Trying to secure funding for your business can be quite a challenge these days. You have to ensure you meet strict criteria, your credit score needs to be acceptable, and you sometimes have to wait for long periods before you can access the funds or get approval from lenders. The good news is that there are different funding and finance options available for businesses these days, which includes the availability of business loans and business credit cards. So, which of these options is the right one for you and your business?
Making Your Choice
As with anything to do with your business finances, it is vital you do some research to determine whether you will be better off using a business loan or a business credit card. Both of these options are popular amongst small businesses, and your needs and circumstances will help to determine which of them is best suited to your needs.
There are various factors you will need to consider to make an informed choice about whether to opt for business loans or credit cards. Your credit score is one of the key things you will need to look at as well as how much you need to borrow. You also need to think about what you will be using the funds for and how quickly you need access to the money.
Using Business Loans
Many people apply for business loans, and this can be for a variety of reasons. These loans are ideal if you need to invest in new equipment for your business, snap up property for your business, or if you want to refinance debts your business already has. The larger amount of money you can get with business loans means they are a good choice if you are looking to make any sort of sizeable investment. They are also great for those who want the financial stability of set repayments over a specified period which makes it easier for you to budget and control your business finances.
The key benefits you get with business loans are that you tend to have greater borrowing power, lower interest rates and longer repayment periods, which can help to ensure you get the amount of money you need and that costs are kept down.
On the downside, you may need some form of collateral in order to secure business loans and the process of applying and being approved can be quite lengthy. You may find it difficult to get one of these loans if your credit is damaged, too, which is another factor you need to take into consideration.
Opting For Business Credit Cards
Business credit cards are also very popular amongst business owners as they offer a greater degree of flexibility and can be used for ongoing expenses. By choosing a credit card, you have the added benefit of paying interest on only what you borrow, and if you can repay within the interest-free period specified, you can enjoy paying no interest at all. This makes it an ideal choice for those looking for shorter-term finance and businesses that want to benefit from greater flexibility.
You will also find a range of business credit cards that offer various perks and rewards ranging from travel rewards to an extended interest-free period. As with business loans, these credit cards can help you to build a solid credit score and history for your business, which is important for future financing needs.
There is a downside to business credit cards as well. First, if you need to spread repayments over a longer time period, you could be hit with crippling rates of interest. In addition, you may have to pay other fees depending on the card and provider you go with, such as annual fees. The interest rates on credit cards are also variable, which can make it more difficult for you to budget effectively. In addition, if you accrue a high debt on your card, this could actually have a negative impact on your business credit score.
Making Your Decision
As you can see, both business loans and business credit cards have pros and cons that need to be weighed up. When you are making your decision, make sure you take these into consideration along with your needs, business finances, and preferences when it comes to business funding. Also, make sure you check your credit score to determine whether there is one option that is likely to be more suitable than the other based on the state of your credit.