Line of Credit and Business Credit Cards – Why Important for Business
A business line of credit and a business credit card are financing options available for small businesses. What is the difference between these two business financing options? Which one should you get? How can you make the most of each? Let’s discuss these questions one at a time.
What is a Small Business Line of Credit?
A business line of credit is similar to a secured business loan. However, instead of receiving the amount of loan in cash, a business owner can choose to withdraw the cash in installments.
The amount of loan depends on the value of the collateral submitted to the lender. As long as the business does not exceed the loan’s value, the borrower can take out the cash needed at any time throughout the loan’s term.
What about Small Business Credit Cards?
A small business credit card on the other hand works in the same way as a personal credit card does. If a business owner needs to make a purchase, he/she can charge expenses to his/her business credit card and pay it back at a later time. Although it is not a loan, having a business credit card gives a business the financial assurance in case emergency expenses arise.
Compared to a business line of credit, applying for a business credit card involves a more convenient process. In fact, applications can be done online and approval can be received within minutes. As soon as your credit card application is approved, you can expect to receive your small business credit card after a few days.
Business Credit card or Line Of Credit – Which is for you?
Which one should you choose? Getting a small business credit card is recommended not only for large businesses but for small businesses as well. In fact, any type of business can benefit from opening a small business credit card account. Why? Aside from the financial assistance, a business credit card also helps a company build credit history.
If you’re in need of additional funding for purchasing stocks or supplies, buying additional equipment, renovating your office space, launching new projects, or expanding your business, you may consider applying for a business line of credit. With a business line of credit, you can be assured that you have a solid financial resource without the need to apply for a loan every time you need funds.
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Many entrepreneurs apply for both a business line of credit and a business credit card at the same time. The important thing is to make sure that the money is being spent wisely. Pay attention to your schedule of payments to avoid incurring late penalties and to protect your credit history.
Remember that regardless of which one you choose- whether a business credit card or a business line of credit – the timeliness and consistency of your payments to your lender would be reflected in your business credit report.
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Pamela Williams is a Loan Consultant, Internet Marketer and Writer. For years she had helped consumers and business owners especially regarding business credit cards. This resource is dedicated particularly on business credit card reviews, articles, tips and advice, and online application so that consumers and business owners may compare which is the best business credit card for their business. Copyright 2007 |