How to Finance Your Business with a Small Business Loan and Credit Card

Small businesses are important for the economy but there are many obstacles that can hinder a business from succeeding. One common setback is the failure to find proper funding during the beginning stages of opening a new business.

You can pay the upfront costs with your own money, but it will not be sustainable for long-term. Most successful businesses often use financing to source their business needs. For example, you can use both credit cards and a business loan to finance your business. There are some reasons why this some combination can be beneficial.

Small Business Credit Cards

Credit card lending to small businesses has grown exponentially in the past few years. Business credit cards are like personal credit cards but instead help fund small to medium sized businesses. Just like personal credit, business credit issuers rely on your business credit report to determine if you will be granted credit and how much you will receive.

It is important to build business credit and you can do this by budgeting funds appropriately. Small business credit cards are a great option for the day-to-day expenses of your business. Furniture, software, business cards, office supplies, and even travel are some things you can get with your business credit card. Remember to keep your credit utilization low and make payments on time all the time.

Small business credit cards are great financial tools when utilized for your business. There are several advantages that the right small business credit card will provide you including:

  • Creating the ability to manage cash flow by giving 30 days to pay off expenses without interest.
  • Making it easier to separate personal and business expenses.
  • Earning rewards like points or cash back on business expenses.
  • The ability to monitor and control employee spending with employee cards that all earn rewards and are tied to the same account.
  • The chance to pay off startup costs with a 0 percent APR offer.

As you and your employees use self-discipline your business will maximize the returns on your small business credit card. If you have a lot of expenses, you will have more rewards to earn. Small businesses with good business credit reports lead to better terms on loans from both banks and alternative lenders.

Small Business Loans

Small business loans allow you to access capital before revenue streams start flowing. Business loans can help build business credit like small business credit cards. By managing both business loans and credit cards, you are able to create the possibility of securing a larger business loan in the future. The average alternative loan ranges between $5,000 to $200,000.

Small business loans can benefit your business by being able to use it for large purchases that are necessary for your business to grow. The following are some examples to consider:

  • Buying inventory or equipment for your business.
  • Investing in a company vehicle.
  • Hiring more people.
  • Refinancing existing debt.

Your business and personal credit scores determine your creditworthiness when applying for a loan. Many small businesses fail to qualify for traditional bank loans. Small Business Administration (SBA) loans and loans from alternative lenders provide a more flexible process that is tailored to your business.

The Bottom Line

The end goal of any small business is to have an overall healthy financial situation. Your business can thrive when you use small business loans and business credit cards in the right way. remember to use the loans and credit cards responsibility, the result will be a growing business and a great business credit score.