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Compare business credit cards vs. business loans
Compare the features and costs of 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 the differences between the two products will affect your bottom line.
The defining features of business loans vs. credit cards
Business credit cards are a lot like personal credit cards: you get a revolving line of credit for ongoing access to funds. Business loans are sometimes tailored for a specific need, such as buying essential equipment, and are usually paid to you as a single lump sum with fixed monthly repayments.
|Business credit card||Business term loan|
|Funding amount||A specified limit, usually up to $100,000, with flexible, ongoing access to funds.||Business financing up to $1.25 million – sometimes more – provided in one lump sum.|
|Repayment||Low minimum monthly repayments.||A set repayment schedule with monthly payments and a specified pay off 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, have a monthly revenue of at least $5,000 and have good personal credit.|
|Starting APR||Usually around 19.99%, but can be as low as 8.99%.||Can be as low as 4%.|
|Fees||Annual fees, late repayment fees, foreign transaction fees and more may apply.||Application fees, origination fees, late repayment fees and more may apply.|
|Other features||Sign-up bonuses, rewards points, miles or cash back, complimentary insurance, access to business tools.||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.|
Compare business loans
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.
Pros to using a business credit card include:
- Avoid interest altogether by paying off your balance in full before the end of the grace period.
- 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 points, miles or cash back, and complimentary insurance.
- Build your business credit score by using the card wisely.
There are also downsides to consider:
- APRs can be high, with some over 19.99%.
- The cost of missing multiple repayments can rapidly escalate.
- Paying only the minimum can leave you accruing interest quickly.
- 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 your credit limit.
Compare business credit cards
Should you get a business loan or a 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.
- You need quick and easy access to credit.
- You need to fund ongoing purchases and expenses, and you’re able to repay what you use each month.
- You want to take full advantage of the extra features and benefits – like earning and redeeming points, cash back or miles and using any available insurance coverage.
A business loan can be a good choice if:
- Your number one priority is getting financing for large expenses like opening a new location or purchasing new equipment.
- You need access to a larger amount of financing.
- You want to borrow only the amount you need without locking yourself into a potentially expensive account.
- You want a tailored 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 a credit card. Remember that if it meets your needs and budget, you can utilize both a loan and a credit card.
Compare business loans to other financing options
|Business loan vs. Angel investor|
|Business loan vs. Personal loan|
|Business loan vs. Home equity loan|
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