As a business owner, you know how important it is to have access to funds when you need them. From covering the cost of your day-to-day operations to unexpected emergencies or opportunities, there are plenty of instances when you’ll need to get your hands on some extra cash. Taking some time to decide how you’ll borrow money when you need it will help ensure you’re prepared and that you make a sound financial decision.
Two of the most common options are credit cards and business loans–but which one is right for you? Let’s take a look at the pros and cons of a small business loan vs. a credit card so you can decide for yourself.
Benefits of a Business Credit Card
A business credit card works in much the same way as a personal credit card, but they sometimes offer perks that are tailored to a business owner’s needs. For example, you may get cash back on common business purchases or receive free employee cards that are linked to your master account. Here are a few benefits of using a business credit card.
1. Revolving Credit
When you take out business credit cards, you’ll have a set spending limit, which you can access repeatedly as you pay down your balance. This can be good for covering smaller, ongoing expenses as well as one-time purchases that you plan to pay off fairly quickly.
2. Rewards and Perks
Paying for items using your business credit card may give you access to special perks, like cash-back, rewards points, or additional warranties on purchases. If you’re planning to use a card for its perks, be sure to choose one that aligns with your needs.
3. Promotional Rate
Some business credit cards offer a 0% interest rate for a set promotional period. This could give you the opportunity to borrow money without having to pay any interest at all. However, it’s important to make sure you have a plan for paying off your balance, ideally before the promotional period ends. Otherwise, you could find yourself stuck with a large balance and a high interest rate.
How to Acquire a Credit Card for Business
There are many different types of business credit cards available, and most offer a simple online application. Start by searching online for business credit cards and choosing one from a reputable company. You’ll want to compare annual percentage rates (APR), lending requirements, and card benefits so you can choose the best option for your needs.
In many cases, you’ll need a credit score of 670 or higher to qualify. You may find a card that accepts lower scores, but it will likely have a higher rate, lower spending limit, and fewer perks.
Benefits of Small Business Loans
A small business loan may be beneficial when you need to make a larger purchase or finance a project, like an expansion or renovation. These often have a fixed interest rate and a fixed payment amount, which can make it easier to budget and manage your cash flow.
1. Payback Time Horizon
Business loans often allow you to choose your repayment term, which could also help you manage your monthly payments. Depending on how much you need to borrow, you may choose a shorter term, so you pay less interest, or choose a longer-term with smaller payments.
2. Lending Limits
You may be able to get a small business loan for a larger amount than the typical credit card limit. For example, while you may have a credit card limit of $20,000, it’s often possible to get a business loan for $200,000 or more.
3. Easier Approval
While business credit cards often require a minimum credit score, you can find lenders, like Zinch, that offer revenue-based business loans. This means that your loan is based on your business income, rather than your credit score. If you have less-than-perfect credit, this could be a good option for you.
How to Acquire a Small Business Loan
There are a variety of lenders offering business loans, from traditional banks and credit unions to online and alternative lenders. Traditional lenders often require you to complete a lengthy application and submit a significant amount of documentation. As such, it’s often faster and easier to apply with an online lender. For example, with Zinch, you can get pre-approved in less than 3 minutes.
Zinch Can Help Fund Your Business Needs
Zinch provides flexible lending solutions for small business owners. Contact us at (714) 500-6622 to learn more about your options. You could qualify for up to $250,000 in just 24 hours.
