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Should I Use a Business Credit Card or Loan?

Greg Swanson

Many business owners wonder, should I use a business credit card or loan to finance growth, cover expenses, or manage cash flow? Both options serve different purposes—and knowing when to use each can make a big financial difference.

Quick answer: Use a business credit card for short-term, smaller expenses, and choose a loan for larger, long-term investments or startup capital.

When to Use a Business Credit Card

Recurring purchases: Office supplies, software subscriptions, and travel expenses work well here.
Cash flow gaps: Cards offer quick access to funds for timing mismatches between expenses and income.
Rewards and perks: Many cards offer cashback, travel points, or discounts on business tools.

When to Choose a Business Loan

Larger funding needs: Loans are best for buying equipment, expanding locations, or hiring staff.
Lower interest rates: Compared to credit cards, loans usually offer better long-term rates.
Predictable repayment: Fixed monthly payments help you plan your budget more easily.

How to Decide What’s Best for You

Consider your financing goals. If you just need flexibility for everyday purchases, a credit card may be enough. But if you're planning big moves, look into small business financing options like term loans or SBA-backed loans. Evaluate all your business credit options carefully, and think about fees, interest rates, and repayment terms.

Updated: August 15, 2025

Which has better interest rates: business loans or credit cards?

Business loans usually offer lower interest rates than credit cards, especially for long-term borrowing.

Can I build business credit with a credit card?

Yes, regularly using and paying off a business credit card can help you build a strong business credit profile.

Are there fees with business loans?

Yes, many loans come with origination fees, closing costs, or prepayment penalties—so read the fine print.

Is it okay to use both a credit card and a loan?

Yes, many businesses use both—credit cards for daily expenses and loans for large purchases or expansion.