Whether you’re looking to grow your business or trying to get out of business debt you’re most likely going to need some form of credit. A business credit card is one of the most popular options for small businesses that need quick access to cash. What you may not know is that there are other options such as a business line of credit.
What’s the Difference Between a Credit Card and a Line of Credit?
A line of credit allows you to borrow money against a revolving line of credit. You can take money out of the credit line, and only pay a fixed interest rate on the amount you borrow. The debt is paid like any other loan. However, with a revolving line of credit, as soon as the debt is repaid, it is possible to borrow up to the set credit limit again without going through another loan approval process.
You may be familiar with lines of credit, such as a home equity line of credit. The good news is that business lines of credit work the same way. Instead of receiving the full amount all at once, you can withdraw from the line as needed.
For example, if a bank approves you for $100,000, you can take out $20,000 one month and $50,000 the next month. You’re not obligated to take or use the full amount. Lines of credit are useful if you don’t know how much a specific project will cost. You could use it to move offices, open a new storefront, or hire more employees.
On the other hand, credit cards have a set limit and allow you to make purchases that you pay back monthly. Most credit cards offer rewards programs, while lines of credit do not, and these can be beneficial. But exercise caution, if you pay off your balance in full each month, then a cashback or a rewards credit card may be useful. You can earn hundreds or even thousands of dollars a year in rewards, not to mention free flights or hotel stays. Credit card companies can lure you in with enticing offers of “free money”, but read the fine print. Many of the offers are only for specific purchases. Moreover, some cards set limits on their rewards.
While credit can be a great option for business owners, they tend to have much higher interest rates and more penalties if you do not pay your bill on time. This could negatively affect your credit score and put you further into debt.
Consult with American Finasco
If you suspect your debt is getting out of control, call American Finasco. We can help you manage and eliminate your commercial debt. Our team is determined to help you gain financial freedom. Contact us today to get your business on the right track! Visit Contact Us and complete our Online Form for a free consultation or call (800) 299-2909. We look forward to speaking with you.