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Business Credit Cards vs Business Loans

Business Finance

Business Credit Cards vs Business Loans

Updated: 30 October 2023

Two of the most common forms of business finance are business loans and business credit cards, both of which come with their own distinct features and considerations.

Here we’ll be diving deep into what business credit cards and business loans have to offer. We’ll explore what they are and what they represent, their benefits and drawbacks, and answer the most common questions surrounding them to help you decide which might be the best fit for your business.

Business credit cards

Business credit cards are financial products that allow businesses to make purchases and access a line of credit.

What is a business credit card?

Business credit cards function very much like personal credit cards, only they’re meant to be used exclusively for business expenses. They allow businesses to pay for goods and services with a grace period before interest or charges accrue. 

As they are designed specifically for businesses, their features and benefits may be more tailored to the needs of businesses, and typically have higher credit limits than personal credit cards.

Am I personally liable for a business credit card?

This will depend on the provider. You may be required to provide a personal guarantee when you take out a business credit card, which would mean you are liable to repay any unpaid debt if the business is unable to. 

Are business credit card payments tax deductible?

If items you buy with your business credit card are for business purposes, typically they will be tax deductible. Keep clear records, receipts and invoices, and speak to an accountant or tax adviser if you’re unsure. Using a credit card rather than cash can make this easier, and it allows you to track multiple card users in one account. 

Can a brand new business get a credit card?

Not only is it possible for a new business to get a business credit card but some financial institutions actually offer credit cards specifically designed for new businesses. These cards may have lower credit limits and fewer rewards initially, but they can help businesses to establish credit and manage expenses effectively.

Can I get a credit card for a business with bad credit?

Bad credit can be a major barrier to securing a new credit card. However, you may still get approved but with a lower credit limit, and some providers offer business credit cards specifically for those with bad credit.

Business loans

A business loan is a financial arrangement where a lender provides a lump sum of money to a business, which must be repaid over a specified period, typically with interest. These loans are often used for larger investments or long-term financing needs.

What is a business loan?

A business loan is a formal agreement between a business and a lender that outlines the terms of borrowing money to fund specific business needs. These needs may include expansion, equipment purchase, working capital or other operational requirements.

Can I get a business loan with bad credit?

Lenders will always consider the credit history and financial health of the business before approving a loan. If you have a poor credit rating, you may still be approved, but for a lower amount or with a higher interest rate. It may be easier to get a short term loan, or you can look for a provider that specialises in loans for those with a poor credit history.

Does a business loan affect personal credit?

This will depend on the product and provider. If a business owner provides a personal guarantee, the provider will run credit searches on their personal credit file which may impact their personal credit score.

How easy is it to get a business loan?

Thanks to recent innovation from providers like Funding Circle, applying for a business loan is much simpler than it was 15 years ago. You can apply online in 10 minutes, and you’ll get a decision in as little as one hour.

Can I get a loan for a new business?

Lenders generally prefer businesses with a track record of revenue and stability. However, some lenders offer startup loans or loans tailored to new businesses. At Funding Circle you need to have been trading for at least 1 year to apply.

What is the difference between business loans and business credit cards?

Business loans differ from business credit cards primarily in terms of their flexibility. A business loan is a more straightforward proposition, whereas a line of credit allows you to withdraw only the amount you need at any one time and repay only that amount. For that reason, business loans are a more popular choice for startups requiring a big lump sum to get a business going.

A business loan provides you with a one-off lump sum which you pay back in its entirety over a fixed period. A business credit card gives you access to credit that you can dip into when needed. You may be able to make partial payments or settle the outstanding balance each month, then use it again. Unlike term loans, there is no defined end date to a business credit card, so as long as you keep up with repayments you can keep using it indefinitely. 

Should I use business loans or business credit cards?

Whether you choose a business loan or business credit card will depend on your specific needs and current financial situation. Typically business loans are for larger investments and can be a commitment over several years, whereas business credit cards are for everyday cash flow needs and can be settled quickly.

How Funding Circle can help

At Funding Circle we offer a variety of products to suit different needs, from business loans to short term lending.

Funding Circle business loans

Borrow from £10,000 to £500,000 over up to 6 years. All loans are fixed rate and come with no early settlement fees. 

Asset finance

Borrow up to £5 million to fund new equipment, vehicles, machinery or other assets through our partners.


Spread the cost of business bills, invoices and more over 3 months with a line of credit of up to £250,000. It includes options to pay by business credit card or transfer directly to a supplier.

30/10/23: While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.

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