Funding Your Business: Credit Card vs Merchant Loan


Funding a business by credit card offers both pros and cons. That’s why it’s important to take into account both of them before applying for a credit card. Besides, it’s important to know that a merchant loan is a great alternative to credit cards. So, let’s move forward and explore all these options in more details.

Funding Your Business with a Credit Card

As a business owner, you may find personal and business credit cards quite helpful for paying some of the bills. This is especially true of the early stages when cash flow and expenses don’t always match.

This type of financing can help you take your business off the ground and overcome some unexpected financial hardships. However, it can also cause some problems to your bottom line, so you should consider both the pros and cons of credit cards before applying for them.

The Advantages of Business Credit Cards

  • You can truly keep your business and personal credit separate
  • Cards are helpful for managing cash flow
  • This is an opportunity to track your expenses
  • Credit cards offer lower cost of capital as compared to other unsecured business debt
  • 0{cc14ccfafd257ee11d1d29aa8d2242333db7b5ed915d6c9334ae2d2c3e17fcd0} introductory APR periods
  • No introductory balance transfer fees
  • Sign-up bonuses and ongoing rewards

The Disadvantages of Business Credit Cards

  • Usually, you should personally guarantee the business card debts
  • Taking on excess debt during your first years, when you often have the highest expenses and your revenue is often low or nonexistent, can be dangerous
  • It’s possible to obtain 1 or 2 business cards with credit limits ranging from $10.000 to $20.000, which you can use to solve some startup or everyday financial issues, and that’s all
  • You can accumulate debt quickly
  • Credit cards can restrict the future lending ability
  • There’s a potential for misuse

Alternative Options for Business Funding: Merchant Loan

According to a recent survey of startup founders by US Trust, 16{cc14ccfafd257ee11d1d29aa8d2242333db7b5ed915d6c9334ae2d2c3e17fcd0} choose credit cards for starting a business. 37{cc14ccfafd257ee11d1d29aa8d2242333db7b5ed915d6c9334ae2d2c3e17fcd0} of millennial entrepreneurs opt for plastic to fund their business. Credit cards and traditional loans are, in fact, only one of the options. You can also turn to alternative funding options to get the necessary working capital for your business.

Thankfully, there’re reputable alternative online lenders that can provide you with the lowest cost and the most secure merchant loan to help you grow with ease. In fact, technology-based alternative funding options have grown exponentially over the recent years, thus enabling merchants to steam ahead.

With a respectable business funding provider, you can get the right kind of financing option tailored to your own business needs.

All business owners know that the lack of adequate cash flow for growth can be one of the biggest obstacles on their way to success. To make securing financing less challenging, don’t merely focus on business credit cards. Consider alternative business funding options as well since they serve as an exceptional source of financing to merchants of any type and size.

Author Bio: As the FAM account executive, Michael Hollis has funded millions by using business funding (merchant loan) solutions. His experience and extensive knowledge of the industry has made him a finance expert at First American Merchant.