How to Fund Your Business: Unsecured Business Loans vs. Credit Cards

Are you looking for an alternative way to get the necessary funds for your business so you can ensure its growth?

Do you need funding to seize new business opportunities or partnerships that’ll allow you to increase your profits?

Or maybe you just need money to invest in your staff or equipment to bring your business to the next level?

Business funding

According to SCORE’s report on female entrepreneurs, 59% of women said they would like funding to grow their business. This isn’t a surprising fact since financial funds and ability to provide them are crucial for business success.

However, most small business owners need quick access to money resources, so they usually opt for unsecured business loans and business credit cards.

But, which of these options is the most suitable for your business?

Let’s take a more in-depth look into the pros and cons of unsecured business loans and business credit cards.

Business credit card

Business Credit Cards

A business credit card is a credit card designed for business use rather than personal use. Some of its benefits are:

  • Straightforward application process. All you need to do is to complete an application. Since the process is usually automated, you will receive an immediate credit decision. There aren’t tons of paperwork and infinite waiting time.
  • Fast access to financial funds to meet your working capital needs.
  • Building a credit profile which is significant for future credit borrowing conditions: it helps you ensure better terms.
  • Available to businesses of all sizes. This makes business credit cards a suitable option for startups, but also for well-established companies.

On the other side, all these benefits come at a certain cost. Business credit cards involve higher interest rates and additional fees.

Still, if you aren’t sure that this funding option is right for your business, maybe Emma’s example can help you out.

Miguel makes healthy fitness bars. He runs a successful business, but he needs to invest in packaging production to meet the increasing demand for her product. Miguel needs around $5,000 to purchase the necessary materials and increase her production.

He calculated that, with such a high demand for his bars, he would be able to pay back his debts quickly. Miguel opted for a business credit card.

Apply for business loan

Unsecured Business Loans

An unsecured business loan represents a loan that doesn’t require pledging collateral, meaning you don’t need to offer some asset to the lender in order to secure your loan. These assets usually refer to real estate property, other accounts, inventory or invoices.

Requirements for unsecured business loans may differ from one lender to another. For instance, some may insist that your business has been operating for three years, while another may ask for more.

However, they give the possibility to quickly raise money to invest in your business growth. Without collateral, and to assure your loan, it has a higher interest rate.

Still, if you aren’t sure whether an unsecured business loan is a right fit for your business, take a look at Janet’s story.

Janet sells hand made bags for women. A piece of equipment she needs to increase her productivity is on sale; however, she doesn’t have enough money to buy it.

She decides to borrow $3,000 in the form of an unsecured business loan and invest in new equipment. Janet knows that with enhanced efficiency she would be able to increase her revenue and pay back her debts soon.

It’s Your Turn

Can you relate to Miguel and Janet’s story?

If so, maybe it would be good to consider getting an unsecured business loan or business credit card. Just make sure you choose the solution that fits best your business needs, and reading this useful article on unsecured business loans vs. credit cards can give you a hand to make the right decision.