Which is a better choice for your business -SME Loan or Credit Card Debt ?

Posted by Digital on October 26th, 2018

You want to expand your business and are scouting the market for some additional funding. Some might advise you to take a small business loan whereas some ask you to put it on your credit card.

Which route you choose to go eventually depends on your requirement, but before you go, considers the reasons why an SME loan is a better and smarter idea.

1.More options

With a business loan, you have multiple options of the lender you are borrowing from, the type of loan you want, the repayment options, to name a few. You can approach Fintech lenders for an SME loan. The choice of loan also includes secured or unsecured loans and if you are a woman entrepreneur there are many loan options for women-owned businesses alone. On the other hand, a business credit card offers you very few options and it does not take into account the needs of your business.

2.More security

Besides racking up hefty interest, credit cards come with a set of security challenges too. Every day we hear of data breaches at vendor establishments or financial institutions. Then there is also the probability of your card being fraudulently used by someone visiting your office regularly. While you might not be liable for the purchase, it is just a lot of trouble that you can avoid. A loan gives you access to funds that you alone can access. There is no fear of fraud and you know the funds are there when you need them.

3.More growth opportunity

Unlike a credit card debt that is a continuous stream of expense, a loan allows you to stagger your payments as per the schedule that you set up with the lender. With the form of flexible business funding, you can focus on scaling up your business and worry less about payments. Better fee structures and reliable financing, with fixed interest rates, give you the peace of mind to work on your business and pay off your debt, in parallel.

The final verdict is that credit card is a good idea for daily, smaller expenses. However, when you weigh in the pros and cons of both, you will realize that taking a small business loan as business funding works out to be a better deal than credit card debt on many counts.