answer the following questions:

  • Are business credit cards personally guaranteed?
  • How can small business owners get a credit card?
  • What are the benefits of having a business credit card?
  • How can Countingup help you manage your finances?

Are business credit cards personally guaranteed?

Usually, yes. Most business credit cards will need to be personally guaranteed since lenders are reluctant to loan money to small businesses that don’t have a strong track record. A personal guarantee assures the credit card provider that there won’t be any outstanding charges on the card, even if the business closes down or goes bankrupt. 

Unless you’re representing a large corporation, this is a typically unavoidable agreement that you will need to make when taking out a business credit card. 

How can small business owners get a credit card?

Business credit cards are available to companies of any size, meaning you can also apply for one if you’re a sole trader. They are given in the name of the business, rather than that of an individual. 

However, there are some steps you will need to take if you’re thinking of applying for one, especially if you want to ensure that you’ll be getting the most out of it:

  1. Check your credit scores

Have a look at your personal and business credit scores as most lenders will look at both once you submit an application. Lenders may also take your business revenue, expenses and personal income into consideration, so take some time to ensure that you’ve organised all your information. 

If you don’t have any business credits, or you have a bad credit score, you might need to work on improving this before you can be approved. 

  1. Research which credit card is best for your business

There are many different types of business credit cards on the market, so you’ll need to consider which one is going to work best for the type of business you’re running. For example, if you frequently travel for work, you might want to choose a card that offers travel rewards. 

You’ll also need to look into the rates that you’ll be paying back on your debt since APRs (annual percentage rates) vary depending on the lender and may be influenced by your credit scores and income.

It’s important to ensure that you’ve done your research upfront because if you make too many applications, this can harm your credit score. 

  1. Send in your application

Once you’re confident that you’ve found the right credit card for your business, you’ll need to fill out an application. Most lenders will allow you to apply online via their website and they’ll outline all of the information they require from you in order to reach a decision. 

If you’re approved, you can activate and start using your new business card as soon as you receive it. 

What are the benefits of having a business credit card?

Although it’s likely that you’re going to have to personally guarantee your business credit card, there are also a number of perks to owning one. Many business owners benefit from using this type of card to manage their company finances, with around 500,000 business credit cards currently in use across the UK.

Here are just some of the reasons you may choose to own a business credit card:

  1. You can keep your personal and business expenses separate

This is one of the main reasons why many business owners choose to take out a business credit card. By keeping your statements separate at the end of each month, it makes record keeping and completing your annual tax return much quicker and easier. 

  1. It’s a good opportunity to improve your credit rating

If you consistently pay off your business credit card’s balance on time, you’ll find that your business credit rating may get a boost. Provided your vendors and suppliers report transactions to the credit bureaus, of course, but if not, you can do this yourself. 

  1. Larger credit limits

Often, business credit cards will provide higher spending limits than personal credit cards. The great thing about this is that these higher limits can allow you to make purchases for your business that may not have been possible otherwise. 

  1. Spending rewards

As we mentioned earlier, some credit cards offer various different rewards, ranging from cashback to air miles and loyalty points. This can be particularly helpful if you have monthly software expenses that could earn you some money back, or travel regularly as part of your job.

How can Countingup help you manage your finances?

Wouldn’t it be so much easier if you could manage all your business finances in one place? With the Countingup business current account and accounting app, you can. 

Take away the time-consuming, and often stressful, aspects of taxes and bookkeeping by making the most of its free accounting software, which automates these processes for you. You’ll also have access to real-time business finance insights with profit and loss reports, tax estimates and the ability to create invoices in instants. Find out more here