How does a business credit card work?

A business credit card allows companies to make purchases on credit and pay the balance later. You'll receive monthly statements and can choose to pay the full amount, a set sum, or the minimum – though only paying the minimum will lead to higher interest charges. Many business credit cards charge an annual fee, so factor this into your decision. Alternatively, business charge cards have no preset credit limit but require the full balance to be cleared each month, making them ideal for businesses with larger, predictable expenses. When choosing a card, always check the terms and conditions. Compare interest rates, fees, rewards, and credit limits to find one that suits your business's needs and spending habits.

Is my credit record checked for a business credit card?

Yes, when you apply for a business credit card, credit card providers will typically assess both your business's credit record and your company’s overall financial health. If your business has limited or no credit history, the card issuer may also check your personal credit score to evaluate your creditworthiness.

Does using a business credit card affect my personal credit record?

Yes – using a business credit card can affect your personal credit, especially if you're the primary account holder or have personally guaranteed the account. Many issuers check your personal credit when you apply, and your payment history can influence your score if you're liable for the debt. To avoid negative impacts, use your business card responsibly: pay on time, keep your balance low, and avoid maxing out your limit. If you’re worried about managing repayments, contact your card provider early – they may offer flexible options or help restructure your debt.

What rewards can I earn with a business credit card?

Many business credit cards offer attractive rewards programs designed to help you earn benefits on your business purchases. Common rewards include cashback, where you receive a percentage of your spending back, as well as air miles, travel points, or even shopping vouchers. To make the most of your rewards, it’s important to choose a business credit card that aligns with your company’s spending patterns. For instance, if your business frequently spends on travel, a card that offers travel rewards like air miles or hotel points may be ideal.

Can I check my eligibility before applying for a business credit card?

Yes, many business credit card providers allow you to check your eligibility online before submitting a full application. This process usually involves a soft credit check, which won’t affect your credit score. A soft check gives you an idea of your chances of approval. By checking your eligibility first, you can avoid unnecessary hard credit checks, which could impact your personal credit score and your business’s financial standing.

Can several employees have their own card?

Yes, many business credit card providers offer the option to get multiple employee cards under one account. This allows selected employees to have their own cards, while the business receives a single monthly statement for all charges. In addition, providers often offer spending controls, enabling you to set individual spending limits and easily monitor expenses for each cardholder. This can help streamline expense management and improve oversight of your company's spending.

Do I need a business current account to apply for a business credit card?

No, you do not necessarily need a business current account to apply for a business credit card. However, having a dedicated business bank account can significantly simplify your financial management, allowing you to separate your business finances from personal transactions, making it easier to track business expenses and manage your cash flow. A business current account can help you stay organised, streamline bill payments, and ensure smoother financial operations for your company. Many business credit card providers may even prefer applicants with a business account, as it shows more structured financial management.

Can I get a business credit card for my new company?

Yes, startups and new businesses in the UK can apply for a business credit card. A business credit card can be an essential tool for managing cash flow and covering initial business expenses in the early stages. However, as a new company, you may be required to provide additional information to demonstrate your ability to meet repayment obligations. To assess your eligibility, the provider may conduct a personal credit check (especially if you're a sole trader or have personal liability), request company financial statements, and ask for details about your business assets. This will help the provider determine your credit limit and the terms of your card. Keep in mind that approval may be more challenging for new businesses without an established credit history, but offering a personal guarantee or showing strong personal credit can help increase your chances of approval.

Are there any interest-free business credit cards?

Business credit cards in the UK typically aren’t fully interest-free, but many offer an interest-free period on purchases — usually between 20 and 56 days — as long as you pay the balance in full each month. If you carry a balance beyond the due date, interest will apply, so it's important to clear the full amount to avoid charges. Always check the card’s terms to understand the interest-free period and any fees. Choosing a card with a generous interest-free window can help manage cash flow, especially when spreading the cost of large purchases.

Is it worth having more than one business credit card?

