Jamela Adam at Best Money wrote about choosing between a business credit card and a business loan. The short version is right: cards for short-term, recurring expenses, loans for large one-time investments. Cards run 16% to 28% APR; business loans run roughly 6.8% to 11%, with a predictable repayment schedule. Using the wrong tool creates cash flow problems that look like a revenue problem.
I shared the example I use with owners. I had a client put a $40,000 equipment purchase on a 0% introductory card, fully convinced he would clear it before the rate adjusted. He did not. When the promotional period expired, he was carrying $40,000 at 24%. The equipment was a good investment. The financing turned it into a bad one, because a card is built for balances that get paid off, and equipment is paid for over years.
The decision rule I give clients: if the expense will be paid off within the billing cycle or a short promotional window with certainty, and it earns rewards or builds business credit, use the card. If it is a large purchase that will be paid off over the useful life of the asset, take the loan, match the term to the life of what you are buying, and lock the rate. Certainty about the payoff timeline is the whole test, and most owners overestimate theirs.
Both options can reach personal credit if there is a personal guarantee, so read that clause too.
Read the full article at Best Money →
