Revolving credit facility vs business credit card: which one actually fits how you spend?

The main difference in a revolving credit facility vs business credit card comparison is scale and how you access the money. A revolving credit facility gives your business a larger pot of funding that lands straight in your bank account, better suited to bigger or ongoing costs like stock or payroll. A business credit card gives you a smaller, card based limit for everyday spending, often with rewards or an interest free period built in. Both let you draw down, repay and reuse funds without reapplying each time, so the right choice comes down to what you are funding and how you want to spend it.

This guide sets out how each option works, what they typically cost, how their limits compare, and how to decide which fits your business, or whether it makes sense to hold both at once.

Revolving credit facility vs business credit card at a glance

What is a revolving credit facility and how does it work?

A revolving credit facility gives your business an agreed credit limit that you can draw against whenever you need to, with funds paid directly into your bank account. Once you repay what you have borrowed, that portion of your limit becomes available again without a fresh application, and you only pay interest on the funds you have actually drawn down. It suits businesses that need to regularly top up stock, cover fluctuating staff costs, or smooth out cash flow gaps that come and go throughout the year. Read our full guide to a revolving credit facility for a breakdown of how limits, rates and terms work across our panel of lenders.

What is a business credit card and how does it work?

A business credit card works in the same way as a personal one, except the credit line, spending and repayments sit in your company's name. You spend through a physical or virtual card up to an agreed limit, and clearing the balance in full each month means you avoid interest entirely, regardless of the card's APR. It suits day to day costs such as stock, subscriptions, travel and supplier payments, and it gives employees a way to buy what they need without a lengthy expenses process. Our guide on how to get a business credit card covers eligibility and the application process in full.

How do the costs compare?

A revolving credit facility usually works out cheaper than a business credit card once you are carrying a balance, but a card can cost nothing at all if you clear it in full each month.

Interest on a revolving credit facility typically runs from around 1% to 4% a month on the funds drawn, which works out at roughly 12% to 50%+ representative APR depending on your risk profile, plus an arrangement fee of around 1% to 3% of the agreed limit. A business credit card has no equivalent arrangement fee in most cases, but representative APRs on the balance you carry past the interest free period typically sit between around 15% and 35%, and can run higher on cards aimed at newer or higher risk businesses.

If you clear your card balance in full every month, you pay no interest at all, which can make a card the cheaper option for short, planned purchases. If you expect to carry a balance for weeks or months at a time, a revolving credit facility is usually the lower cost route, since its rate sits below most card APRs once you are actually paying interest. If you are already carrying a balance on an existing business credit card, it is worth reading our guide to balance transfer business credit cards before deciding whether to switch cards or move to a revolving credit facility instead.

How do credit limits compare?

Revolving credit facility limits are generally set around one month's turnover, extending further for established businesses with a strong trading history, and funds are agreed for a fixed term of 6 to 24 months. Business credit card limits are typically smaller for newer or smaller businesses, often a few thousand pounds, though some fintech providers offer up to £250,000 to larger, well established companies, and most lenders will review your limit upward once you have built a track record of on time repayments.

A stronger business credit score tends to unlock a higher limit and a better rate on either product, so it is worth checking where you stand before you apply for either one.

Which is better for day to day spending versus larger costs?

A business credit card is the better fit for everyday spending you can track and clear monthly, since it comes with built in expense controls, employee cards and often rewards on money you are spending anyway. A revolving credit facility is the better fit for larger or recurring costs, such as restocking ahead of a busy period, covering payroll between invoice payments, or bridging a cash flow gap that runs longer than a single billing cycle.

Consider a revolving credit facility if:

• You need a higher limit than a card can offer

• Your funding need is tied to stock, payroll or a recurring cash flow gap

• You would rather have funds land in your bank account than spend through a card

• You are comfortable carrying a balance for weeks or months at a time

Consider a business credit card if:

• Your spending is made up of smaller, day to day purchases

• You can clear the balance in full most months and want to avoid interest entirely

• You want to give employees their own spending limits without a lengthy expenses process

• Cashback or rewards on existing spending would add real value

Can you use a revolving credit facility and a business credit card together?

Many businesses hold both at the same time, and there is no reason not to if your overall borrowing is manageable. In practice, this often works well: a business credit card handles day to day spending and earns rewards along the way, while a revolving credit facility sits in reserve for bigger or ongoing costs that a card's limit was never designed to cover. Keeping card spending connected to your accounting software also makes it easier to see exactly how much of your overall credit you are using across both products at any time.

What do lenders check before approving either option?

Lenders assess a revolving credit facility and a business credit card in a broadly similar way, looking at:

• Whether your business is registered and trading in the UK

• Your trading history, though minimum requirements vary widely by lender and product

• Your monthly turnover and recent cash flow, usually evidenced through bank statements

• Your business and personal credit history

Revolving credit facilities are usually offered to limited companies rather than sole traders, while business credit cards have a wider pool of providers open to sole traders and partnerships too. If you do not meet every criterion above, Capitalise also works with specialist lenders who consider businesses with a shorter trading history or an imperfect credit record.

Get matched with the right funding for your business

Whether your business needs the higher limit of a revolving credit facility or the everyday flexibility of a business credit card, we can match you with the right option from our panel of 130+ UK lenders. Apply for a revolving credit facility or a business credit card through Capitalise, with a dedicated funding specialist on hand to talk you through rates and terms, and no impact on your credit score just for checking.