At some point, most small businesses use some type of financing to either cover expenses during down periods or to fuel growth during periods of expansion. Two common options favored by small business owners are business credit cards and working capital loans. Find out the difference between the two so you can make an informed decision the next time you need an injection of capital.
How Does a Business Credit Card Work?
A business credit card works just like a personal credit card. You can charge business purchases on your card, then repay either a minimum amount or the full balance on your due date. The interest rate is variable and depends on both your credit score and market rates. Some business credit cards charge an annual fee, so it’s important to know all of these details up front in order to understand the true cost of this type of financing. Finally, like a personal credit card, a business credit card can impact your credit score. It’s a form of revolving credit and keeping a large balance on any credit card can cause your score to drop significantly.
How Does a Working Capital Loan Work?
A working capital loan is a type of installment loan that gives you a lump sum of cash to improve your company’s cash flow. You get a fixed interest rate with automatic payments so you always know what you owe. With terms between six and 24 months, you can repay the funds quickly. Plus, when you choose a lender like us, you can get approved and funded within just a few days. Without having to wait for a credit card to arrive in the mail, you can start using that working capital right away. A working capital loan is also considered an installment loan on your credit report, which has a less dramatic impact on your score.
The Bottom Line
Which is right for you? It depends on how you prefer to receive your funds, how much you need to borrow, and how you want to repay your balance. For quick business funding with a working capital loan, fill out an application with CMS Funding.