Over the past few weeks, I have seen a significant amount of articles, blogs, and content debating the definition of a Small Business Loan. Much of the debate is focused on the size of the business. For example, many of the large banks consider any business with revenues less than $20 million a Small Business. Of course, my opinion is that any business nearing $20 million in annual revenues isn’t even close to a small business. For me, a small business is a main street business: restaurants, dry cleaners, gas stations, car dealerships, etc. The overwhelming majority of these businesses have annual revenues less than $3M!
However, one of the debates that has me undecided is the discussion regarding whether a business credit card should be considered a small business loan. Here are some of the characteristics that could put it into the “loan” category:
- The line/amount extended on the credit card is in fact a loan (extension of credit) by the financial institution.
- Usually, there aren’t any restrictions on how you can use the credit card.
- The amount used has an associated interest rate and terms for repayment.
However, there are also other reasons why you wouldn’t include it in the “loan” category:
- Usually higher rates and fees.
- Smaller loan sizes.
- Loan amount revolves.
- Usually can’t access the amount in cash.
- Usually can’t write checks from the account (without some balance transfer fees).
At the end of the day, I’d like to hear what you think. Why would or wouldn’t you consider a business credit card a small business loan?