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.
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
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.
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.
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.
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
- 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.
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
Why Business Credit Card Funding Could be a Smart 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.