Business credit cards vs business loans

We've compared the core features of both business credit cards and business loans to help you work out which is right for you.

Business loans and business credit cards are both popular ways for companies to borrow money, but the way they work is quite different.

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 closer look at their different features.

Business credit cards vs business loans features

Business loan
Business credit card
FundingBusiness financing up to £10 million (or in some cases more) provided in one lump sumA specified credit limit with flexible, ongoing access to funds – could be up to £250,000
RepaymentsA set repayment schedule with monthly payments and a repayment deadlineFlexible monthly repayments with no end date
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 4% if you have good creditCan 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 and you receive the money upfront.
  • You know how much you’ll pay in interest and how much your monthly repayments will be from the start.
  • Good for a big, one-off project, like expanding your business, hiring more staff or replacing old equipment.
  • Competitive rates available, although what you’ll be offered will depend on a number of factors, including your credit score.
  • Good for borrowing over the long term – many lenders allow you to borrow for up to 10 years or even more.


  • Not very flexible – you need to know how much you’ll need to borrow from the start.
  • The minimum loan amount may be more than you need to borrow.
  • You might not qualify if your credit isn’t great or if you are a startup.
  • Lenders may require collateral and a personal guarantee.
  • 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 sometimes earn rewards on your business spending. However, using a credit card to borrow over the medium to long term 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 your card 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 if possible).
  • Additional cards are available to give to your colleagues to help with 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.


  • It can be an expensive option if you don’t clear your balance each month.
  • You won’t be able to borrow as much as you can with a business loan.
  • Interest rates tend to be higher than with business loans.
  • You’ll usually need a good credit score to qualify.

Reasons for borrowing with a business loan vs a business credit card

Below we’ve outlined some of the most common reasons for borrowing with both a business loan and a business credit card.

Business loan

  • Buying new equipment
  • Hiring more staff
  • Moving premises
  • Expanding operations
  • Buying stock
  • Consolidating existing debt

Business credit card

  • Improving cash flow
  • Paying for travel expenses
  • Paying for office expenses
  • Entertaining clients
  • Paying invoices
  • Controlling employee spending

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

The option that’s best for you will ultimately depend on how much you need to borrow and whether this is a one-off purchase or you need to finance ongoing expenses

If you need to borrow a lump sum of cash to buy new equipment for your business for instance, a business loan will be more suitable. You can borrow over a number of years and you’ll know exactly how much you need to repay each month.

On the other hand, if you only need to borrow from time to time or improve your cash flow, a business credit card lets you borrow more flexibly. You might even benefit from perks such as cash back or travel rewards. Just remember that if you don’t pay off your balance in full each month, interest rates can be higher compared to loans, and it can become an expensive choice.
Used correctly, both business loans and business credit cards can help improve your business credit score.

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.

Bottom line

Business loans

  • Let you borrow a lump sum of cash which could be several million pounds
  • Often offer fixed monthly repayments, making it easier for budgeting
  • You can borrow over several years
  • There might be penalties if you want to pay back your loan early
  • Depending on the loan, you might need to secure it against an asset which can be risky, or you might need to sign a personal guarantee (meaning you’ll be responsible for repaying the loan if your business can’t)
  • No rewards available

Business credit cards

  • Can be easier to get accepted for compared to a loan
  • Let you borrow up to a set credit limit (perhaps up to £250,000)
  • You can repay your balance as and when you want to, as long as you meet at least the minimum monthly repayment
  • Interest rates can be high, making it expensive if you don’t pay off your balance in full each month
  • You might be able to benefit from extra rewards
  • Useful for improving cashflow

Frequently asked questions

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