Whether it’s purchasing extra inventory or helping you manage your cash flow, having access to credit can be critical for your business. It’s an excellent financial tool in your arsenal to keep your business running smoothly during the slower months or to cover an unexpected expense.
Two popular options for accessing credit are opening a business credit card or taking out a revolving line of credit. While the two have some similarities, there are some key differences that can help you decide which option is right for your business.
What is a business credit card?
Like a personal credit card, a business credit card allows you to make purchases for your business that you pay back each month. With a fixed limit, you can charge up to that amount on everyday business expenses while building credit. It’s also usually a quick and easy, collateral-free financing option and is useful when wanting to give multiple employees access to making business purchases. Don’t forget credit cards also come with interest and fees that are sometimes quite steep.
What is a revolving line of credit?
A type of financing you can get from your local bank, a revolving line of credit allows you to borrow a predetermined amount, however, they tend to come with higher credit limits, making it a better alternative for when needing cash for larger purchases. It’s also different from a business loan in that you can access cash whenever you need it or as expenses come up. It’s important to note that lines of credit come with draw periods where you can access the line as often as you like. During the draw period, you can make interest-only payments, partial payments or pay down your line of credit completely.
Which is right for your business?
At the end of the day, a credit card might be a better option for smaller everyday business expenses that you can pay off each month; i.e. gas, travel expenses, meals, office supplies. When it comes to larger expenses or expenses you can’t pay with a credit card, like payroll, leases, or inventory, a revolving line of credit might be the better option.
But as you can see, each of these credit options can play a different role for your business, so having access to both can be beneficial as well.
Interested in a business credit card or a revolving line of credit? Union Savings Bank offers both to local businesses in Western Connecticut. Not only do we offer a variety of loans at competitive rates, but we’ll work with you one-on-one to build a customized solution based on your individual business needs. And if you qualify, we can process your loan request quickly.
Call us at 866.650.0720 or visit one of our branches.