As a business owner, one of the most difficult decisions you will need to make from time to time relates to taking on debt. You may be struggling with limited cash flow, trying to expand your business or have other challenges or goals that you need money for. If you decide to take on debt to obtain the cash that you need, you must then decide between a small business loan and a credit card. There are pros and cons associated with using a credit card over a bank loan, but each business owner will need to review these carefully so that he or she makes the best decision for the unique circumstances of the business.
Draw the Money When You Need It
A credit card works in a similar fashion as a line of credit. You draw the money when you need it, and your monthly payments will be based on how much money you have outstanding for that period. With a business loan, you will get all of the money in one lump sum, and your fixed loan payment will reflect this. However, it is important to note that a line of credit and a small business loan generally have a fixed term rather than a revolving term. This means that more of the principal may be paid down with each payment with a small business loan or a line of credit than with a credit card, and it can take longer to pay off credit card debt as a result.
Great Introductory Offers
There are some fabulous introductory offers with credit cards that you can take advantage of, such as a low or zero percent annual percentage rate for the first six to 12 months. With these offers, most or all of your payments will be applied directly to principal, making your payments far more effective than they would be with business loans or lines of credit. There are other types of introductory offers as well, such as those that give you bonus rewards points for using a new account within a certain period of time after opening the account. Rewards points may be redeemed for cash back, merchandise and other rewards that may have financial benefit to you.
Low Fees, High Rates
With small business loans and lines of credit, you typically will have rather high initial fees, but in exchange, you will have a reasonable interest rate in most cases. With a credit card, you typically will not have any up-front fees to open the account. However, you may have an annual fee or other related usage fees. You also typically will have a higher interest rate after the initial introductory period is over.
With so many pros and cons associated with all of the financing options available, it may be difficult to determine which options are right for you. Consider how quickly you need access to the money, and analyze your total loan or financing costs based on how quickly you believe you can repay the money. By taking these steps, you will likely discover the option that is best for you. If you’d like to know more about how we can help you get money for your business, call us for a FREE Business Funding Consultation at (800)416-7713.
Rick Anderson @FundingExpert1
Rick Anderson is the CEO and Senior Small Business Funding Specialist with Small Business Money Solutions. A company that helps small business owners and self employed professionals get the financial solutions they need to GROW and thrive. Rick has been in business for over 22 years, and his company has helped 22,485+ small business owners and counting. Rick has also written a book on small business finance entitled 10 Easiest New Money Sources For Business Owners.
Connect with him https://www.linkedin.com/in/RickAndersonSmallBusinessLoans or if you would like to ask him a question, send it to Rick@SmallBusinessMoneySolutions.com. If you’d like a FREE ‘Business Funding’ Consultation, call him at (800)416-7713.