Small Business Financing Through Loans And Credit Cards–What Options Are Best For New And Growing Companies

Small business financing options are usually sought out through either traditional small business loans or options from the Small Business Administration as there are new programs being implemented to help small companies, startups, or businesses in underserved areas, but there are some who feel that small business credit cards can also be a viable option and source of financing for companies that are starting out or looking for growth opportunities. However, these options may not always be in a business’s best financial interests, and as a result, both financing from loans and small business credit cards must be researched before a particular business will be able to see which route is best for them.

As an example, the Small Business Administration recently has implemented programs that have streamlined the application process for some companies and, again, offered more financial options for underserved communities through organizations that are centered around community development. While these loans have been available for more small businesses, as opposed to traditional loans from major banks, due to the fact that they are guaranteed by the SBA, businesses may also find that more major financial institutions are beginning to open up their small business lending practices as the economy improves.

Also, there are some indications that even financial institutions like credit unions or small community banks are attempting to help small businesses with financing options through loans, and there are even some options through either the SBA or local lenders that may help companies by offering them small business advice, counseling, and general guidance. Understandably, these banks will want a company to succeed so many who are well-versed at offering small business options can also help new companies or even established organizations that can use funds from a small business loan in the hopes of furthering a company’s success and profitability.

However, there are some who feel that a small business credit cards can be beneficial and may be more accessible for certain businesses who have, as an example, recently begun a business and may not be established to a point where some lenders feel comfortable offering a loan. Yet, small business credit cards may be more beneficial due to the fact that they can offer more businesses a line of credit that could potentially be used for furthering their company, but business owners do not have to focus on repaying a large sum of money, which is usually the case when a small business loan has been acquired. If a company simply needs to make small purchases for inventory, furnishing a new office, or buying equipment, this can be accomplished with a small business credit card and could allow a business to avoid borrowing a larger sum of money from a loan for these purchases.

Obviously, small businesses will need to compare credit card offers and interest rates if they feel this form of financing is best, due to the fact that some businesses may be able to benefit from rewards, like travel points, while others may not want to meet higher fees or interest rates that may be associated with cards that do offer incentives for users. However, business owners have also been cautioned about aspects of small business credit cards as certain practices by financial institutions, like levying fees or increasing interest rates do not protect business cards, as the CARD Act protection rules are only in place for consumer credit. While many reputable financial institutions do offer credit card options that can be helpful for certain companies, exploring both business loan and credit opportunities must be the first priority of any company in need of financing, as there are various ways that an organization can raise capital or gain access to credit, but again, not all may be in their best financial interest.