Fuel Card Guides | How To Get a Fuel Card with Bad Credit or No Credit Rating

How To Get a Fuel Card with Bad Credit or No Credit Rating

Tue, 16 March 2021

Person using card to pay on laptop

How To Get a Fuel Card with Bad Credit or No Credit Rating

Fuel cards work like credit cards, but only for buying fuel. In other words, the fuel card provider advances you a line of credit for all your company’s business fuel.

Since your company drivers could buy a lot of fuel on their fuel cards before the invoice comes, fuel cards are only given to companies which pass credit checks up front.

If you are a new company, you may not yet have a credit rating. You don’t yet have a track record of paying your invoices on time, and it could be 18 months before you have to produce your first set of accounts.

If your company has recently had some cashflow problems, it may have a bad credit rating. If so, the last thing you need is for your drivers to be unable to refuel easily, making it even worse to get the company working efficiently and back on track.

Man filling up vehicle with petrol

If your company does have bad credit, do not panic about going back to the bad old days of driver cash advances, or expenses claims with paper receipts.

There are two options that some fuel card companies offer to keep your drivers refuelling:

  • Fuel card advance purchase accounts
  • Refundable deposits.

Advance purchase fuel card accounts

If you apply for fuel cards for your business and fail the credit checks, the card supplier may offer you the chance to open an advance purchase fuel card account.
This account for companies with a bad credit rating lets your drivers use fuel cards as normal, and your company credit history is not relevant.

How does an advance purchase account work?

With an advance purchase fuel card account, you pay for your petrol or diesel in advance. Then your drivers just use their fuel cards to fill up as normal.

You can top up your account with your company debit card or by bank transfer.

The card provider will ask how much fuel you use each week and calculate how much fuel you need to buy and have credited to your account to cover this. There is normally a minimum amount of fuel that must always be in your account. This is the “headroom” amount, like a safety net. When your balance goes below this, you will need to top it up – if you don’t, your fuel cards will stop working.

If you stop using the account, you can get a refund on any leftover fuel that you haven’t used.

Which fuel cards can you get with an advance purchase account?

Companies do not actively market their products to customers with bad credit, which makes it difficult to find out what it available. Sometimes it is a question of approaching different companies to ask what they are willing to offer your company.

It takes a bit of patience, because the fuel card providers have to do the credit checks before they can tell you what they can offer you – every company is unique. iCompario can take the pain away by doing some of the legwork for you.

Having fuel cards can save your business money, do your driver fuel expenses claims automatically and make it a 30-second job to reclaim your fuel VAT. As a free comparison site, iCompario can find you offers on cards from all the big oil companies or multi-brand cards, and deals with no minimum purchase or tie-in contracts.

Pros of an advance purchase fuel card account

  1. This solution completely bypasses credit checks, so no matter how bad your credit rating, you can apply for this type of account. So long as you keep your account balance above the agreed minimum headroom level, your drivers can use their fuel cards.
  2. You benefit from the convenience of using fuel cards which log fuel purchases automatically, instead of the hassle of collecting paper receipts from your drivers and logging them by hand. This means that expenses claims for your employees are created automatically by the system.
  3. You can see in real time where all the spending on fuel is being made. This makes it easier to keep control over your business costs.
  4. You have ready-made invoices for reclaiming VAT on fuel from HMRC.

Cons of an advance purchase fuel card account

  1. If you have cash flow issues, you may find it hard to buy fuel in advance, and to make sure there is always the right level of minimal headroom on the account to avoid your drivers’ fuel cards being rejected at the pump.
  2. An advance purchase account doesn’t actively help you work towards a better credit rating. Since there’s no credit being advanced to you, you are not building up a trade credit history with the fuel card provider. This means you will need to use other ways to improve your credit score, such as always paying your bills on time over a number of years.

Fuel cards with a refundable deposit

The second possibility for companies which need fuel cards but have a bad credit rating or no credit record is to make a refundable deposit.

