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Business Credit Card or Small Business Loan?

October 25, 2018 by OSYB Staff

Bankrate.com shares that “According to the Small Business Administration, a third of American businesses get started with less than $10,000 in capital.”  Is that a feasible financial situation for most businesses?  If not, what do most business owners do?  Some finance their businesses from personal savings accounts or personal credit cards.  A more appropriate option would be to get a business credit card or apply for a small business loan .  Both can be designated for small businesses to cover operating expenses, manage cash flow fluctuations, and plan for future growth.  So which is the better option for you?

Benefits of a business credit card:

  • an opportunity to build your business credit
  • covers during low cash flow periods and business credit card interest is tax-deductible though it is suggested as good practice to pay off balances when possible
  • take advantage of 0% or very low credit card introductory rates to spread out the payments of high-priced purchases but work to payoff within the introductory period otherwise the interest rate could skyrocket
  • earn rewards with your business expenses

Benefits of a small business loan:

  • access to funds, anywhere from $50,000 on up
  • a loan larger than a credit card limit can help you expand your business opportunities
  • “small business loans generally come with lower interest rates than business credit cards — and any interest you pay is tax-deductible.  Small business owners can either take out a business loan from a bank or apply for a Small Business Administration loan”

Depending on what your business needs are figure out what works for your unique small business.   A business credit card is needed to  build your businesses credit history and helps to get small business loans.   Use the business credit card for day-to-day expenses or to help your business handle cash flow fluctuations.

If you need more than a few thousand dollars to fund a business plan to grow your business, then think about applying for a small business loan.  Before you incur any debt, be sure to consult your financial professionals.

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Business Credit Card or a Small Business Loan: How to know what’s right for you?

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