Atlantic Blog

As a savvy business owner, you understand the importance of managing short-term cash flows and the need to tap into credit when necessary. Whether it's a broken grill, higher inventory costs, or simultaneous software license renewals, unforeseen challenges can take a toll on your expenses. When these situations arise, choosing the right type of credit for your business is crucial, but what type of credit is right for you?

While both credit cards and business lines of credit are viable options when your business needs to keep its cash flow moving, each type of credit has pros and cons. 

Business Credit Cards

When it comes to obtaining credit as a business owner, credit cards are typically the easiest route to go in terms of applying. Plus, credit cards often include rewards and perks that can be beneficial to your business.

• Flexibility and convenience
• Help with organizing your expenses
• Keep your personal and business expenses separate
• Ease of organizing expenses for taxes
• Ability to have multiple employee cards under one account

However, while business credit cards offer a slew of benefits and are accepted at most places, there are some limitations.    

• Cannot use to cover payroll
• Some vendors do not accept credit cards
• Higher interest rates (depending on credit score)
• Not accepted by all billers (for example: lease payments)

As a business owner, credit cards can be vital for managing everyday expenses. However, did you know that your personal credit score and history could determine your eligibility for a business credit card? That's right – lenders often consider these factors when assessing small business owners.

It's crucial to prioritize maintaining a good personal credit score. By doing so, you'll be unlocking the doors to better business opportunities and setting yourself up for success.

Business Line of Credit

A business line of credit functions similarly to a credit card; you'll have access to a specific amount of funds you can use as needed. Once you pay back the borrowed funds, you can draw on them again.

While this type of loan may function like a credit card, there are many benefits business owners can take advantage of to keep their businesses growing.

• Only pay interest on what you borrow
• Pay vendors that don’t accept credit cards
• Lower interest rates than most credit cards
• Can use to cover payroll & lease payments
• Higher loan amounts than credit cards

A business line of credit is a great way to fill the gaps in areas where credit cards cannot – such as making payroll or lease payments. However, there are also limitations that come with this type of loan.

• Your business may be used as collateral
• Interest begins accruing immediately
• There may be additional fees involved

Depending on the loan size, securing a business line of credit can be challenging for new businesses without sufficient collateral. Instead, personal assets may have to be used, increasing the individual risk for business owners.

The Bottom Line

Find the perfect credit combination for your business! Using both options for different business needs can help keep everything running smoothly. You can enjoy the savings and flexibility of a line of credit while also taking advantage of the convenience offered by a credit card.

We Can Help!

Having access to credit can be a vital component to running a business. Whether you’re considering a credit card or a line of credit for your business, we have options available. Easily cover business costs — planned and unplanned — with anytime access to flexible funds.

Interested in securing a line of credit for your business? At Atlantic Federal Credit Union, we make it simple. Apply online or visit one of our branches. We offer competitive rates, fast decision-making, and immediate access to funds once approved, ensuring you never struggle with managing your credit.

Don’t hesitate to call 800-384-0432 or read more about Atlantic’s Business Loans to learn more about the various products we offer designed to help your business grow. 

Stay up to date and join our email list.

The Atlantic blog strives to deliver informative, relevant, and sometimes fun financial information. If you enjoyed this article, please forward it to a friend.

Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.