Benefits of using a credit card to finance your small business

April 14, 2022

Using a credit card to finance your small business

According to some statistics, 53% of small business owners find it difficult to get capital and invest in their future. No wonder that many people turn to credit cards, as a financing option, to take care of short-term, and in some cases, even long-term debt.

We’ve all heard the success stories of people who hawked everything they owned and maxed out their credit cards only to make a huge profit later on.  Then again, we’ve also heard stories of high interest and credit card debt.

Perks of using credit card for financing your small business

But believe it or not, there are many advantages to using a credit card for a small business over getting a business loan. Let’s discuss why more people are funding startups with credit cards – and why it makes sense in dollars and cents.

Credit cards eliminate personal risk

Sure, debt is difficult to live with. But the good news is that with a credit card for business, you won’t have to put up anything for collateral. If you have good-to-great credit, you will be able to access inexpensive capital, and only have to pay back the loan with interest. 

Can the interest soar over time? Yes, but contrary to popular belief, personal loans are not that much better than credit card loans – especially if your credit is average to good. 

The interest rate with a business or personal loan is based on credit score, as well as collateral. 

But it’s usually only perfect-credit-consumers who get approved for the personal loan. Some personal loans have a variable rate anyway, which means a fluctuating interest rate. The only real difference between using a credit card, and taking out a loan then, is the degree of personal risk. 

Credit cards don’t lose equity and they sometimes come with rewards programs as an extra perk. No wonder 46% of all small business owners use personal credit cards for their businesses, according to the SBA website.

Finding a lower-interest rate card

The main issue is finding a low-interest credit card. Like business loans, credit cards also go by an APR range. Some companies offer lower APR rates than others, and some even specialize in offering low-rate cards and a better APR overall. It might cost you a rewards program, but if funding is all that matters to you, who’s complaining. 

For example, you can apply for a SoFi credit card and immediately get a better deal than at more famous banks. SoFi offers no annual fee, cryptocurrency redemption, and reward points when you order from Lyft or DoorDash. 

Some credit unions usually put caps on credit card interest, so the idea that credit card interest is huge and predatory is exaggerated. Credit card debt is not that much different, in total cost than the interest on a personal loan. 

If you find a good-to-average credit card offer, you can take advantage of grace periods or low introductory interest rates, and 0% APR.  However, if that’s not feasible and you do acquire debt over time, remember you can also negotiate a lower interest rate with the financial institution – especially when business picks up.

Credit cards help keep your cash flow positive

Many business owners believe that credit cards are more controllable resources for funding. You don’t have to take thousands out at a time. You simply buy the equipment or the products you need, while keeping your balance afloat, and the cash flow steadily increases. 

You can also open multiple lines of credit and diversify your funding resources, rather than spending a larger balance with just one company. In some cases, it is smart to keep an eye on options like invoice financing to be sure that your cash flow remains steady.


Lastly, remember that even if you’re happy with your credit card company, you may still be able to find a better refinance deal if you keep looking. The market fluctuates so pay attention to changes and new opportunities. And as your business grows slowly, even before you turn over a profit, you may find ways to save by renegotiating credit card terms. 

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