10 ways to increase your business productivity

Starting your own business is an exciting and demanding experience. 

Dealing with the challenges of running a business could be made a little easier with a range of flexible funding options.

Whilst there are a number of options available to start-ups, two possible ways of obtaining such finance are through a business credit card or a Start Up Loan.

In this article, we’ll take a closer look at both options, exploring how they work and what might make one a better fit than the other. We’ll also examine how they might complement each other.

Our goal is to help you make an informed choice that suits your business needs.

Of course, when it comes to financial decisions, it’s always wise to consult with an independent financial advisor. 

They can guide you to the best solution for both you and your new business, making sure you’re set up for success.

What is a business credit card?

For many businesses, having a business credit card is an important way to access finance.

A business credit card is a financial tool that provides short-term financing solutions for your business, helping you manage your company's expenditures efficiently.

Similar to personal credit cards, business credit cards also have a predetermined spending limit.

The versatility of business credit cards allows you to cover various business-related expenses.

These can range from purchasing office supplies to covering travel costs.

Consequently, a business credit card could be an essential tool to maintain smooth and efficient business operations.

Learn more about business credit cards.

What is a Start Up Loan?

A Start Up Loan is a personal loan aimed at helping people start or grow their businesses. 

It’s specifically created for aspiring entrepreneurs and new business owners who often face challenges securing funding. 

To address this, the government introduced the Start Up Loan programme to make financing more accessible for these groups.

One of the key features of a Start Up Loan is that it’s unsecured lending. 

This means you don’t need to offer your home or other valuable assets as security to access the funds. 

It also comes with a fixed interest rate of 6%, providing predictability in your repayments. 

Beyond just funding, the Start Up Loan includes additional support to help set your business on the path to success. 

For example, it provides successful applicants with 12 months of free mentoring and a range of exclusive business offers.

Learn more about a Start Up Loan.

How much funding could I access via a Start Up Loan or a business credit card?

With a Start Up Loan, you could borrow anywhere from £500 to £25,000 to help get your business started or to grow it. 

If your business has more than one director, there’s even more potential. 

Each director (up to a maximum of four) can apply for their own Start Up Loan. 

This means your business could benefit from a combined funding boost of up to £100,000.

With a business credit card the amount you could borrow as a start-up might be anywhere from a few hundred pounds to £10,000, depending on your business’s financial health and credit score. 

Over time, with responsible use, improved credit reputation and increased turnover, that limit could increase.

What is the process for applying for a Start Up Loan or a business credit card?

Since its launch in 2012, the Start Up Loan programme has helped over 100,000 people bring their business ideas to life. 

Many of these individuals had struggled to secure funding through other means, such as traditional lenders.

Applying for a Start Up Loan is straightforward and quite similar to other types of loans. 

The process begins with an eligibility and credit check to ensure you qualify. 

From there, you’ll need to complete an application form and submit important documents, such as a business plan and a cash flow forecast.

To apply for a business credit card the application process may vary, depending on the provider’s policies. 

For instance, some card providers require you to open a current account with them before you can even apply.

When evaluating your application, the credit card company will consider several factors:

• Affordability: The provider will assess your business's financial health and its ability to manage credit card repayments
• Company assets: The value of your company's assets can influence the decision. This gives the provider a sense of your business's financial stability
• Business credit history: Your business's credit history plays a crucial role in the decision-making process. A good credit history indicates responsible financial management, which is attractive to credit card companies.

What do I need to prepare before applying for a Start Up Loan or a business credit card?

When applying for a Start Up Loan, applicants will need to put together a Business plan, Cash flow forecast, and a Personal Survival Budget.

These documents will be used to assess the strength and viability of the applicant’s business as well as their ability to afford the repayments.

Templates for each document can be downloaded from the Start Up Loans website.

Your Business Support Partners (BSP) can help provide guidance and support throughout the application process. 

They work with you to develop your application, not just review it, to ensure it is as strong as possible before the final lending decision is made.

Some credit card providers require that you open a business bank account with them to access their business credit card services.

In addition, you’ll need the personal details of all  the directors or partners of the business (including their home addresses for the last two years). 

You’ll also need your basic business details, including your Company’s Registration Number (provided by Companies House) if you’re a limited company.

In terms of financial information, you’ll have to provide details of your company’s annual revenue, income and expenditure as well as any debts. 

You may also need to provide a business plan and a cash flow forecast.

You should also expect your company’s credit history to be checked.

If you’ve only just started trading and don’t have a business credit report, providers run a check on your personal credit file.

When applying for a Start-Up Loan or business credit card you must be at least 18 years old and reside in the UK. Additionally, your business should be based in the UK.

What will a Start Up Loan or a business credit card cost?

A Start Up Loan will require you to repay the entirety of the loan (plus interest charged at 6%) over the course of the loan duration – which can be anywhere between one and five years.

You are personally liable for repayment even if your business faces changes or difficulties.

The cost of a business credit card varies greatly depending on the terms of the lender and financial position of your business. 

The typical cost of a business credit card varies depending on the provider, features, and the type of business.

Typically, there is an annual fee that ranges from £0 to £100, with interest rates ranging from 15% to 35%. However, if the balance is paid off in full each month there won’t be any interest to pay.

Most business credit cards require a personal guarantee from the business owner or director, making them personally liable for outstanding debts if the business defaults.

What additional support does a Start Up Loan or a business credit card provide?

When someone takes out a Start Up Loan, they become eligible for 12 months of free business mentoring.

Having a mentor can offer a fresh, unbiased perspective on your current strategies, helping you make smarter decisions. 

Plus, they can connect you with knowledge and resources you might not have found on your own.

Start Up Loan recipients can also access a customer benefits programme that offers a variety of offers and discounts on:

• business and personal development
• tech empowerment
• everyday top brands.

Business credit card providers may offer a range of perks, although specific offerings will vary between different card providers. 

herefore, it's crucial to thoroughly review the terms and conditions of each card before making a decision.

Here are some possible benefits: 

• Online guarantees: these guarantees offer protection against fraudulent online use of the card 
• Misuse insurance: this covers any unauthorised or inappropriate use of the card by employees
• Extra fraud insurance: in addition to misuse insurance, some providers offer extra coverage for any form of fraud or misuse
• Travel insurance: Some card providers also offer complimentary travel insurance
• Partner discounts: Some business credit card providers offer discounts via partners on office supplies, software, courier services, as well as travel and hotels
• Cashback and credit: this includes cashback on business purchases, up to 56 days interest-free credit on purchases if the balance is paid in full, as well as flexible repayment options.

How long does a Start Up Loan or business credit card last for?

With a Start Up Loan, the relationship between the applicant and the lender ends once the applicant has paid back the money borrowed, plus any accrued interest.

This will be during a previously agreed period of time that could be anywhere from one year to five years.

If a business has paid back their loan and is still under five years old, they could then apply for a second Start Up Loan.

While a physical credit card is replaced every 2-5 years, the credit account remains open unless closed by the cardholder or issuer.

But why not choose both?

You don’t have to choose between a Start Up Loan and a business credit card and could have both.

You could use a Start Up Loan for major upfront costs (equipment, setup, marketing), while using a business credit card for ongoing expenses and short-term cash flow.

This dual approach offers flexibility and provides a financial cushion without relying too heavily on one single source of funding.

Still, it’s best to seek independent financial advice before entering into any financial agreement.

Interested in learning more?

Whilst a Start Up Loan and a business credit card are both ways in which entrepreneurs finance their venture, there are other options.

Our Making business finance for you guide takes you through many of the different funding options that are suitable for starting a business.