The number of business credit cards you should have depends on your business's needs. If your business has varied expenses, like travel or supplies, multiple cards can help manage these categories and maximise rewards (e.g., cashback or travel points). However, it’s important to manage credit limits carefully to avoid high credit utilisation, which could affect your credit score. Multiple cards can also help with cash flow management by spreading out payment due dates, but make sure you can track and manage each account effectively. Ultimately, choose the number of cards that fits your business spending and financial management capabilities.

How do business credit cards impact business taxes?

Purchases made for business purposes using your credit card, such as office supplies or travel expenses, can typically be claimed as business expenses when filing your taxes. It's important to keep detailed records of all transactions to ensure they are valid tax-deductible expenses. Business credit card statements can be a helpful tool for tracking and categorising these expenses for your self-assessment or corporate tax returns. However, interest paid on outstanding balances is generally not tax-deductible, so it's crucial to manage payments and avoid carrying a balance. It’s generally a good idea to consult with an accountant to ensure you're complying with tax laws and making the most of available deductions.

How long does it take to get approved for a business credit card?

Approval times vary by provider. Some offer instant decisions, and you may even receive a digital card the same day. If additional verification is needed, approval can take a few days, and the physical card typically arrives within 5–10 working days. To speed up the process, have the following information ready: Business name and trading details Company registration number (if applicable) Financial figures (e.g., annual turnover) Personal details for directors or partners

Can I get a business current account with bad credit?

Yes, it’s possible to get a business current account even if you have bad credit, though it may be more challenging. Some banks and financial institutions offer business accounts specifically designed for people with poor credit histories. These will sometimes come with fewer features, but can still help you manage your business finances effectively. To improve your chances of being accepted for an account, you can take steps to enhance your credit history, such as paying bills on time, reducing outstanding debt, and regularly checking your credit report for errors.

How long does it take to open a business bank account?

Opening a business bank account typically takes between one and four weeks, though the process can be faster depending on the bank and your business type. Some banks even offer same-day account opening. Factors that can affect the timeline include your business structure (sole traders usually take less time), your relationship with the bank, and the application method. Some banks offer faster services, and non-residents or high-risk businesses may experience longer processing times. Once your application is submitted, the bank will conduct background checks and may contact you for additional information.

Can I use a personal current account for my business transactions?

While it’s technically possible to use a personal current account for business transactions, it’s generally not recommended. Keeping personal and business finances separate helps you stay organised, track expenses more easily, and simplify tax reporting. If you run a limited company, using a business current account is a legal requirement because your company is considered a separate legal entity. Sole traders aren’t legally required to have a business account, but opening one can provide tailored features, such as accounting tools.

What fees can I expect with a business current account?

The fees for a business current account can vary depending on the bank and the account type. Common charges to look out for include: Monthly maintenance fees: A fixed charge for maintaining your account. Transaction fees: Costs for deposits, withdrawals, and payments. Overdraft charges: Fees for accessing overdraft facilities. International transfer fees: Charges for sending or receiving money abroad. Debit card usage fees: Costs for using your business debit card, especially abroad. Some business accounts may offer free banking for an introductory period, so it’s essential to carefully review the fee structure to find an account that matches your business needs and budget.

Are business bank accounts protected by FSCS?

Yes, business bank accounts are protected by the FSCS up to £85,000, provided the bank is FCA or PRA-authorised. For small businesses or limited companies, protection applies if the bank fails. Sole traders have combined protection with personal accounts under one £85,000 limit. For more complex claims, eligibility may vary depending on your business type. Check with your bank for specific coverage details.

Can I have multiple business current accounts?

Yes, you can have multiple business current accounts. This can be useful for managing different aspects of your finances, such as separating operational expenses from tax savings, or tracking revenue for different projects. If you run multiple businesses, separate accounts for each can simplify accounting and financial reporting.

Do I need to maintain a minimum account balance?

Whether you need to maintain a minimum balance depends on the specific business current account you choose. Some banks may require a minimum balance to avoid fees or to access certain account features, while others may be more flexible. Review the account’s terms and conditions or ask your provider directly if you're unsure.

