Guest Blog: Is A Credit Card Or A Loan Best For Your Small Business?

In today's unsteady financial climate, it can be difficult to raise funds for a small business venture. This may be especially true if you have a poor credit rating. According to a study by the United States Small Business  demonstration, lending to small businesses has declined by around 18%, which is double the standard rate of decline in commercial lending. However, if the amount you need to borrow is fairly modest, then you may find it possible to secure a short term loan or a cash advance from your credit card to cover the cost. It is simply a case of deciding which is the best option.

Advantages Of Choosing A Credit Card

One of the main advantages of choosing to use a cash advance from your credit card is that since you already have the account, you know that there is no issue getting approval. With some credit cards it is possible to get a  reduced rate of interest on cash advances, especially with newly opened accounts. In order to secure a cash advance from your credit card, you will usually be required to just withdraw the money from an ATM using your designated PIN.

If you are using a rewards card or a credit card which offers cash back then you will also have the opportunity to take advantage of the subsequent rewards offered. In fact, if you need the cash to purchase items for your business it might be worthwhile simply using the credit card to pay for the transactions. Just be sure to check out what method will offer the best rewards or the most favourable interest rate.

The Downsides Of A Credit Card 

The main downside of using a credit card is that you will be restricted to whatever remains of your credit limit. You may also find that the interest rate is considerably higher than what you might expect to pay on a loan, unless you
have a low promotional rate in place.

Credit cards are best used when paid off in full each month to avoid paying any interest, but if you are going to be using it more like a loan then you are not really going to be making good use of this particular resource.

Why Choose A Business Loan?

Securing a small business loan is often a much more cost effective way to raise the funds that your business needs. Even if you have bad credit there are loan providers out there which will be happy to work with you. The key is finding lenders who specialize in small business loans and/or bad credit loans. The interest rates offered on loans are usually far lower than on a cash advance from your credit card.

The type of business loan that you opt for will depending on your current situation. If you are already established and are simply looking to expand then a fairly standard small business loan is likely to offer everything you need. However, if you are jut trying to raise funds to get your small business started then a start-up loan might be much more suitable.

In the majority of cases, choosing a small businesses loan will always be more preferable to taking a cash advance from a credit card. As with any financial decision, it is important to do some careful research and make sure that you can afford to meet the repayments every month. Whether you opt for a loan or a credit card, choosing the right loan provider is every bit as important as choosing how to get the funding required.

Hugh Tyzack is both the managing director and founder of . Hugh's company specializes in providing loans to individuals who have bad credit ratings. Outside of the world of finance Hugh is a keen musician. Catch up with Hugh on Twitter  @badcreditloans8 

Comments (6)

  1. Funda Custom Credit Solutions says:

    I agree that it is very difficult to raise funds in order to start a business. This is why business loans offered by various business financing firms come in handy. Entrepreneurs can borrow money for the capital they need and have the option of paying them back weekly or monthly on the amount that they can afford.

    Among those reliable custom credit solutions provider is Funda which offers services mainly to Australians. They offer a quick and easy way to get approved. They also provide online loan application forms here:

    Just provide the details and click "Apply Now"

  2. John Decker says:

    This is an interesting article. I think getting a credit card loan can be a good idea for a small business. People apply for loans all the time but I think it is important to learn about a IRS wage garnishment before doing so. You never know what things can come from a loan. Visit this site to learn more about a IRS wage garnishment.

  3. Dennis Maria says:

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  4. Danial Louis says:

    Your way of sharing is very help full and unique which is exactly what I need. I will tell my friend about site on obtaining good stuff. I’ll keep checking your site regularly for more information.

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  5. Martha S. Ginyard says:

    I would say it is a big no!

  6. Karen A. Moore says:

    This is a very great point you raised. Indeed, financing through credit cards is worth pondering on.

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