UK business finance glossary

Plain-English definitions of the terms you'll meet when comparing business credit cards, expense tools and rewards.

Use the list below as a quick reference. We link to these terms from across the site.

APR (Annual Percentage Rate): The yearly cost of borrowing — includes interest plus mandatory fees.; APR lets you compare the cost of credit between providers on a like-for-like basis. UK lenders must quote a 'representative APR' that at least 51% of accepted customers receive. Your personal APR may be higher.
Representative example: The standard advert format showing the rate most accepted customers receive.; A representative example must state the assumed credit limit, the representative APR, any fees, and the interest rate. It is illustrative — your actual rate depends on the lender's assessment of you.
Soft search (quotation search): A credit check that does not affect your credit score.; Soft searches are visible only to you on your credit file. Eligibility checkers and pre-approval tools usually use soft searches. They tell the lender enough to estimate your chance of being accepted without leaving a footprint others can see.
Hard search (application search): A full credit check that is recorded on your file and may affect your score.; Hard searches are left when you formally apply for credit. Several in a short window can lower your score and look like 'credit shopping' to other lenders.
Personal guarantee: A director's personal promise to repay business borrowing if the company can't.; Most UK business credit cards require a personal guarantee from a director or owner. If the limited company defaults, the lender can pursue the guarantor personally. Read the agreement carefully — guarantees usually survive cancelling the card.
Interchange: The fee a card scheme charges the retailer when you pay by card.; Interchange funds most card rewards. UK regulated consumer cards are capped at 0.2% (debit) and 0.3% (credit). Commercial (business) cards are not capped, which is why they typically pay more generous rewards.
FX fee (foreign exchange fee): The mark-up on a non-GBP transaction.; Most UK business cards add 2–3% on top of the Visa/Mastercard wholesale rate when you spend abroad or in another currency online. Some products advertise 'no FX fees' — check whether that applies to all spend or only certain merchants.
Cash advance: Withdrawing cash on a credit card — usually expensive.; Cash advances normally carry a fee (typically 3%) and start accruing interest immediately at a higher rate, with no interest-free period. Avoid where possible.
Avios: The British Airways / IAG loyalty currency.; Avios can be redeemed for flights, upgrades, hotels and more. Several UK business credit cards let you earn or transfer points to Avios. Value per Avios varies hugely by redemption — long-haul Club World tends to give the best pence-per-point.
Cashback: A percentage of spend returned as cash or statement credit.; Cashback is the simplest reward currency to value because £1 = £1. It is typically lower headline value than Avios on premium redemptions but easier to use.
Interest-free period (grace period): Days between a statement and payment due when no interest is charged.; If you pay your statement balance in full by the due date, you typically pay no interest on most purchases. Carrying any balance often forfeits the interest-free period on new purchases too.
Minimum payment: The smallest amount you can pay each month to stay in good standing.; Paying only the minimum will mean interest charges and very slow debt reduction. Treat the statement balance, not the minimum, as the real bill.
Credit utilisation: The percentage of your available credit you're using.; High utilisation (typically above ~30%) can lower your credit score. Spreading spend across cards, or asking for a higher limit, can reduce your utilisation ratio.
Director's loan account: A record of money owed between a UK company and its director.; If a director pays for company costs personally, the company owes them. If the company pays personal expenses, the director owes the company. Overdrawn director's loans can trigger tax (s455 charge) — keep records and reconcile.
VAT-able expense: A business cost that includes recoverable VAT.; VAT-registered UK businesses can usually reclaim VAT on legitimate business expenses, provided you hold a valid VAT invoice. Some costs (e.g. client entertainment) are blocked from recovery.