Business loans and business credit cards are both popular ways for companies to borrow money, but the way they work is quite different.<\/p>
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\u2019s take a closer look at their different features.<\/p>
| <\/th> | Business loan<\/h5><\/th>Business credit card<\/h5><\/th><\/tr><\/thead>Funding<\/th> | Business financing up to \u00a310 million (or in some cases more) provided in one lump sum<\/td> | A specified credit limit with flexible, ongoing access to funds – could be up to \u00a3250,000 <\/td><\/tr> | Repayments<\/th> | A set repayment schedule with monthly payments and a repayment deadline<\/td> | Flexible monthly repayments with no end date<\/td><\/tr> | Eligibility<\/th> | Criteria can vary hugely depending on the lenders, but typically requires good business credit and running an established business<\/td> | Fewer requirements than a business loan, but typically requires good business or at least personal credit<\/td><\/tr> | Interest rate<\/th> | Can be as low as 4% if you have good credit<\/td> | Can be as low as 9.9% if you have good credit<\/td><\/tr> | Interest-free period<\/th> | None<\/td> | Billing cycles can be up to 56 days long, some cards offer 0% introductory periods for up to 6 months<\/td><\/tr> | Fees<\/th> | Arrangement fees, early or late repayment fees and more may apply<\/td> | Annual fees, late repayment fees and more may apply<\/td><\/tr> | Other features<\/th> | Not many perks available<\/td> | Rewards, insurance and other perks available<\/td><\/tr><\/tbody><\/table> | Pros and cons of business loans<\/h3>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.<\/p> \n \n Pros<\/h4>\n \n Cons<\/h4>\n Pros and cons of business credit cards<\/h3>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.<\/p> \n \n Pros<\/h4>\n \n Cons<\/h4>\n Reasons for borrowing with a business loan vs a business credit card<\/h3>Below we\u2019ve outlined some of the most common reasons for borrowing with both a business loan and a business credit card. <\/p> Business loan<\/strong><\/p> Business credit card<\/strong><\/p> The option that\u2019s 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<\/p> 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\u2019ll know exactly how much you need to repay each month.<\/p> 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\u2019t pay off your balance in full each month, interest rates can be higher compared to loans, and it can become an expensive choice. 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<\/a>.<\/p> Business loans<\/strong><\/p> Business credit cards<\/strong><\/p> |
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