How To Choose Between a Credit Card And a Loan For Your Business

Nowadays we have all these great options for how to handle finances and entrepreneurs have a bigger safety net than ever when it comes to making do at the end of each month because they can rely on highly beneficial loans like the ones we’re going to talk about today.  While there are many ways in which you can take care of your financial problems, it’s also a lot easier to get into something you don’t fully understand, and that can lead to more complications. If you think your business might need a loan or credit card, take a look here to see what the differences are between those two forms of borrowing money.

business planning

Myriams-Fotos / Pixabay

The business credit card

Getting a business credit card is at its core the same thing as getting a personal credit card, with the important difference that the business credit card is your business’ name, not yours.  Your business has its own financial identity and that’s what the business credit card is linked to, not your personal finances or situation.

The business credit card is used in order to receive a set amount of credit which can be spent as seen fit by the user. So if your request for a business credit card is accepted, you will be able to draw from it whenever you want, as long as you don’t go over the limit.

The limit of a card is determined based on a number factors, including how much money you actually need to borrow and how much you can afford and are allowed to borrow based on your credit score. The money that you borrow, or draw from your credit is subtracted from the total credit you have available, but as soon as you pay back what you have borrowed, the original credit limits are restored. This is what is called a revolving credit line, and it’s the opposite of a non revolving credit card. Its long term and unlimited nature make a business credit card the preferred option for entrepreneurs that are looking to sustain regular expenses within their organization.

The business loan for short term investments

Getting a short term loan instead of a credit card is a completely different gig. It is different in multiple ways, one of the most important ones being the fact that we’re talking about a finite number here. With a credit card, you have the convenience of constantly drawing money from your credit card as long as you pay it back and restore the credit. When it comes to loans, you only get one big loan which you can spend however you want, and then repay it in the agreed period of time.

Getting a short term loan is more direct in many ways and it’s a much more straight forward concept, making it a more fitting solution for those that are only interested in securing a singular loan to take care of an urgent and unforeseen matter, for instance.

As you can see, both of these solutions offer their own perks and it really depends on what you’re looking for when you are trying to choose between them. There’s not winner here, as both are excellent methods of gaining access to much needed funds. There are however other factors to consider like loans having a way bigger interest rate than credit cards for instance.


Arnel Ariate is the webmaster of Money Soldiers.

Click Here to Leave a Comment Below 0 comments

Leave a Reply: