In the last year and a half, the UK’s economy has taken a nosedive because of the pandemic. Offices closed, industry-leading brands went bankrupt, and a considerable portion of the population remains on furlough.
Household spending, which makes up a large part of the global economy, reduced drastically as individuals lost confidence in their finances. As the world begins to reopen, the UK’s economy will likely grow, and businesses will start to reopen their doors.
The pandemic also created a surge in new small businesses, many of which were run from our homes. Starting a business requires a lot of funding to pay employees, fund products and grow the business as a whole. If you are starting a new business or struggling to finance your current one, you should consider whether a business credit card or business loan.
A small business loan is a good option for refinancing any existing debt or investing in real estate. Loans typically cover a large sum of money and can be repaid monthly at a fixed interest rate. Small business loans are challenging to get approved and often require the business to have an established revenue already in place.
These loans are perfect for business expansion, such as setting up an office in a new destination. Interest rates are often lower for businesses with steady finances, and you may be offered a more extended repayment plan – in some cases, as long as 25 years. Of course, the downside of small business loans is qualifying for them and recognising that you may need collateral, like inventory and real estate.
Business credit cards, on the other hand, are suitable for ongoing expenses and establishing capital. If you need flexibility and a way to track business expenses, a credit card is an option for you and your business. Some credit cards come with 0% interest, and others can come with high interest costs and several other fees. Watch out for hidden costs when signing up for a line of credit, and always consult a financial advisor if you’re unsure.
The flip side of a credit card is that it can negatively impact your credit score in the long run. You need to stay on top of repayments and track your spending to make sure the credit card won’t have detrimental consequences in the future.
When it comes to financing, always research your options and ask a professional for advice.