This is an arrangement that you may be offered by a fuel card provider’s credit department. Its greatest advantage is that it gives you the chance to work your way back to improving your company’s standing with your fuel card provider.

How does a deposit account work?

When you apply for fuel cards for your business, you are asked how much fuel your company buys each week. The card provider will work out your weekly fuel spend from this. They will also carry out a full credit rating assessment.

If you have a good enough credit rating, you may be offered weekly invoicing with 7 days to pay. This means your drivers get fuel on credit for a week, then the invoice comes and you have another week to pay it. You pay for your fuel on this weekly rolling credit system.

If you have a bad credit rating, you may be asked to make a refundable deposit. This could be anything from 20% to 100% of your usual fuel spend, depending on how risky the fuel card provider thinks you are. They will look carefully at your credit rating and various other factors. With this deposit in place, the fuel card provider will let you buy your fuel on credit, so your drivers use their fuel cards as normal.

An example of a refundable deposit for fuel cards

Suppose your weekly fuel spend is £400 and the fuel card provider offers you

  • a weekly invoicing facility
  • and 7-day payment terms
  • with a 50% deposit.

This means they will ask for a refundable deposit that equals 50% of what you spend in your fuel account. In this example, that deposit would equal £400 (two week’s credit at 50%).
If you didn’t pay the bill the following week, the fuel card provider would stop the account and ask for full payment.

  1. If full payment was not made, then ultimately the deposit would be used to pay the fuel debt.
  2. If the full payment was made, then the account would be released and your deposit would remain in place for the next invoicing period.

Be warned, scenario 2 would be considered “poor payment behaviour”. In this case, you might have to give a higher deposit to be allowed to keep using your account.

When does your deposit get refunded?

When you make a deposit, the fuel card provider will tell you the conditions you need to fulfil before they will refund all or part of the deposit. This assumes no changes in your overall circumstances at the time your account is reviewed.

Typically, they would want a period of “clean trade history”. This means no non-payments (i.e. direct debit being returned unpaid on due date). They would also want to see an improvement in your business’s credit rating.

How could you improve your credit rating?

Trade history can be built up over a period of 3, 6 or 12 months. It is one of the things that influence your credit rating. To improve your whole credit rating often takes years of profitable and improving trading accounts to be published.

For many businesses it means that they can keep their drivers on the road conveniently and, over time, build up to a normal trading account with a credit line.

Having fuel cards can save your business money, do your driver fuel expenses claims automatically and make it a 30-second job to reclaim your fuel VAT. As a free comparison site, iCompario can find you offers on cards from all the big oil companies or multi-brand cards, and deals with no minimum purchase or tie-in contracts.

Pros of fuel cards with a refundable deposit

  1. When you provide a refundable deposit to a fuel card provider, you may provide less up-front cash than you would with an advance purchase fuel card. The amount would vary depending on the percentage deposit the card provider requests. This means there is the potential to tie up less of your company’s cash, and have higher available working cash.
  2. When you use fuel cards with a refundable deposit, you are working towards a credit line and therefore have the opportunity to improve your credit rating.
  3. You have the convenience of a fuel card online system logging fuel purchases and generating invoices automatically, instead of collecting paper receipts from your drivers and processing expenses claims by hand.
  4. You can see where the money is going in real time, helping your analyse your cash flows.
  5. You have ready-made invoices for reclaiming VAT on fuel from HMRC.

Cons of fuel cards with a refundable deposit

  1. The downside is that you have a lump of cash tied up with the fuel card provider which may create additional cash flow challenges for your company.
  2. This solution does still provide you with a certain amount of credit, so it may not be offered to all companies.

iCompario can help

Choosing a fuel card can be challenging at the best of times. Finding the right one is even harder when your options are narrowed down by having poor credit ratings, or possibly no credit rating at all if you are a newly created company.

iCompario can help by taking a few details from you and searching through the card options to find a match that can work for your company.

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