Business Credit Card vs. Business Loan
When starting a business or even expanding a business there are two options available to you for obtaining additional funding. Those options are a business loan and a business credit card. Which is right for your situation?
Business loans can be great for a variety of different options. For example, if you are just starting out and need seed money to start your business, a business loan can be a good option because it gives you the ability to obtain a larger amount of money than you might qualify for through a business credit card.
The problem with business loans, however, is that the requirements for obtaining a business loan are usually much more stringent than a business credit card. Most lenders will require an extensive business plan and will need to see collateral before they will be willing to approve a business loan. For a business that is just starting out, it can be difficult to meet these requirements. The collateral requirement, in particular, is often difficult for many start-ups to meet.
A business credit card works very differently from a business loan. If you have not yet established a credit history for your business, it may still be possible to receive a small business credit card based on your personal credit history. If your personal credit score is excellent or even good, you can almost be guaranteed approval for a small business credit card.
Even if your personal credit score is fair you still have a chance to be approved for a small business credit card. There are also small business credit cards that are designed for individuals who have poor credit or no credit at all. Obtaining a small business credit card gives you the opportunity to receive the funding you need while steadily establishing your business credit by making payments on time. Once you have demonstrated financial responsibility through your business, you can often enjoy rewards such as lower interest rates and expanded lines of credit.
In addition, small business credit cards offer rewards and bonuses that simply are not available through a business loan, such as cash back, travel points, gift certificates and much more.
And here’s the icing on the cake: Obtaining a small business credit card can actually make it much easier for you to be approved for a larger business loan in the future because you’ve established business credit.
