Working Capital Loans VS Business Credit Cards

Why Working Capital Loans are Better Than Business Credit Cards

13 Aug 2020
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There was a time when availing credit was not only difficult but also deemed a huge burden on the borrower for years to come. In today’s time, credit comes in a wide variety of convenient forms, many of which can be customised to suit your specific needs. Out of these, two of the most popular forms of credit are loans and credit cards.

However, while the debate between loans and credit cards in general varies widely, it takes on a special significance if you are a business owner. Any entrepreneur worth his or her salt can vouch for the ever-changing demands of operating a business as well as the financial requirements that arise from time to time. Keeping this in mind, it is vital that a business owner be aware of the ideal form of credit for their enterprise.

When given the choice between working capital loans and business credit cards, these financial requirements are better served by the former. In order to better understand why that is the case, let us take a closer look at working capital loans as well as their advantages over business credit cards.

What are Working Capital Loans?

Business operations come with a variety of needs, not all of which are focused on the long-term. Working capital loans are designed to cater to such specific short-term requirements of businesses. As opposed to larger loans that aim at establishing, expanding or restructuring a business, working capital loans aim at funding everyday business operations such as rent, debt payments and payroll. They are also ideal for meeting capital requirements of SMEs and small businesses as well as businesses that operate on a seasonal basis.

Here are some of the common purposes for which working capital loans are an excellent credit option to be availed:

●  Making Payments:

No matter how your business might be faring, there is one business need that always needs to be met: payments. With a working capital loan, you can easily fill any financial gaps that may arise to make orderly payments as and when required.

●  Inventory Purposes:

 If you run an inventory based business, you know too well the importance of stocking up when the right opportunity presents itself. You can easily achieve this by availing a working capital loan to meet your inventory needs.

●  Payroll Purposes:

It is the hallmark of a well-established business to pay its employees on time. You can ensure that you are never short on payroll finances by availing a working capital loan when the need arises.

Know more about the various types of working capital

With the convenience of technology, availing and making payments towards working capital loans has become simpler than ever. You can easily avail a working capital loan online platforms such as the Finserv MARKETS.

Why Working Capital Loans are Better Than Credit Cards

While working capital loans certainly benefit your business in a number of ways, the obvious question that follows is: why should you opt for them over business credit cards? After all, the latter is also geared towards achieving a similar purpose. In response to such a query, here are the various advantages offered by working capital loans over business credit cards:

● Lower Interest Rates:

There are a number of business credit cards in the market that often offer 0% interest promotional period, making them a lucrative option. However, it is important to note that these offers are temporary. On the whole, purchases on business credit cards can be charged high interest rates which can make them an overall costly form of credit. On the other hand, working capital loans such as those available on Finserv MARKETS, offer lower interest rates and allow you to conveniently pay off your credit within your choice of tenure.

●  Higher Borrowing Amounts:

 While your business requirements might be for the short-term, the actual amount you wish to borrow can depend on various factors. You can enjoy this freedom of loan size when you avail working capital loans since they offer much higher borrowing amounts than allowed by business credit cards. With the latter, there might be various monthly limits in place that can restrict your access to adequate financing. Moreover, in addition to the interest you pay on business credit cards, you can also be charged with high withdrawal fees.

●   No Collateral Required:

Some potential borrowers are often under the impression that it is mandatory to place your valuable assets as security in order to avail loans. However, this is not at all the case. If you wish to avail a working capital loan for your business, you can easily do so on a trusted online platform such as Finserv MARKETS platform. These working capital loans can be conveniently availed without the need for a collateral or a guarantor. Compare this to business credit cards, where borrowers are required to sign a personal guarantee, making them liable for unpaid debt and thereby risking their personal assets.

●  Repayment on Your Terms:

An ideal form of credit for your business should offer not just your desired borrowed amount but also the convenience of making your repayments. With business credit cards, this facility of repayment is often quite limited and does not offer much scope for flexibility. With certain working capital loans, however, these repayments can be easily customised to suit your specific financial circumstances. For instance, working loans available on Finserv MARKETS offer borrowers the choice of choosing their own tenures as well as various other customisations.

Conclusion

With the advent of technology, availing loans have become easier than ever before. So if your business requires extra capital to ensure smooth operations or meet a short-term need, a working capital loan might be your best bet. When compared with other forms of credit such as business credit cards, working capital loans offer various unique advantages. This is particularly true if the working capital loan is availed on a well-established online platform such as Finserv MARKETS. The platform offers a variety of business loans, including working capital loans, at nominal interest rates and at your choice of tenure ranging from 12 to 60 months. What’s more, the platform has more than 100 million trusted clients across the country and offers super-fast online loan processing.

Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition -- Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we work towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.