Can I get a business credit card as a sole trader

Who can apply for a business credit card?  

You can apply for a business credit card if you’re a:

• sole trader or self-employed
• freelancer
• business owner
• company employee (if you have permission to do so)

It doesn’t matter what type of company you run. Whether you’re a startup business, sole trader or help run the accounts for a larger company, you can still apply for a business credit card.

Business credit card eligibility criteria 

Although lenders have different criteria, there are some common checks that they all conduct. These include (but are not limited to):

• your credit history (business and sometimes personal as well)
• how much you earn
• how steady your income is
• how well you’ve managed any previous debt

If your business hasn’t taken out credit before, it’s likely that the lender will take your personal credit history into consideration as well as your business credit history.

You can check how likely you are to be accepted before you apply by using a business credit card eligibility checker. This tool runs a soft search on your credit file, which means it doesn’t affect your credit score.

How can a sole trader get a credit card? 

To get accepted for a credit card as a sole trader, you will need to provide the following information to the lender:

Proof of income

This typically takes the form of bank statements, tax returns and profit and loss statements. Some lenders require you to have a minimum monthly or annual income to qualify for a business credit card.

Business credentials

Your business credentials as a sole trader include your trading name and your unique taxpayer reference (UTR). You may need to provide these in order to prove that you are a sole trader.

Savings

Lenders usually consider people with savings as low risk, because it shows that you can manage your money responsibly. Even if your income fluctuates throughout the year, you have savings to fall back on. So, in theory, you should be less likely to miss credit card repayments than somebody with no savings.

Credit history

The better your credit history is, the higher your chances are of getting approved. A higher credit score shows lenders that you can borrow responsibly and are likely to make your repayments on time.

If you don’t have a high business credit score, don’t worry – it may just be that you are a new sole trader and haven’t had a chance to build one yet. Many lenders take your personal credit score into consideration too, which could work in your favour if you have a good rating.

Advantages of a business credit card 

There are many different advantages to getting a business credit card as a sole trader:

• convenient and easy way to pay – you can pay online and in person. You don’t have to carry cash around with you, which also means your money is more secure
• keep your personal and business finances separate – this helps when it comes to bookkeeping
• build your business credit history – if you manage your sole trader credit card responsibly you can build a good business credit history and credit score. In turn, this could boost your company’s chance of approval for finance in the future
• access rewards – for example, air miles, travel insurance and cashback are more common with business credit cards than personal credit cards
• spread the cost of expenses – this can help with cashflow and make your repayments more affordable. However, interest may apply if you don’t clear the balance in full each month (unless you are on a 0% introductory offer)

Things to consider before getting a business credit card 

You should also consider the drawbacks:

• annual fees – business credit cards usually come with an annual fee, which should be stipulated in the terms and conditions
• damage your credit score – not managing your card responsibly can damage your business and personal credit scores, so you need to make sure you can pay at least the minimum amount on time, every time – and stay within your credit limit
• higher amount of credit – having more credit available at your fingertips could make you appear as high risk to lenders in the future, and there may be more temptation to spend
• late repayment fees – each time you miss a payment or pay less than the minimum amount, you are likely to be charged a late fee, and this will stay on your credit report for 6 years
• interest rates – if you don’t repay the full amount each month, your credit card provider will charge you interest on top of the balance