Business credit cards vs business loans

Learn the differences between a business credit card and a business loan so you can make the right choice for your company.

Both business credit cards and business loans are popular financing options for many companies, but there are several key differences between the two. To find the better option for your business’s needs it helps to compare the two side by side and examine what these differences are.

Business credit cards are a lot like personal credit cards. They put a revolving line of credit in your pocket, which needs to be managed responsibly.

Business loans are usually tailored for a specific need such as buying essential equipment. They can be paid to you in installments or as a single lump sum, and often you’ll have the option to tailor your repayment schedule to suit your business’s needs. There are many different types of business loans available.

Compare business loans and business credit cards

Rates last updated September 25th, 2017
Table Image Min Loan Amount Max. Loan Amount Loan Term Application Fee Product Description
Prospa Business Loan Prospa Business Loan $5,000 $250,000 0.25 to 1 years $0 Apply for a business loan from $5,000 and enjoy a shorter loan term up to 12 months. Go to site More
NAB QuickBiz Loan NAB QuickBiz Loan $5,000 $50,000 1 to 2 years $0 An unsecured business loan from $5,000 that can be processed in 1 business day. Go to site More
Moula Business Loan Moula Business Loan $5,000 $250,000 0.5 to 1 years $0 Small business loans of up $250,000 approved and funded within 24 hours. Transparent fees and rates. Go to site More Flexible Business Loan  Flexible Business Loan $5,000 $500,000 0.5 to 1 years 1.5% A 100% online business loan with amounts available from $5,000. Flexible eligibility criteria and transparent rates and fees. Go to site More
Rates last updated September 24th, 2017
Name Product Bonus Points Rewards Points per $ spent (VISA/MC) Rewards Points per $ spent (AMEX) Complimentary Travel Insurance Annual fee Minimum Income Product Description
NAB Rewards Business Signature Card
75,000 bonus points
$175 p.a.
Earn 75,000 bonus points when you spend $4,000 on everyday purchases in the first 60 days of account opening.
American Express Gold Business Card
10,000 bonus points
$169 p.a.
Take advantage of no pre-set spending limit, data that feeds to MYOB accounting software and up to 51 days interest-free on purchases.
American Express Platinum Business Card
120,000 bonus points
$1,500 p.a.
Enjoy a platinum business concierge, complimentary Virgin Lounge access, worldwide travel insurance and luxury hotel benefits.
ANZ Business Black
$0 p.a. annual fee for the first year ($300 p.a. thereafter)
Offers premium features including uncapped rewards, travel benefits and tools to manage your business expenses. per additional card.
American Express Velocity Business Card
$249 p.a.
Easily download expenses into business and account management software, plus receive two Virgin Australia lounge passes per year.
American Express Business Card
$109 p.a.
Consolidate your business expenses and extend your cashflow with up to 51 interest-free days on purchases.
American Express Business Explorer® Credit Card
100,000 bonus points
$395 p.a.
Earn 100,000 bonus points when you meet the requirement and 2 Membership Rewards points per $1 spent.
American Express Qantas Business Rewards Card
100,000 bonus points
$450 p.a.
Earn up to 2 Qantas Points per $1 spent on eligible purchases and enjoy up to 51 days interest-free on purchases.
Caltex StarCard
10,000 bonus points
$35.40 p.a.
Minimise your monthly fuel expenses and collect bonus Qantas Points on eligible business purchases.

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The defining features of loans vs credit cards

If you’re looking for business finance, then either a credit card or business loan can work well, but there are enough differences between the two that one will usually be significantly more suitable than the other.

Business credit cardBusiness loan
FundingA specified amount of money that you can spend as a flexible, ongoing, revolving line of creditOne defined lump sum or multiple set payments
RepaymentMinimum monthly repaymentsA set repayment schedule
EligibilityTypically has strict requirementsMany options with less strict requirements are available
Interest ratesVaries, most offer purchase rates of between 10-20% p.a.Can be a monthly or annual rate. Typical annual rates for secured loans range between 3-10% p.a.
FeesAnnual fees, late repayment fees and more may applySignup fees, late repayment fees and more may apply
Other featuresRewards points, complimentary insurance and link-ups to accounting softwareTypically has no special features other than online account management
AdvantagesFlexible funding, continuously available money and bonus featuresMany different options, can be closely tailored and a choice of many providers
DisadvantagesTypically cost more than standard loansHas few special features, loan quality varies widely

How business credit cards are different to business loans

Business credit cards offer a number of advantages in comparison to typical business loans, mostly in the form of extra features. How extensively you plan on utilising these features often answers the question of whether or not a business credit card is worth it for you.

Business credit cards often come with the following bonus features:

  • Track your business spending more easily by seeing all expenses in one place
  • Access various account management and financial analysis tools
  • Give business credit cards to employees and manage the cards through one account
  • Enjoy rewards like frequent flyer points and complimentary insurance
  • Get access to perks such as free delivery or express shipments
  • Build your company credit score by using the card wisely

There are also downsides to consider:

  • Interest rates skew high, ranging from about 10% to 20% p.a.
  • Almost all business credit cards charge an annual fee, which is usually higher than the annual fee charged for an equivalent loan.
  • It can be difficult to get a business credit card. Eligibility requirements are usually more strict than with loans.
  • The cost of missing multiple repayments can rapidly escalate. An extended period of poor business might saddle you with growing debt.
  • If you depend on this credit to pay for business operations, then you might become abruptly stuck when it runs out

Choosing between a business loan and a business credit card

Generally speaking, a business credit card probably isn’t the right choice if you’re looking for ongoing funding. However, it probably is the right choice if you’re looking for an all-round business tool with built-in borrowing functionality. Business credit cards can help fund ongoing purchases and expenses, as long as you’re able to repay what you use each month. Taking full advantage of the extra features and benefits, as well as using the card for quick financing on the side, is an effective way to use a business credit card.

If your number one priority is getting financing, then a business loan is more likely to be right for you. You can borrow only the amount you need without locking yourself into a potentially expensive account, you can tailor your repayment plan and there are plenty of options for self-employed borrowers and people with an erratic credit history.

Picture: Shutterstock

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