Are there any limitations on the number of transactions or cash deposits I can make?

Many business current accounts have limits on free transactions or cash deposits each month. Exceeding these limits may incur fees. Some accounts also cap the maximum cash deposit per day or month. To avoid extra charges, review the account terms and choose one that suits your transaction volume.

What happens if I close my business?

If you close your business, notify your bank and close your business current account. The bank will guide you through the process, which will typically involve settling any outstanding payments or fees. Any remaining funds can be transferred to a personal account or another business account.

Am I guaranteed an overdraft with a business account?

No, getting an overdraft with a business current account isn’t guaranteed. Just like with personal accounts, you’ll need to pass a credit check to be approved, and the overdraft limit offered will depend on both your financial circumstances, and the bank’s assessment of your business. If you need an overdraft, it’s a good idea to speak directly with your account provider to explore available options and understand the terms, including any fees and interest rates that could apply.

Is my business eligible to use the Current Account Switch Service?

Your business may be eligible to use the Current Account Switch Service if it meets the following criteria: Fewer than 50 employees Annual turnover of £6.5 million or less Both your current and new banks are part of the switch guarantee scheme If you're unsure whether your business qualifies, contact your new bank for confirmation and guidance on the switching process.

Can I have a business current account if I'm a sole trader?

Yes, sole traders can open a business current account, just like partnerships and limited companies. Having a dedicated account is smart as it separates personal and business finances, simplifying income tracking, expenses, and tax management. Many banks offer accounts tailored to sole traders with features like accounting integrations, invoicing tools, and business support, helping you manage cash flow and prepare tax returns more easily.

Can I use my business current account for personal transactions?

Generally, it’s not advisable to use your business current account for personal transactions. Keeping business and personal finances separate helps maintain clear records, avoid tax complications, and ensures compliance with accounting standards. Mixing personal and business expenses can lead to confusion and potential legal issues, especially when it comes to taxes and audits. Additionally, it's worth noting that many banks prohibit the use of business accounts for personal purposes.

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Business overdrafts: what they are and how to apply

How to get a business overdraft

Written by Rachel Wait, Contributing writerEdited by Lucinda O'Brien, Senior finance editor, 25 April 2025

Fact Checked

We explore how business overdrafts work and reveal the pros and cons of using one.

A business overdraft is a short-term borrowing facility linked to your business bank account.

Having access to a business overdraft could enable your small business to borrow money as and when required while only paying interest on the amount it uses. This guide explains everything you need to know.

Key takeaways

A business overdraft links to your business bank account
Your bank gives you an overdraft limit and you can borrow up to this amount when needed
Repayments are flexible, but the sooner you repay the amount borrowed, the less you pay in interest
It’s usually quick and easy to arrange your business overdraft
You can usually apply online or by phone

Choose the best business bank account for your company with features including no set up fees.

Compare business bank accounts

What is a business overdraft?

A business overdraft is a short-term borrowing facility linked to a business bank account. It allows small businesses to withdraw funds beyond the available balance in their current account, up to an agreed limit.

This can give businesses access to funds whenever required, helping to solve short-term cash flow issues and pay for unexpected expenses.

How does a business overdraft work?

When you apply for a business overdraft, your bank reviews your business finances and sets an overdraft limit based on what it thinks you can afford. This is the maximum amount of overdraft you can use without incurring additional fees and potentially damaging your business credit score.

Once you’ve set up a business overdraft, the money is available instantly whenever you need it. This means your account balance can drop below £0. So, if your balance is £200 and you spend £1,200, your new account balance falls to -£1,000.

Whenever you borrow money through your overdraft, you need to repay it. There’s no fixed amount to repay each month, but as most banks charge daily interest on the amount borrowed, the sooner you repay your overdraft, the less you pay overall.

