What is a business credit card? 

A business credit card works like a personal credit card, in that it allows an owner or employee to make company purchases on credit, which should be repaid to the card provider at the end of the statement period.  

Many Australian banks and credit unions offer credit card products for businesses, with varying terms and conditions. A credit card differs from a business credit account, which gets used for purchases from a specific vendor.  

How is a business credit card different to a personal credit card? 

A business credit card differs from a personal credit card in the eligibility requirements and purchases allowed. As a rule of thumb: you should never use your company credit card to purchase personal items. Doing so may violate the terms of your agreement with the lender.  

Also, in Australia, you will require, at minimum, a valid Australian Business Number (ABN) or Australian Company Number (ACN) to apply for a business credit card (there is no use applying for a business credit card without a business). 

Why do businesses want to apply for business credit cards? 

Revenue isn’t always consistent. Sometimes business owners see an advantage in maintaining cash in hand while using credit to pay outgoing costs. A business credit application for small business can be useful in this regard. These credit purchases get bundled into one bill. At the end of the reporting period, the business can pay all the credit off in one action. In the meantime, cash holdings can be kept and used for investments or unforeseen costs.  

Businesses with large amounts waiting in accounts receivable may find a credit card valuable, as they know the money is due in future (assuming that the owing parties aren’t bad debtors). They can make purchases or pay outgoings now, then use the influx of cash later to pay off the credit card bill.  

Business credit card products can also have reward or incentive programs that benefit customers, as with many personal credit cards. Your business may seek to access that benefit program on top of the line of credit.  

Do business cards utilise credit scores? 

Yes, lenders will use credit score information when assessing a borrower. Before lenders approve your business’ application for a credit card, they will usually conduct a check of your credit file with one or more reporting bodies (including your credit score). This check helps them determine a business’s suitability for the credit card product and the level of risk it may pose. 

Does applying for a business credit card affect personal credit? 

Yes, business credit payment behaviour can certainly affect your personal credit score. If you neglect credit card repayments, this behaviour may hurt credit scores for both the business AND any individuals involved. Repayment history on credit products is one of the factors known to affect an entity’s credit score.   

Is it worth applying for a business credit card with poor personal credit? 

Each credit provider has its own eligibility requirements. You may still be able to access credit card products, but they are likely to have higher interest rates applied if your credit score is poor. This is because you’re considered a higher risk to the lender.  

What are the pros and cons of having a business credit card? 

Pros: 

• Maintain a reserve of cash in the bank
• Spend the money held in accounts receivable now
• All purchases can get bundled into one bill
• The card may have rewards, perks, cashback or incentive programs 

Cons: 

• Easily accrue high interest charges on the debt if mismanaged
• Can be costly ongoing fees, such as annual fees
• Negative repayment behaviour may lower credit scores  

A step-by-step guide to applying for a business credit card 

• Thoroughly compare different business credit card products 

There are many credit card products to consider, each suitable for different kinds of business. You should thoroughly review and compare business credit cards in Australia to determine the best business credit card for your needs. You must be aware ahead of time of any fees or interest rates applied or if it is a business credit card with rewards. 

• Gather business documents 

The credit card provider will ask for different documents to verify and credit check your business during the application process. To save time, consider gathering the relevant documents before beginning.  

These documents may include: 

• Bank statements 
• Invoices
• Cash flow statements
• Legal documentation
• Review terms and conditions before applying to ensure eligibility 

There is no use applying for business credit card products the business is ineligible for. You will not receive approval, and submitting such an application may harm your credit score. Ensure you read all terms, conditions, credit card requirements and eligibility criteria before proceeding. 

• Apply either online, or by phone, mail or at a branch 

Once you are confident that you have gathered the appropriate documents, and found the ideal credit card product, fill out and submit your application.  

• Receive the credit card (if the application is approved) 

After assessing the application, the lender will approve or reject it. This process can take a number of days. If approved, the credit card gets sent to the business’ nominated address.  

Credit check risky trading partners with CreditorWatch 

With businesses continually seeking to access new lines of credit, your cash flow can be at risk. If a trading partner becomes too credit hungry, you may only realise the danger once they default on the money they owe you. You need to know about their deteriorating creditworthiness ahead of time.  

RiskScore, from CreditorWatch, is the most predictive credit scoring technology available for businesses. Drawing from data including 11 million monthly tradelines from 55,000+ customers, RiskScore allocates a credit score between 0-850 and risk tier from A1 to F. The higher the score, the less risky the company.  

If you discover that trading partners may be trending towards default, it’s time to prioritise collections and get that money out of your accounts receivable. We have branded templates, complete with our powerful third party endorsement, for every type of debtor communication. With 30, 60, and 90-day notices, final notices and more, our collections resources have proven to reduce days-sales-outstanding by up to 53%. That cash may make the difference for your business. Make it a priority. 

With the right tools, your team can make informed credit decisions that protect cash flow and avoid risky debtors. Speak to our expert team today.