Business credit cards vs business loans

We've compared the core features of these two complementary forms of business finance.

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While both feasible ways of financing a business, a business loan and a business credit card respond to very different needs.

A credit card is all about helping with your cash flow, while a business loan is more suitable for expanding your business or purchasing new equipment. Let’s take a better look at their different features.

Business credit cards vs business loans features

Business loan
Business credit card
FundingBusiness financing up to £1 million (or in some cases more) provided in one lump sumA specified monthly limit with flexible, ongoing access to funds
RepaymentsA set repayment schedule with monthly payments and a payoff dateLow minimum monthly repayments
EligibilityCriteria can vary hugely depending on the lenders, but typically requires good business credit and running an established businessFewer requirements than a business loan, but typically requires good business or at least personal credit
Interest rateCan be as low as 2-3% if you have good credit (but fees will apply!)Can be as low as 9.9% if you have good credit
Interest-free periodNoneBilling cycles can be up to 56 days long, some cards offer 0% introductory periods for up to 6 months
FeesArrangement fees, early or late repayment fees and more may applyAnnual fees, late repayment fees and more may apply
Other featuresNot many perks availableRewards, insurance and other perks available

Pros and cons of business loans

A business loan allows you to borrow more, over a longer period of time, at a cheaper price. However, it isn’t very flexible and may be harder to qualify for.


  • Higher funding amounts are available.
  • You know how much you’ll pay in interest and how much your monthly repayments will be from the very start.
  • Good for a big, one-off project, like expanding your business, hiring more staff or replacing old equipment.
  • Lower rates available, even though what you’ll be offered will depend on a number of factors, including your credit score.
  • Good for borrowing for the long term – many lenders allow you to borrow over up to five years.


  • Not very flexible – you need to know how much you’ll need to borrow from the start.
  • It may not be available if your credit isn’t great or if you are a startup.
  • Not necessarily the best solution for cash flow issues.
  • You won’t earn any rewards for borrowing.

Pros and cons of business credit cards

With a business credit card, you can improve your cash flow and earn rewards on your business spending. However, borrowing for the medium or long term with it will be expensive and should be avoided.


  • If you pay off your bill in full every month, you won’t be charged any interest.
  • Using it frequently will help you improve your business credit score.
  • Good for improving your cash flow.
  • Good for occasionally borrowing for the short term (but you should still clear your balance in full most of the time).
  • Additional cards are available to give to your colleagues and better handle your team’s expenses.
  • Extra rewards and perks available, from cashback to air miles to complimentary travel insurance.
  • Very flexible, you can use it as much or as little as you need.


  • You shouldn’t use it to fund a big project or borrow for a long period of time – it can become really expensive.
  • Lower funding amounts available.
  • Annual rates tend to be higher than with business loans.
  • If you carry a balance, you need to carefully do the maths and figure out how much it will cost you.

The verdict: Should you get a business credit card or a business loan?

At this point, you will understand that it entirely depends on what you are planning to do with the money.

If you want to fund a project or have an unexpected and pretty chunky expense to meet, a business loan is the way to go. It will be cheaper, you’ll know how much it will cost you in interest from the start and you can take a fairly long time to pay the sum back.

A credit card meets a range of different needs. Using it regularly and clearing your balance in full every month is the best way to go: it will help your business cash flow, improve your business credit score and, depending on your deal, let you earn rewards or cashback on your spending or offer you extra perks. You can also occasionally use it to borrow a small sum for a short period of time, but you don’t want to constantly be carrying a balance on it.

Finally, keep in mind that there are different types of business loans and other types of business finance available. You can compare them in our business finance hub.

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