Business loan vs business credit card - which is right for your business?

• Cash flow challenge: Businesses needing to fund purchases, manage expenses, or cover short-term cash flow gaps but deciding whether to use a business loan or a business credit card can be confusing.

   

• Perfect for: Business owners comparing finance options to manage cash flow effectively, whether funding a one-off investment or handling regular operating costs.

Novuna helps businesses make informed funding decisions that balance stability with flexibility either through our award-winning in-house finance options or by comparing trusted providers to find a great deal for your situation.

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Understanding the difference between loans and credit cards

Choosing between a business loan and a business credit card depends on how your business manages its finances. While both provide valuable funding options, they serve different purposes.

A business loan offers structured, long-term finance for investment or growth, while a business credit card provides short-term flexibility for managing everyday expenses.

What is a business credit card?

A business credit card provides revolving credit that can be used as and when needed, up to an agreed limit.

It’s most useful for:

• Managing day-to-day expenses such as travel or supplies
• Covering short-term cash flow gaps
• Handling emergency costs
• Making smaller purchases quickly without loan applications

Credit cards offer flexibility but often come with higher interest rates and smaller borrowing limits than loans. They can, however, be an excellent way to build business credit when used responsibly.

What is a business loan?

A business loan provides a lump sum of capital that’s repaid over a fixed period, typically with a lower interest rate and higher borrowing limit than a credit card.

Business loans are ideal for:

• Investing in equipment, vehicles, or technology
• Funding expansion or new contracts
• Covering large one-off costs
• Improving long-term cash flow stability

With predictable monthly repayments, a loan gives you certainty and structure ideal for businesses planning for sustained growth.

Learn more about our small business loans and how they can support your next stage of growth.

Business loan vs business credit card – key differences

Which option is better for your business?

A business loan may be the better option when:

• If you’re investing in long-term growth, such as buying new equipment, expanding premises, or hiring staff, a business loan provides stability and structure.
  

• If you’re managing daily costs or seasonal fluctuations, a business credit card offers flexibility and quick access to working capital.

Many UK businesses use both where a loan for long-term projects and a credit card for everyday operations are used for balancing control with convenience.

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When to choose a business loan

Choose a loan if you need:

• A large amount of funding upfront
• Predictable repayments
• Lower long-term interest costs
• Support for expansion or investment

Novuna offers working capital loans and asset finance solutions to help you plan for sustainable growth.

When to choose a business credit card

Choose a credit card if you need:

• Short-term flexibility for smaller purchases
• A buffer for managing irregular cash flow
• Fast access to funds without detailed applications
• To build or improve your business credit profile

If you’re managing frequent transactions or variable income, pairing a credit card with invoice finance can give you consistent liquidity.

Combining both options for better cash flow

In practice, many small businesses benefit from using both tools strategically:

• Use a business loan for structured investments (equipment, expansion).

• Use a business credit card for flexible, everyday expenses.

This approach balances long-term stability with short-term agility, ensuring your business can respond to opportunities and challenges as they arise.

How Novuna Business Cash Flow can help

Whether you’re planning long-term growth or simply want to manage everyday costs more efficiently, our funding solutions are designed around your goals.

Speak to our experts today to help you make the right decision for your situation.