Credit card benefits and risks highlighted to SMEs in new guide

By Anita Jaynes on 20 September, 2016

The key aspects of business credit and charge cards for small businesses have been explained in a new guide by ICAEW and Barclaycard. With credit cards used by 47%* of SME employers, they are the most popular form of finance but come with both benefits and risks.

Credit and charge cards are a popular form of finance for small businesses alongside bank overdrafts (also 47%). The new guide highlights the benefits such as improved cash flow, a line of credit, reporting and building a credit history. However is also explains the risks to consider such as fees, interest, budget management and security.

Stephen Ibbotson, ICAEW Director of Business, said: “With many banks, the application process for business credit or charge cards may be faster and easier than for a bank overdraft or loan. This means that a business can get quick access to credit and it is understandable why they are so popular. As with any credit however, there are risks and this guide helps small businesses understand what these are and how they can avoid them.”

Alejandro Stein, Managing Director for Barclaycard Global Commercial Payments, said: “This guide aims to help small business owners – whether they’re just starting out or have been operating for a few years – understand more clearly how business credit and charge cards can benefit them, both in terms of improved cash flow and greater levels of reporting. It also covers control and security, and the features they need to be conscious of, for instance budget management as well as potential fees and interest.  We hope it will help SMEs of all sizes make better use of business credit and charge cards where there is the opportunity for them to improve their business performance.”

Stephen Ibbotson, added: “For many businesses, a business credit or charge card can smooth out peaks and troughs in purchasing. Provided you keep control of the expenditure, a business credit or charge card can provide a valuable source of finance, while keeping a succinct record of overhead expenses.”

The ICAEW Business Advice Service (BAS) is able to direct start-ups and SMEs to local accountancy firms which offer free sessions to explain how credit cards can help, along with a number of other areas including cashflow, growing a business and other finance options. For more information go to:

*Survey by Department of Business, Enterprise, Innovation and Skills (BEIS)