Business credit: how a business credit card helps your startup

At the early stages of your start-up journey, access to credit can be a lifesaver.

Cashflow is tight, customer revenue can fluctuate wildly and large-scale bank loans and external funding may be in short supply. In this situation it might seem counterproductive to apply for a business credit card – a move that adds to your debt level.

But, in fact, applying for a company credit card and using that credit facility responsibly can have a hugely positive effect on your ability to fund your growth and access lines of credit.

Let’s explore five ways that a business credit card can improve your funding

1. Builds up your business credit profile

When you use a business credit card responsibly, and pay off the repayments each month, this starts to build up a credit history for the company. This credit profile is directly linked to your business and is separate from your own personal credit.

Having this credit history (and the associated business credit score) is crucial when applying for business loans and accessing future, large credit lines.

2. Establishes you as a responsible borrower

Paying your credit card bill on time each month demonstrates your financial discipline and an ability to manage debt in a responsible way.

When applying for loans, bank overdrafts and trade credit, lenders want to know that you’re a low-risk business to lend to. Responsible payment behaviour acts as an indicator of trustworthiness for future borrowing and will increase your chances of successful funding.

3. Provides a flexible line of credit

Having a business credit card makes it easier to cover your expenses and overheads.

A credit card gives you flexible, accessible funds for your day-to-day operational needs. It’s also an excellent way to cover any unexpected expenses or cashflow gaps. Managing this line of credit also prepares you for larger, more formal, credit facilities.

4. Demonstrates a prudent use of credit

Your credit utilisation rate is a key metric that credit reporting agencies will be interested in.

By not maxing out the available credit on your credit card, and keeping utilisation low, you can show that your business manages debt in a sensible way. This marks you out as a low-risk borrower – a key factor in accessing further credit, business finance and investment..

5. Acts as a gateway to more favourable terms

By being responsible with your credit use, you set the foundations for a business credit profile.

A solid track record with a business credit card may lead to pre-approved offers for larger credit lines, better interest rates and more flexible terms from banks. This is incredibly helpful as you scale the business and need additional funding to drive your growth journey. Talk to us about applying for credit and business finance

If your startup is in need of an increased cash runway and improved access to credit, applying for a business credit card is an excellent way to improve your financial flexibility.