pros-and-cons

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 November 21st, 2017
Name Product Min Loan Amount Max. Loan Amount Loan Term Application Fee Product Description
Prospa Business Loan
$5,000
$250,000
0.25 to 2 years
$250 establishment fee
Special offer: No repayments required until Monday 8 January 2018 for business loans that are settled between 20 November 2017 and 31 December 2017. Conditions apply.
NAB QuickBiz Loan
$5,000
$100,000
1 to 3 years
$0
An unsecured business loan from $5,000 that can be processed in 1 business day.
Spotcap Loans
$10,000
$250,000
1 year
$0
Take advantage of a fixed interest rate and no upfront fees on this business loan, available up to $250,000. Note: Business must have been operating for at least 18 months and have turnover over $200,000.
Moula Business Loan
$5,000
$250,000
0.5 to 1 years
$0
Small business loans of up to $250,000 approved and funded within 24 hours. Transparent fees and rates. Note: Business must have been operating for at least 12 months and have monthly sales of at least $5,000.
GetCapital Flexible Business Loan
$5,000
$500,000
0.25 to 1 years
1.5% to 2.5% initial draw down fee
A flexible business loan that allows you to earn Qantas rewards points. Note: Business must have been operating for at least 9 months and have monthly sales of at least $10,000.
Sail Unsecured Business Loan
$5,000
$100,000
1 year
2.5% origination fee
Take advantage of a convenient business loan available from $5,000. Bad credit applicants considered. Note: Business must have been operating for at least 6 months and have turnover over $50,000.
RateSetter Business Loan
$10,000
$150,000
0.5 to 5 years
0.5%
Apply for up to $150,000 and choose between a secured or unsecured loan. Note: Business must have been operating for at least 2 years and have turnover over $250,000.
businessloans.com.au  Flexible Business Loan
$5,000
$500,000
0.5 to 1 years
1.5% Initial draw down fee
A 100% online business loan with amounts available from $5,000. Flexible eligibility criteria and transparent rates and fees.

Compare up to 4 providers

Rates last updated November 21st, 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
ANZ Business Black
1.5
Yes
$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.
Commonwealth Bank Business Gold Awards Credit Card
1
0.5
Yes
$150 p.a.
Earn up to 2 Awards points per $1 spent, receive an unsecured credit limit of up to $50,000 and up to 55 days interest-free on purchases.
American Express Gold Business Card
10,000 bonus points
0
1
Yes
$169 p.a.
$24,000
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
0
1
Yes
$1,500 p.a.
$75,000
Enjoy a platinum business concierge, complimentary Virgin Lounge access, worldwide travel insurance and luxury hotel benefits.
Commonwealth Bank Business Interest-Free Days Credit Card
No
$60 p.a.
The flexibility of a Mastercard and an American Express, plus the ability to directly transfer your points to Qantas frequent flyer.
American Express Velocity Business Card
1
Yes
$249 p.a.
$24,000
Easily download expenses into business and account management software, plus receive two Virgin Australia lounge passes per year.
American Express Business Card
0
1
Yes
$109 p.a.
$24,000
Consolidate your business expenses and extend your cashflow with up to 51 interest-free days on purchases.
Commonwealth Bank Business Awards Platinum Credit Card
1
0.5
Yes
$300 p.a.
Earn up to 3 Awards points per $1 spent and receive complimentary travel and unauthorised transaction insurances.
American Express Business Explorer Credit Card
100,000 bonus points
2
Yes
$395 p.a.
$24,000
Earn 100,000 bonus points when you meet the requirement and 2 Membership Rewards points per $1 spent.
Commonwealth Bank Business Awards Credit Card
1
0.5
Yes
$100 p.a.
A low fee business rewards credit card with up to 55 days interest-free on purchases and a $50,000 limit.
American Express Qantas Business Rewards Card
100,000 bonus points
1.25
Yes
$450 p.a.
$24,000
Earn up to 2 Qantas Points per $1 spent on eligible purchases and enjoy up to 51 days interest-free on purchases.
Caltex StarCard
1
No
$35.40 p.a.
Minimise your monthly fuel expenses and collect Qantas Points on eligible business purchases.
Bankwest Low Rate Business Mastercard
0
No
$99 p.a.
Offers an introductory 0% p.a. interest rate on purchases for 12 months. Plus, add up to 3 additional cardholders for $0.

Compare up to 4 providers

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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