Advantages of a business overdraft

There are many advantages to using a business overdraft, including:

Easy to arrange – If you have a business bank account, it should be straightforward to arrange a business overdraft. You can often do this online or over the phone, and most overdrafts are set up as soon as you’re approved
Ideal for cash flow management – An overdraft can enable you to pay staff or suppliers, even when clients are late paying you
Only pay interest on what you borrow – You only pay interest on the amount you use, not the whole overdraft limit
Flexible repayments – There’s no fixed repayment schedule to follow

Disadvantages of a business overdraft

There are also several downsides to consider:

Higher interest rates – You typically pay a higher interest rate on an overdraft than with other finance options
Temporary solution – You should only use a business overdraft for short-term borrowing
Smaller borrowing limits – You can’t usually borrow as much as you can with a business loan
Fees apply – You may have to pay an arrangement fee, as well as a renewal fee each year when you renew the overdraft facility
Repayable on demand – In some cases, you might have to repay your overdraft whenever your bank demands, rather than when you can afford to

What fees and rates apply to a business overdraft?

You pay an annual interest rate on the amount by which you’re overdrawn. This rate can vary depending on the provider, as well as factors such as your business credit history and financial stability. You usually pay a variable interest rate, which means it can change at any time.

You might also pay a fee for setting up the overdraft. Your bank often links this arrangement fee to the size of overdraft you apply for, so you pay a higher fee for a larger overdraft. Fees can also apply each year that you renew the facility and if you exceed your overdraft limit.

These charges can make business overdrafts more expensive than other finance options.

Am I eligible for a business overdraft?

To be eligible for a business overdraft, you must be at least 18 years of age and, typically, already hold a business bank account with your chosen provider. Some banks also ask that your business has been trading for a set time and companies usually need to be UK based.

When assessing your eligibility, providers look at your business credit history, as well as your cash flow and revenue, to calculate whether you can afford to repay the amount borrowed. They also consider any existing debt your business has.

How to apply for a business overdraft

You can usually apply for a business overdraft over the phone or online. You need to provide personal and business details, including your name and address history, your company address, your registered company number with Companies House (if applicable), and what you need the money for.

As part of the application, the provider usually asks for documents such as:

Business bank statements for the past three to six months
Financial accounts
Cash flow forecast
Business plan – especially if your business is new

Once you’ve submitted the required information and documents, the bank assesses your business’s creditworthiness and health. If you’re approved, you should receive details about your overdraft limit and interest rate soon after.

Business overdraft alternatives

An overdraft isn’t the only way to borrow funds for your business. Other options to consider include:

Business credit cards – These provide another flexible way to borrow money. You can borrow up to your set credit limit and choose how much to repay each month. However, interest rates can be high, unless you clear your balance in full each month
Business loans – These enable you to borrow a larger sum of money, which you then repay in monthly instalments over a set term. You typically pay a lower interest rate, but repayments are less flexible
Invoice finance – This enables you to borrow money by using your business’s unpaid invoices as collateral. You borrow up to a percentage of the value of those invoices and repay this once your customers have paid
Asset finance – This is only suitable if you need to buy equipment or machinery for your business but don’t have the funds to pay for it up front. It enables you to spread the cost over time
Merchant cash advance – You can use a merchant cash advance if your business takes most of its sales through card terminals. You receive a lump sum up front and repay it through a percentage of your card sales

Find out more about the different types of business finance available.

FAQs

Can I have a loan and an overdraft?

Yes, provided the lender believes you can comfortably afford to make the repayments for both.

Can I increase, decrease or remove the limit of my business overdraft?

Yes. You can usually do this through online banking or your provider’s app. However, your provider might not agree to your request – particularly if you’re looking to increase your overdraft limit.

How much does a business overdraft cost?

That depends. You may have to pay an arrangement fee to get the overdraft set up. But you also pay interest on any overdraft you use. The rate charged depends on the bank, as well as factors such as your business’s creditworthiness.

Will getting a business overdraft affect my credit score?

Yes, a business overdraft can affect both your business and personal credit score, particularly if you fail to repay your overdraft or exceed the limit. It’s more likely to impact your personal credit score if you’re a sole trader or if you have signed a personal guarantee.

However, if you stay within your overdraft limit and make regular repayments, an overdraft can have a positive impact on your credit score.