Should I Fund My Business With a Credit Card?

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Funding a business with personal vs. business credit cards
Pros of funding a business with credit cards
- Credit cards are typically easier to qualify for than business loans. Business loan qualification often hinges on time in business, annual revenue, collateral and credit score. Business credit cards, on the other hand, typically depend on your credit history and score.
- You can access funds quickly. The entire Small Business Administration loan process could take up to 90 days, and bank loans can be slow to fund, too. While online loans have faster turnaround times, credit cards can be even faster.
- You can earn rewards for each dollar spent. Similar to personal credit cards, many business credit cards come with rewards programs that offer cash back or points or miles for travel. Using these rewards to offset other business costs is an added bonus.
- It establishes your business credit. To build your business credit, aim to pay off the card in full each month to keep debt at a minimum. A history of using credit responsibly can help your business qualify for more funding options down the line.
Apply now | Apply now |
Annual fee$0 | Annual fee$150 |
Regular APR17.49%-27.49% Variable APR | Regular APRN/A |
Intro APR0% intro APR on purchases for 12 months from the date of account opening | Intro APRN/A |
Cons of funding a business with credit cards
- Overspending can lead to debt. Credit cards are a great way to inject cash into your business as long as you’re able to pay off what you borrow. If not, interest can add up quickly and it can be hard to get out of the cycle. Introductory offers, like 0% annual percentage rate for the first several months, can help you buy time. Just be sure you’re making the minimum payments each month and have a plan to pay off the full balance before the introductory period ends and a variable APR sets in.
- You’ll probably need to sign a personal guarantee. In other words, you will be held personally responsible for paying off your credit card balance if your business cannot. This puts your personal assets at risk. Some business credit cards also report to consumer credit bureaus, which means your personal credit score can be affected by your business spending for better or worse.
- Loans may give you access to higher limits and longer terms. While business credit cards can be used for everyday business expenses, term loans may be a more fitting option for long-term financing and large purchases, like real estate.
Alternative funding sources for small businesses
- Bank loans: Best for established small businesses that have collateral, excellent credit and strong annual revenue. Bank loans usually offer the most competitive interest rates, though they’re difficult to qualify for.
- SBA loans: Best for small businesses that don’t meet banks’ lending requirements but have been operational for multiple years and have good credit. SBA loans may have longer repayment terms than banks, up to 25 years in some cases. They also have competitive interest rates but may take weeks or even months to fund.
- Online loans: Best for small businesses that don’t qualify for SBA or bank loans. Online loans are generally more expensive than traditional business loans, but they are quick to fund and usually easier to qualify for.