A Line, a Card, or Both – Which Credit is Best for Your Business?

Have you heard the expression, “you have to spend money to make money?” Well, it couldn’t be truer for the budding entrepreneur. Entrepreneurs need to invest in their business to generate growth, but where does that money come from? Not surprisingly, money and credit are among the most discussed topics at our Enthuse Foundation events. Where to get it? How to grow it? How to make my dollar go farther? 

To answer these financial inquiries, we invited Erica Sandberg to be a guest at our Entrepreneur Lunch Hour. Sandberg, a freelance journalist, is one of the nation’s top consumer finance experts. Her work is published in a wide variety of outlets, including U.S. News & World Report, Experian, and CardRates. Sandberg’s Small Business Credit Profile column appears on CreditCards.com and she served as editor-at-large for Credit Card Guide. 

Here is Sandberg’s perspective on business credit cards and business line of credit. For more information on this topic, check out Sandberg’s article on Bankrate. Additionally, check out our blog post on “The Best Fundraising Option for Your New Business.” 

What is a Business of Line of Credit?  

Sandberg defines a business line of credit as a fixed amount of money a bank allows you to borrow. The bank will set the parameters on a minimum monthly repayment option and when the entire line of credit needs to be paid off.   

When Should My Business Take Out a Line of Credit?  

• Need to purchase something expensive quickly ($25K+) including equipment, inventory, brick, and mortar space.  
• Cushion capital available while waiting for cash to come in from customers  
• Help cover costs related to production  

What is a Business Credit Card?  

A business credit card is like a personal credit card but designed with the small business owner in mind.  

Don’t be confused – a business credit card is different from a corporate credit card. A business credit card is under your name while a corporate card is under the name of a business. A corporate card requires much more information about the business than you might have right now.  

  Why Should I Have a Business Credit Card?  

• Smaller expenses that you can pay back in a month (less than $25K) including office supplies, web services (domain name, website hosting)  
• Helps with your bookkeeping. Keep your personal expenses on your personal card and your business costs on your business  
• Rewards! Do you love the free things associated with your regular credit card? Business credit cards are known to offer more perks including signing bonuses, cashback options, and travel points.  

Conclusion:  “Think of a business line of credit and a business credit card as financial siblings,” Sandberg said. “They share many of the same characteristics but are two separate products. And they can get along quite nicely.” 

There are a variety of options for a business line of credit and a business credit card. Each vendor has its pros and cons. Only you (and maybe your accountant) know the best choice for your business. Here are additional articles and resources from Sandberg highlighting different possibilities and answering more questions.  

• Best Business Credit Cards for Earning Points  
• Is a Business Line of Credit a Good Idea? 
• Am I Personally Responsible for my Business Credit Card? 
• Do I Need a Business Credit Card for my Business? 
• How to Open a Credit File for a New Business?

Have a question for Erica Sandberg? E-mail us at info@enthusefoundation.org and we’ll pass it along to her.