When lenders close a door, Lendio opens a window. We know that hearing “no” on a business loan application doesn’t solve your very real needs for capital. Instead of giving you a pat on the back and saying, “You’ll get ‘em next time, tiger” (Though, you will get ‘em…. tiger), we’re pushing onward to give you the actionable information you need to finance your business today—when you need it.
So how are you going to find financing when you’ve been denied for a business loan? You probably already think you know how we’re going to answer this question. Maybe because you peeped a look at the title of this article—you know, when you clicked on it. Maybe because we’re not masters of suspense. We’re okay with that—we’re business finance experts, and we understand we can’t be everything to everyone.
Business credit cards. Yup, you guessed right. You already know they might help you, but let’s get into the details of how and why business credit cards are an asset.
Business credit cards provide obvious advantages for small businesses from an accounting perspective. Using a business credit card, as opposed to a personal credit card, simplifies the identification of business expenses. It puts the charges in one place and saves you the time and energy required to sift through credit card statements to separate business and personal expenses. Plus, many accounting platforms allow you to sync credit card charges so they are directly imported into your bookkeeping. Time is money, so saving time means saving money. Nice.
Now, let’s get into the funding advantages business credit cards can provide (aka the reason you’re reading). Business credit cards can function similarly to a line of credit for a small business. Access to capital when you need it, no requirement to use it when you don’t. With a lower barrier for entry, business credit cards are one of the most accessible forms of business financing.
All capital comes at a cost, and business credit cards are no different. They vary from business loans in the way that cost is determined. When using a business credit card, annual fees and interest rates will determine your cost of capital.
Lenders may charge an annual fee each year to cover the cost of the account. The size of the annual fee varies depending on the card, lender, and the card’s perks. On the high end, you’ll find cards like the American Express – The Business Platinum Card, which has an annual fee of $595. Many borrowers find that they can offset the cost of the annual fee with the multitude of perks offered by the card. On the other end of the spectrum, you’ll find cards with no annual fee, so you can really choose your own adventure when it comes to the cost of annual fees.
Again, you’re going to have a wide range here. Your credit score and other qualifying factors will contribute to the type of interest rate you receive. Interest rates typically range from 8–24% for a business credit card.
Some caveats apply (It’s finance! There are always caveats!). You only pay interest on the balance you carry on the card. If you don’t carry a balance, then there’s no interest. In that case, your only cost of capital would be the card’s annual fee. If you have a large expenditure you plan to repay within a few months, these interest rates can feel relatively minimal—especially if it’s giving you access to the capital you need to make strategic decisions for your business. If you plan to open the card with the specific intention of making a large purchase, you should check out cards with 0% introductory interest periods. Look at you taking the reins on your cost of capital!
Office supplies, tractor, commercial refrigerator, an ergonomic desk chair (or 1 for the whole team), business travel, a tiny robot that will sit on your desk and give you compliments… you name it. Business credit cards are exceptionally flexible. You can use them for any business-related expenses. How’s that for flexibility?
Great question. The short answer is most people can! Unlike business loan decisions, business credit cards are awarded based on your personal credit history. You can expect an experience similar to opening a personal credit card. For the long answer, you can check out our guide to business credit card requirements to learn everything you need to know.
Perks are the cherry-on-top of the business credit card sundae. Many cards offer points on your purchases, extra points in certain business-related categories, and cash back. Rewards vary by card, so make sure to check the perks on each one.