Can I fund a startup with a credit card?

Do you need funding for your startup?   

A startup may want to access funds because, simply put, starting a business is expensive. There are lots of costs you need to consider. Having funding can also help you get your business off the ground faster or scale up more quickly.

Reasons why you might need a credit card for a business startup:

Develop your product/service  

If you are developing a product, you’ll need to cover production costs before you can sell it. Even if you are providing a service, you might have advertising costs to cover. Besides, you need to pay yourself while you are working!  

Expand your team 

When it comes time to scale up, you may need to quickly expand your team in order to keep up with demand. Otherwise, you could become overwhelmed and have to turn away orders. Having ready funds to expand your team could help you out financially, but you should think carefully about whether you can commit to paying your staff on a credit card. 

Separate personal and business spending  

It’s important not to mix your business and personal spending – especially when it comes time to do your taxes! Having a credit card can help you separate your finances because you can use the statements for your expenses.  

Build up your business credit score  

As a startup, you’ll probably have a low credit score. But don’t worry, this may just be because your business hasn’t used any credit yet. 

Building a credit history through responsible use of a credit card can allow your startup to access better rates and other forms of credit in the future, like business loans.  

It’s important to remember to make payments on time and stay within your limit, as not doing so could harm your credit score. 

Can I get a business credit card as a startup?  

You should be able to get a startup business credit card, even if your business has a thin credit history.

There are cards specifically designed for startups, although you may need to sign a personal guarantee.  

You can apply for a business credit card online, over the phone or even by visiting the lender’s branch in person. Some companies don’t let you apply online if you’re a new customer, but it can be a good idea to talk your options over with a person, anyway. If you are applying online, make sure you use an eligibility checker tool before you apply to see how likely it is that you’ll get accepted. 

When you formally apply for a card, you’ll need to provide information including: 

• company name 
• type of company (e.g., sole trader, limited company, etc)
• how many employees you have
• what sector you trade in
• which countries you trade with
• how many employees you have
• revenue (if any)
• what you need the card for
• the credit limit you’d like on the card
• personal details (e.g., your name and address) 

As a startup with no credit history, the lender will likely take your personal credit score into consideration. Building your credit score will increase your chances of getting accepted for a business credit card.

What is the best credit card for a business startup?  

There is no best startup business credit card in general – but there is a best one for your business. What it is will depend on your individual circumstances, so make sure you look at the different types of cards available before making a decision. The types of cards you may want to consider include: 

• business credit cards – specifically designed for business (not personal use), it helps you keep your finances separate
• personal credit cards – linked to your personal credit history, not your business one. This could be an idea if you haven’t even started your business yet but need to access funds
• credit cards for bad credit – if you have a bad credit score you might want to consider a card that looks at other factors as well as your credit history
• 0% purchase cards – you get charged 0% interest on purchases within a set timeframe. Just remember, you need to pay off the card before the interest-free period ends to avoid fees
• rewards credit cards – earn rewards on your credit card to benefit your startup, such as cashback, insurance and points
• money transfer cards –  allows you to transfer money into your bank account without a fee, usually for an introductory period. Again, make sure you pay it off before the period ends to avoid charges
• balance transfer cards – you can transfer the balance of one credit card to another, allowing you to lower your interest rate. This could free up cash that you can use for your startup. Just make sure you pay your new card off

What are the different funding options available for startups?  

A credit card may not always be the best option for your startup. But the good news is that there are so many different funding options available. Which one is best for you depends on a range of things such as business size, amount needed, region, sector, turnover and other factors.  

Instead of getting a business startup credit card, you could fund your business by opting for one of the following routes instead: 

Crowdfunding  

Crowdfunding is where lots of people each pay a small amount (or large, if you’re lucky) towards your new business or project. You use a crowdfunding platform to explain your idea and collect donations. The best part of crowdfunding is that you can choose how you repay your donors. For example, free access to the game you’re developing. 

Business loan  

Your bank may be able to offer you a business loan to cover the costs of starting your business. If you need a large amount of money and can access low interest rates, this may be a good option for you. With a business credit card, you may get a higher credit limit than with a personal card, but you’re unlikely to access as much cash as you would with a loan. 

Bootstrapping  

If you have personal savings, you may want to put them towards the costs of your startup. Bootstrapping might also be a good idea if your business idea will start making you money quickly – you can invest back into your company. Doing this would mean that you don’t have to worry about paying off any debt.  

Government grants  

There are some government grants available to new businesses, as well as support schemes run by charities like the Prince’s Trust, which helps young entrepreneurs. It might be worth seeing if your startup is eligible for a grant.  

Thinking about funding your new business with a personal loan? Find out everything you need to know first. 

Disclaimer: All information and links are correct at the time of publishing.