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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.

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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

Data indicated here is updated regularly
Name Product Min. Loan Amount Max. Loan Amount Loan Term Upfront Fee Filter Values
Valiant Finance Business Loan Broker
$5,000
$1,000,000
3 months to 5 years
$0 application fee
A Business Lending Specialist from Valiant Finance can give you access to competitive business loans from over 70 lenders. Loans between $5,000 and $1 million are available. Request a call – your loan can be funded in 1 business day.
Prospa Business Loan
$5,000
$300,000
3 months to 3 years
3% origination fee
Small business loans are available from $5,000 - $300,000 on terms of up to 3 years. At least six months trading history and a monthly turnover from $6,000 is necessary.
Max Funding Unsecured Business Loan
$2,000
$300,000
1 month to 1 year
$0 application fee
An unsecured business loan from $2,000 that offers convenient pre-approval and no early repayment fees.
OnDeck Business Loans
$10,000
$250,000
6 months to 2 years
3% of loan amount
Apply for up to $250,000 and receive your approved funds in one business day. Minimum annual turnover of $100,000 and 1 year of trading history required.
ANZ Secured Business Loan
$10,000
$10,000,000
Up to 15 years
$600
Benefit from a low rate when you secure this loan with property and/or business assets. Loans from $10,000 available.
Westpac Business Loan
$5,000
$1,000,000
1 to 30 years
$0 application fee
Purchase a new vehicle, equipment or support your cash flow with a business finance solution from Westpac.
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Data indicated here is updated regularly
Name Product Bonus points Rewards points per $ spent Complimentary travel insurance Annual fee Minimum annual revenue
American Express Qantas Business Rewards Card
120,000
1.25
Yes
$450
$75,000
ABN holders w/ $75,000 revenue. Get 120,000 bonus points, 3x points on eligible Qantas flights & 2 lounge passes per year.
NAB Rewards Business Signature Card
100,000
1.25
No
$175
$75,000
Earn 100,000 bonus points when you spend $4,000 on everyday business purchases in the first 60 days of account opening. ABN required.
American Express Business Explorer Credit Card
100,000
2
Yes
$395
$75,000
ABN holders w/ $75,000 revenue. Get 100,000 bonus points. Plus, 2 airport lounge passes.
NAB Qantas Business Signature Card
100,000
0.66
No
$295
$75,000
Receive 100,000 bonus Qantas Points and earn points on everyday business purchases. Also get up to 44 days interest-free. ABN required.
American Express Platinum Business Card
150,000
2.25
Yes
$1,750
$75,000
ABN holders w/ $75,000 revenue. Get 150,000 bonus points and up to 2.25 points/ $1 spent on eligible business purchases.
American Express Business Card
1.5
No
$109
$75,000
ABN holders w/ $75,000 revenue. Up to 1.5 points/ $1 spent and extended cashflow with up to 51 days interest-free on business purchases.
American Express Gold Business Card
100,000
1.5
Yes
$169
$75,000
ABN holders w/ $75,000 revenue. Get 100,000 bonus Membership Rewards Points and up to 51 days to pay for purchases.
American Express Velocity Business Card
1
Yes
$249
$75,000
ABN holders w/ $75,000 revenue. A business charge card offering Velocity Points per $1 spent and up to 51 days interest-free on 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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