When planning to start a business, getting a small business loan to jumpstart your business is a great idea. But when making small business purchases there is no point in taking a small business loan.
There are a dozen reasons on why you should use a credit card instead of a small business loan but I will state just a few.
1. You do not like to pay interest
There is no where on earth you are going to find any lender willing to give you an interest free loan. This is what makes using a credit card attractive, because if you fully pay your bills each month you are practically getting a loan with no interests whatsoever. When dealing with banks or any other lenders immediately after the loan is issued the interest is calculated no matter how fast you pay the loan.
After every purchase you will have a grace period following the end of the billing cycle and a due date. If you make sure that your bills are fully sorted by the due date you will incur zero interests for the purchases you will have made during that billing cycle.
2. To reduce the amount of risk you are taking
All sorts of credits are risky if you do not pay, but some are more risky than others. The issuer of a credit card may follow up on you personally if you default to pay but that is nothing compared to what you would lose if you failed to pay a business loan. On many loans including SBA loans you must put up collateral to be eligible for the loan. The higher the amount you want the more costly the collateral. Often, this means a lien on residential real estate.”
3. When qualification for a loan is not certain
Credit cards not only offer convenience. At times, they might be the only option to unlock your potentials especially when you are looking to build your business credit score but does not qualify, with a strong personal credit score, you should have little problem getting a loan. However, be sure to separate personal expenses to those exclusively related to business. Hence you will have an easy time when filing your taxes. Besides, just ensure the card you choose will your business needs.
4. When seeking No-Interest Promotional Financing
Using credit cards will make you miss out on no-interest offers. However, you can as well enjoy the no-interest transactions for a limited time especially from Platiq. Although they are less common than with personal credit cards, a number of SME credit cards offer 0% introductory offer for one year. These come in handy especially when you are making a big purchase and require additional time to pay off the balance without incurring any interest. Be sure to pay off the balance before the intro period expires since business cards tend to charge high-interest rates than their personal counterparts.
5. If you do not want to pay Fees
When you take a loan, you might be slapped with high interest rates. In addition you may face prepayment penalties if you want to pay off the loan before the term expires. However, you can avoid the fees altogether with a business credit card including paying the annual fees. Although some cards consider including the capital one spark cash select for organizations.
6. If you want to give your Employees Access to Credit
It is always safe to make your employees authorized users on your business credit card that it is to give them to give them your firms line of credit. Through this, you will be able to monitor their spending more closely with a credit card. Besides, you can limit their expenditure by calling the number at the back of the card. Nonetheless, the limitation does not apply to hotel tips and hotel extended stays beyond the original reserved dates.
There are times where a small business loan is appropriate and you should not hesitate to use it then. Also there is a time to use a credit card and you must not shy off since it is even cheaper and more convenient.