Small businesses need constant requirements of funds and a steady cash flow for their day-to-day business activities. Getting access to secured loans is a hassle as most small businesses do not have the requisite security to be pledged. Also, most small businesses lack a strong credit history which results in them having a poor credit score. 

Lenders as such do not favour small businesses for granting loans other than unsecured loans which carry a high rate of interest. Under such circumstances, most small businesses depend on credit cards for funding or financing their businesses. Using a personal credit card is risky if the small business does not work out. One should therefore consider a business credit card. 

Let us then understand the pros and cons of using a credit card to fund a small business.

 Which credit card is best for a small business? Personal or Business? 

If you are using your personal credit card to fund your business finance needs, then it is not a good idea as debt keeps accumulating on a monthly basis. If the business does not work out, then it would be more difficult for the small business owner to repay the debt. Therefore, a small business should opt for a business credit card.

Business credit cards have a higher credit limit sanctioned which would help a small business to manage their day-to-day business expenses and keep track of the business purchases, recording every transaction in a systematic manner.

Pros and Cons of Using Credit Cards to Fund Small Business 


  • Easily Available 

If you already possess a personal credit card, then your chances of getting a business credit card increases, as you have a credit score and credit report. Also, if your business has a good credit history and you have been in operation for a few years, then it’s easy to get a business credit card. 

A good credit score increases your chances of getting your business credit card easily approved by the bank. You can check your latest business credit score right on our site. Just provide a few basic details and get your credit score and report within a few minutes. 

Smart Credit Card Tip: It’s always better to keep your personal and business finances separately. So, instead of using your personal credit cards for business, apply for and use a separate business credit card. 

  • Revolving Credit

A business credit card gives you the benefit of revolving credit. It means you can purchase for your business till the credit limit is reached and pay for it later. After your bill has been paid, fresh purchases can be made. However, you need to ensure that you pay your credit card bills on time, as this will give you the benefit of a continuous credit limit and a good credit score.

  • Full Ownership

Financing your business with your business credit card entails having complete ownership of your business. This is beneficial for maintaining control over your company and helpful while searching for investors.

  • Competitive Interest Rates

Have a business credit card provides you with the option of getting competitive interest rates as compared to other business loans. Also, business credit cards entail easy financing of your business needs ensuring a steady cash flow.

  • Collateral not required

The bank does not ask for collateral for a business credit card, unlike a secured business loan.

  • Build Business Credit

Having a business credit card will help a small business to build business credit which otherwise would have been difficult to build for a small business. A business credit card also helps to improve credit over time depending on your timely payments. This will also help you to get potential business loans easily.

  • Tracking Expenses

Having a business credit card also helps in keeping track of your business expenses and related purchases. This would help in managing your business accounts and for tax purpose. 

  • Higher Rewards

Business credit cards are premium credit cards that come with a higher credit limit, better offers and rewards than a personal credit card. 


  • Sole Liability

The business credit card holder has sole liability for all expenses made using the card and will be solely responsible for the timely payment of bills. If the business does not work out, then the card owner will have to repay all the charges

  • Personal Guarantee

Another disadvantage of getting a business credit card is that the lender requires a personal guarantee from the applicant. To qualify for a business credit card, you will require proper identification and credit history. This could also impact your personal credit card score and you becoming liable for any late payments on your business credit card.

  • Expensive

Business credit cards are expensive as they charge higher annual fees and higher interest rates as compared to normal credit cards. Late fees of a business credit card are also high.

  • Misuse by staff

Unless strict policies are imposed by the owner for making only business transactions through business credit cards, there is the chance of misuse of such cards. Therefore, careful monitoring of expenses and purchases is required.


Business credit cards are helpful when it comes to operating a small business, especially in the early stages. However, one should weigh the pros and cons of using such a credit card before using it for business purposes. 


1. Can a person with a low credit score apply for a business credit card?

A person with a low credit score may not get his business credit card approved by the lender.

2. Can I make personal purchases on my business credit card?

Yes, you can make purchases on your business credit card provided you stay within the sanctioned credit limit. However, it’s not a good idea to mix your business and personal expenses. 

3. Is it necessary to repay business credit card dues on a monthly basis?

Yes, it is necessary that you repay your business credit card dues on time. Otherwise, you will lose the benefit of revolving credit and also have a low credit score. A low credit score will hamper your chances of getting potential business loans approved.

4. Do you require collateral for a business credit card?

There is no requirement of collateral for a business credit card, which otherwise would be required for a business loan.

5. Is a business credit card expensive as compared to a normal credit card?

A business credit card is a premium credit card with a higher credit limit, better offers and more rewards as compared to a personal credit card. So the rate of interest and annual charge is higher than a personal credit card.