If you’re in need of financial backing, the two options that will pop up the most for you are probably going to be a loan and a credit card. There are some key differences between them, and we’re going to put them into perspective so you know how getting a business loan differs from getting a business credit card and vice versa. With that said, lets’ get into it and see what’s different between the two.

Getting a loan

Getting a loan implies that you get a lump sum of cash at the beginning of the agreement. You are then obligated to pay back what you have borrowed over a set period of time, with an interest rate that is mostly unchanged.

Even if you are talking about getting a business loan specifically and perhaps even more so in that context, a loan might be the better solution simply because you get the money upfront, in a larger amount. If you’re dealing with problems like unpredicted repairs or unexpected medical bills for your employees, things like that which require a larger sum upfront, you might want to consider a loan.

While you can tweak your contract so that your interest rate fluctuates and is recalculated depending on the state of the market at any given point,  most of the time you will be dealing with a fixed interest rate which makes it a lot easier to calculate into your repayment plan. After you receive the money upfront in the beginning, you don’t get any more money and all that’s left is for you to repay what you have borrowed.

Getting a credit card

This is a very different financial solution. The first noticeable thing is that you don’t get the entirety of the loan upfront. Instead, it is given to you in the form of a credit and you can withdraw from this credit whenever you need the money.

This credit isn’t an eternal well however and every time you draw from it, your credit cap will be reduced by the amount you’ve taken out. If you repay what you have borrowed last, the previous cap will be restored. This allows you to keep going and to tap into the credit for as long as you need to.

This makes the credit card a much more reliable solution in situations where expenses aren’t that big, but they are constant. So for example if you’re having trouble with paying for the upkeep of your office space, having a credit card for the electric bill, heating, water, and all that could be very useful.

There are more differences between the two, such as how high the interest rates go. However those are things that on top of being different between the two forms of financial aid, they also fluctuate from lender to lender. Always look for the one that will save you the most money.