What is a revolving credit card?

With 46% of small business owners using their personal credit cards to fund business expenses, it’s no surprise some entrepreneurs are wondering if a revolving credit card might be a good tool for their business.

What is a revolving credit card?

A revolving credit card is an ongoing line of credit extended from a lender to a borrower. The borrower can use the provided card to make both online and physical payments. They can then return the spent funds (usually within a 30 day period) and reuse the line of credit as and when it’s needed, up to the agreed limit.

Benefits of getting a revolving credit card for your businesses

• Flexibility: A revolving credit card can be a flexible way to gain access to funds as and when they are needed. Since the limit always stays open, you can access the funds on months they’re needed and leave them on months they’re not.

• Cash flow: 30-day invoice payment terms are fairly standard now, which often means B2B businesses are left paying their suppliers before they receive the funds from their clients. If utilised correctly, a revolving credit card can help manage cash flow in circumstances like these.

• Rewards: Many business credit card providers offer rewards. These rewards can come in the form of air miles which can be used to pay for flights, points which can be used to make purchases, and discounts at popular stores.

A few drawbacks to be aware of

• Overuse: Continuous access to a line of credit can result in overuse and impulsive decision making.

• Credit score: Applying for a revolving credit card will usually involve a hard search being added to your credit record. If too many hard searches are added, your score can go down. Furthermore, utilising your entire credit limit on a regular basis, not making your repayments on time, and defaulting on your credit card can all have a negative impact on your business or personal credit score and therefore on your ability to borrow in the future.

How much can I get with a revolving credit card?

If you are eligible for a credit card, your limit will be based on a number of factors, including:

• Credit score: Your personal or business credit score will likely have an impact on how much you’re extended. Which one it will impact will depend on whether you’re applying as a business, a sole trader, or as a start up, and whether or not you’re asked to provide a personal guarantee.

• Business history: Your history, cash flow projections, and the details of your business can also have an impact. For example, a new start up may get a smaller limit than that of a twenty year old business with an established income and spending history.

• Your decision: It’s also your choice how much of a limit you get. If you’re extended a limit of £10,000 and you feel uncomfortable with that amount, you’re always free to request a reduced limit. You’re also able to ask for higher limits from your provider once you’re signed up with them. These increased limits are subject to approval. 

The average UK credit limit is between £3,000 and £4,000. Best practice generally suggests utilising up to 25% of your credit limit, so if you are provided a limit of around £10,000, best practice would recommend using approximately £2,500.

Is a revolving credit card the right choice for my business?

Whether or not a revolving credit card is the right choice for your business will depend heavily on your needs, circumstances, and business goals. Consider these questions when making your decision:

• Do you want a way to manage company expenses?

• Are you a responsible borrower?

• Do you want flexible access to funds?

• Do you want access to credit card rewards, points, and travel benefits?

• Are you prepared to repay all borrowed funds on a monthly basis?

• Can you keep track of your spending to avoid overspending?

If you answered yes to many of these, a revolving credit card may be a suitable choice. Apply for one here.

Apply for a revolving credit card with Funding Options by Tide

We help match eligible businesses and sole traders to our network of over 120 lenders offering between £1,000 and £20M. Getting a quote won’t affect your credit score (although a full application will – but don’t worry, we’ll let you know once you get to that stage) and our dedicated business finance specialists are on hand to provide expert support. Just click the link below and submit your details to find out if you’re eligible.

Find a revolving credit card

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.