Likely to have lower interest rates than other lending options
Provides quick access to cash
You don’t have to go through a loan application process
Provides revolving credit, so you only have to pay for what you borrow. Also, the credit line is restored as you make payments
It is easy to track business expenses
Provides access to rewards programs
Offers zero or low balance transfer fees
The debt is all yours and not the business’s, which means you do not lose any equity


Costly fees if you go over your credit limit or miss a payment
Easy to mismanage
A limited credit line may not be enough for the funding your business needs
Your personal credit is at stake until you establish a business credit score

Best Practices with Business Credit Card Funding

Like any credit card or line of credit, you should do your homework before using this type of funding.

Consider the following:

  • Decide what you need before you apply - before you apply for a small business credit card, take the time to evaluate how you will use the card for your business. This approach will help you narrow down your options. Remember that a business credit card might affect your personal credit.
  • Compare several credit card options - this will help you find the one with the most competitive rate and rewards program for your unique business needs. You will also want to consider the fees associated with each card. You might also wish to compare a line of credit vs credit card.
  • Use the card for business-related expenses only - business cards usually have language written into the user agreement prohibiting using the card for personal expenses.
  • Pay off the card each month - when you use your card for business purposes, try to pay it off as quickly as possible to avoid paying interest and additional fees.


5 Alternatives to Credit Card Funding

1. Business Line of Credit

A business line of credit is similar to a credit card because it gives your business access to revolving credit. With revolving credit, once you have paid back the loan and its interest, the lender gives you automatic access to draw from the loan again. You only pay the interest and fees associated with the amount you borrow.

Although there are numerous options on the market for a business line of credit, Fundbox has become a popular choice. If your business is U.S. based and earns at least $100,000 in annual revenue, then Fundbox is a great alternative. Fundbox will provide you with quick access to credit.
If you want to know more before you make a choice, check out our list of the best business line of credit providers.


2. SBA Loans

The SBA does not provide Small Business Administration (SBA) Loans. However, it does offer lenders access to capital to provide funding to small businesses. This access allows lenders to offer a wider range of funding and competitive terms.

Fora Financial is one lender offering SBA loans. Fora Financial provides loans ranging from $5,000 to $500,000 and does not require any collateral. They also have flexible repayment terms over 18 months.

Fora Financial

3. Commercial Real Estate Loans

Small businesses can use commercial real estate loans to purchase property or rental income. These types of loans provide longer repayment terms and have competitive interest rates. However, new businesses may find it tough to secure funding since many loans require years in business and a 20% down payment.

For businesses interested in a commercial real estate loan, GoKapital is a top choice. Loans can be approved for up to $50 million, and rates start at 6%. Once more, the repayment terms are equally competitive.


4. Borrowing Against Personal Assets

Also known as asset based lending. If you own a home, this might provide an alternative for short-term financing. But it also means taking on more personal debt.

  • Refinancing - if you have equity in your home, you may be able to refinance the loan and draw out some of the equity to fund the business.
  • Home equity line of credit (HELOC) - you can also borrow against the equity of your home with a line of credit, which usually has a variable interest rate and lets you borrow funds as you need them.
  • Home equity loan - similar to a HELOC where you are borrowing against the equity in your home, but it’s typically a fixed interest rate with fixed monthly payments after you receive a lump sum.

5. Personal Funds

Lastly, you can pay for business expenses or funding by using your personal savings. While you will not be increasing your personal debt, it could increase the amount of time it takes to get your business started.


Should You Finance a Startup with a Business Credit Card?

A common question among entrepreneurs is if you should use a business credit card to finance a startup. And like so many answers to questions around business, it depends on the situation and level of risk you’re willing to take.

As mentioned, there are several benefits to using a business credit card, including help with cash flow management, quick funding, and access to introductory purchase APR offers and lucrative sign-up offers for rewards. These are all benefits that are a tremendous help when you’re trying to get your business off the ground.

There are risks with this approach though. 

The interest rates are almost always higher with a business credit card. Unless you start off with a 0% interest rate, it’s going to cost you more to carry a balance each month, which means your best course of action is to pay the balance in full each month. And if you do use a business credit card for a cash advance, be prepared to pay quite a hefty cash advance fee.

Most likely you will be personally liable for any balance owed on the business credit card, which means you’re putting your own finances at risk too. There’s a chance your business will not generate enough revenue, so you have to be prepared to pay the balance in some way.

The bottom line is, if the benefits of using the business credit card for a startup outweigh the potential risks, then it’s worth considering, especially if you can find a startup business credit card that aligns with your company spending.


Why Business Credit Card Funding Could Be a Smarter Option

Credit card funding could be the answer if you want to get your business off the ground quickly or need a small amount of funding to reach a business goal. It might only be a short-term solution. However, it does benefit from paying a low-interest rate and the possibility of earning additional rewards or cashback. Credit card funding may be a manageable way to give your business push it needs to get started, grow, for debt financing, or get back on track. 

About the Author

Sara Coleman

Sara Coleman

Freelance Financial Writer

Sara Coleman is a freelance writer with several years of experience covering personal finance topics such as insurance, loans, credit cards, budgeting and more.

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