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It’s an unfortunate statistic for entrepreneurs but more than 80% of new businesses fail within the first four weeks of their official “launch” date. Whether because they didn’t do their homework or simply didn’t have the demand they thought they would, wannabe small businesses close up shop, owning money to creditors and credit cards alike.
Early on in the process, many small business owners need to figure out the best way to fund their needs. The most popular options in doing this are to open up a business credit card or sign on the solid line (no longer dotted) for a business loan. I would recommend doing both, and here’s why.
Small Business Credit Card Benefits
A business credit card can be a scary proposition for business owners because overspending and defaulting on the agreement can lead to big headaches but it’s a must own. Business credit cards have a variety of positives too, including:
- A good grace period allows cardholders an interest free loan for up to 25 days
- Great small business credit cards come with a variety of perks included cash back, up front bonuses and 0% introductory interest rates
- Having all business purchases on one credit card makes tax time that much easier (Save me hours and hours)
Business Loan Benefits
Business loans can also provide a few good reasons to apply. While you shouldn’t expect your bank to give you cash back on your loan, you can expect:
- A very low interest rate compared to that of a credit card. Many small business loans offer interest rates between 5% - 10% and on a credit card you could be paying up to 25%.
- To build a relationship with your bank for future business. Banks love it when businesses take out a loan and pay it back and the next time around, they’re more likely to give you a better deal.
- A much larger credit limit. Business credit cards, especially for new businesses come with small credit limits with low flexibility. A bank which offers a business loan can do much better.
Since each opportunity above provides different incentives, applying for both lines of credit (and keeping them in good standing) will help fund all of your business needs as well as build credit for the business in the future.