Learn the differences between a business credit card and a business loan so you can make the right choice for your company.
Both business credit cards and business loans are popular financing options for many companies, but there are several key differences between the two. To find the better option for your business’s needs it helps to compare the two side by side and examine how these differences apply to your company.
Business credit cards are a lot like personal credit cards. They put a revolving line of credit in your pocket for ongoing access to funds.
Business loans are sometimes tailored for a specific need, such as buying essential equipment. They’re usually paid to you as a single lump sum and come with fixed monthly repayments. There are many different types of business loans available.
Read further to get into the details of business loans versus credit cards and compare your options.
National Business Capital Business Loans
National Business Capital provides small business owners with a range of financing options of up to $5,000,000 to grow their businesses.
- Maximum Funding Amount: $5,000,000
- Minimum Funding Amount: $10,000
- Numerous financing options
- Simple and fast online application process
- Must have been in business for at least 6 months
- Must have an annual revenue of $180,000 or more
The defining features of business loans vs. credit cards
|Funding amount||A specified limit, as high as $250,000, with flexible, ongoing access to funds.||One defined lump sum of up to $5,000,000.|
|Repayment||Low minimum monthly repayments||A set repayment schedule with monthly payments and a payoff date|
|Eligibility||Less requirements than a business loan, but typically requires good personal credit||Generally you must be in business for at least a year and have annual revenue of $100,000+, but good personal credit isn’t usually required|
|Starting APR||Can be as low as 11.99%, some cards offer 0% APR intro periods for up to 12 months||Can be as low as 5.85%|
|Fees||Annual fees, late repayment fees and more may apply||Application fees, origination fees, late repayment fees and more may apply|
|Other features||Sign-up bonuses, rewards points, cash back, complimentary insurance||Ability to sync to your online accounting software|
|Advantages||Flexible funding, continuously available money and bonus features||Many different loan options, can be closely tailored to your borrowing needs|
|Disadvantages||Lower funding amount, higher APR||Less additional perks, stricter requirements|
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Is a business credit card worth it?
Business credit cards offer a number of advantages in comparison to typical business loans, mostly in the form of extra features. How extensively you plan on utilizing these features often answers the question of whether or not a business credit card is worth it for you.
Business credit cards often come with the following bonus features:
- Track your business spending more easily by seeing all expenses in one place.
- Access various account management and financial analysis tools.
- Give business credit cards to employees and manage the cards through one account.
- Enjoy rewards like frequent flyer points and complimentary insurance.
- Get access to perks such as free delivery or express shipments.
- Build your company credit score by using the card wisely.
There are also downsides to consider:
- APRs can be high, with some over 20%.
- The cost of missing multiple repayments can rapidly escalate. An extended period of poor cash flow might saddle you with rapidly growing debt because of the high interest rate.
- Some business credit cards charge an annual fee, which you’ll have to pay each year you keep the card account open.
- If you depend on this credit to pay for business operations, then you might become abruptly stuck when you reach the credit limit.
Should you get a business loan or business credit card?
A business credit card can be a good choice if you’re looking for an all-round business tool with built-in borrowing functionality. Business credit cards can help fund ongoing purchases and expenses, as long as you’re able to repay what you use each month. Taking full advantage of the extra features and benefits, as well as using the card for quick financing needs, is an effective way to use a business credit card.
If your number one priority is getting financing for large expenses like opening a new location or purchasing new equipment, then a business loan might be better suited for you because of the higher funding amount. You can borrow only the amount you need without locking yourself into a potentially expensive account as well as tailor your repayment plan.
Be sure to consider your business’s current financing needs as well as what your business might need in the future when deciding on a business loan or credit card.
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