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Should You Get a Business Loan or a Credit Card?

Guest post by: Al Shea

Article Overview: With so many credit card offers available to businesses, which is best - a business loan or a credit card? This article explores the benefits behind both options.

Should You Get a Business Loan or a Credit Card?

When you require a credit facility for your business you should consider all your options. Important factors to consider are how much you require and how long you need the facility for. If you are looking for a large amount of credit and want to pay it back over several years then a business loan or asset finance agreement(if you are buying equipment) would probably be the best and cheaper route to go. If you are looking at a smaller amount of credit it may be worth looking at a business credit card instead, but only look at this option if you are committed to making the regular repayments required to pay off the finance quickly - if you decide to only make the minimum repayments each month this route may take longer and cost more to clear than a regular business loan.

Business credit cards will only have an annual fee regardless of the number of purchases you make on it within your credit limit, a business loan will normally have an arrangement fee and annual fee to take into consideration when working out which option is the most cost effective. The benefits of some lease rental/business loans howevercould be a fixed rate throughout the full term of the agreement, whereas a business credit cards APR is variable and can change at any time if the provider writes to you. Also buying an asset on a business credit card allows you to claim the vat back straight away, whereas a lease rental charges vat on each monthly rental over the duration of the arrangement, so there are a variety of pros and cons to both options that should be carefully considered.

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Article Tags: apr, business loan, credit card, finance agreement



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