Financing a Business With a Small Business Loan and Credit Card
How to Finance Your Business with a Small Business Loan and Credit Card
July 02, 2018

How to Finance Your Business with a Small Business Loan and Credit Card

Small businesses play a vital role in the economy. In fact, according to the Small Business Administration, small businesses account for 99.7 percent of all businesses in America. After the latest recession in 2008, they accounted for 67 percent of new jobs.

While small businesses are so important for the economy, there are many obstacles that can hinder a business from succeeding. USA Today reports that 20 percent of these small businesses will fail in their first year. One common setback is the failure to find proper funding during the beginning stages of opening a new business.

It’s possible to pay upfront costs out of pocket with your own money, but that route isn’t a sustainable financial strategy for most long-term business plans. Successful businesses often use outside funding to source their business needs. For example, you could utilize both credit cards and a business loan to finance your company. In this post, we’ll explain why this combination can be beneficial.

Small Business Credit Cards

It’s estimated that the expansion of credit card lending to small businesses added around $142 billion to the U.S economy and led to the creation of 1.6 million jobs between 2003 and 2008.

Business credit cards are like personal credit cards, but they are designed to help fund services for small to mid-sized businesses. Just like personal credit, business credit issuers rely on your business credit report to determine if you’ll be granted credit and how much you’ll receive.

It’s important to build business credit with self-discipline and the ability to budget funds appropriately. Small business credit cards are a great option for your business’ day-to-day expenses. When you start a business, you can use a business credit card for basic office supplies, business cards, software, furniture, and even travel. As you pay off these expenses, your business’ credit will likely improve. By keeping the credit utilization low and making all payments on-time, the American Bankers Association found businesses got higher returns in terms of employment and revenue growth.

Small business credit cards are valuable financial tools when utilized for your business. The right small business credit card will provide advantages such as:

  • Creating the ability to manage cash flow by giving 20 to 30 days to pay off expenses without interest.
  • Making it easier to separate personal and business expenses.
  • Higher credit limits than personal consumer cards.
  • Earning rewards like points or cash back on business expenses.
  • The ability to monitor and control employee spending with employee cards that all earn rewards and are tied to the same account.
  • An opportunity to pay off start-up costs over time with a 0 percent introductory APR offer.

As you and your employees use self-discipline, your business will maximize the returns on your small business credit card. The more expenses you have, the more rewards you can earn.  In addition, small businesses with good business credit reports leads to better terms on loans from both banks and alternative lenders.

Small Business Loans

Small business loans allow you to be proactive, providing access to capital before revenue streams begin flowing. Like small business credit cards, business loans can help build business credit. By successfully managing both business loans and credit cards, you’re able to create the possibility of securing a larger business loan in the future. Currently, the average alternative loan ranges between $5,000 to $200,000.

Small business loans can benefit your business in ways that matter to your business. No two business loans are the same, and should be customized for your business’s needs. This additional working capital can be used for large purchases that are necessary for your business to grow. A few examples would be:

  • Purchasing equipment or inventory for your business.
  • Investing in a company vehicle.
  • Hiring more employees.
  • Refinancing existing debt.

When applying for a loan, your business and personal credit scores determine your creditworthiness. Many small businesses fail to qualify for traditional bank loans. For this reason, Small Business Administration (SBA) loans and loans from alternative lenders provide a more flexible process that is tailored to your business.


 The end goal of any small business is to have an overall healthy financial situation. Through the use and complete understanding of small business loans and credit cards, your new business can thrive. Always remember to use loans and credit cards responsibly; the result will be a growing business and a great business credit score.

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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Courteney Reed is dedicated to empowering people to make smart financial decisions. As a passionate financial industry analyst, she is driven to provide the best quality of information.