7 Times a Business Credit Card Is Better Than a Loan

7 Times a Business Credit Card Is Better Than a Loan

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When you need financing for your small business, your choices often come down to a credit card or a loan. On one hand, small business loans can offer competitive interest rates and the ability to write checks to employees or vendors. A business loan can also offer you a larger line of credit than a small business credit card can. But don’t forget that there are several times that a small business credit card can offer distinct advantages over a loan or other types of financing.

Here are seven times that a small business credit card can be better than a loan.

1. When you need very short term financing 

When you draw on a small business line of credit, you will incur interest starting on day one. But with a small business credit card, you can enjoy an interest-free grace period when you pay your entire statement balance in full. The grace period typically lasts 21 or 25 days after your statement closes before payment is due. However, when you consider your 30-day statement period itself, you could receive up to 55 days of interest free financing on your purchases, which a loan will never offer.

2. When your credit card has a promotional financing offer

Some small business credit cards feature 0% APR financing for a limited time when you open the account. These offers can include financing on new purchases, balance transfers or both. While you will have to make the minimum payment each month, you won’t incur any interest charges until the promotional rate expires and the standard rate comes into effect.

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3. When you travel

If your business often requires to you travel, a business travel credit card can be a great help. When renting a car, most companies will require that you have a major credit card, or you’ll have to provide extensive documentation and a deposit. And when checking into a hotel, a credit card or a significant deposit is required. There are also many times that you can’t pay with cash, such as buying train tickets from a kiosk or making inflight purchases of food, beverages or internet service. Airline credit cards can offer you priority boarding, discounts on in-flight purchases and free checked bags while hotel cards can offer you room upgrades, late checkouts and free breakfasts.

4. When you need purchase protection benefits

Credit cards offer numerous benefits that you won’t receive when writing a check from a line of credit. For example, purchase protection policies can cover theft or accidental damage. A price protection policy can offer you a refund if the price of a purchased item falls. And return protection can reimburse you when a retailer refuses to accept an item.

5. When you need financing quickly

It can take a long time to apply and receive a business loan. But with a small business credit card, you can be approved in seconds and receive your card in just a few days. Be sure to check your credit before applying, you can see your personal and business credit scores for free with Nav.

6. When you don’t have collateral

A business loan might require you to put up some collateral, such as real estate or equipment. But with a small business credit card, that’s never a requirement.

7. When you need to extend your purchasing power to employees

While you can possibly give employees authorization to draw on your small business loan, you might not want to. Instead, it’s much easier to add an employee as an authorized user to your small business credit cards. This allows you to monitor employee spending and many cards let you enable alerts or even limits.

Nav has a free tool that connects you to the best business financing offers based on your business and credit data by instantly calculating which ones you're most qualified for. You can see your "MatchFactor score" for over a hundred of the top credit card and loan options—all without a hard credit pull. See my top options now.

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About the Author — Jason Steele is an expert in the credit card industry. He is frequently quoted in national media and his work is regularly featured by mainstream outlets such as Yahoo! Finance, MSN Money, and Business Insider.

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