Introduction

Starting or expanding a small business often requires external funding. As a small business owner, understanding the various financing options available is crucial for making informed decisions. This article delves into the pros and cons of three popular funding methods: credit cards, loans, and lines of credit, all offered by Dover Federal Credit Union.  By the end of this guide, you will have a clearer picture of which option best suits your business needs.

Credit Card for Small Business Funding

What is a Small Business Credit Card?

A small business credit card operates similarly to a personal credit card but is tailored for business expenses. It allows businesses to make purchases and pay for them later, up to a pre-set limit.

Advantages of Using Credit Cards

Using credit cards for business funding offers several benefits, including:

• Convenience: Easily accessible for everyday expenses.
• Rewards Programs: Earn cash back, points, or travel miles.
• Expense Tracking: Simplifies bookkeeping with detailed statements.
• Immediate Access to Funds: Quick and easy access to credit when needed.
• Flexibility: Use for various business needs with no restrictions.

Disadvantages of Using Credit Cards

There are also downsides to consider:

• High-Interest Rates: Can accumulate significant debt if not managed properly.
• Credit Limit: May be lower than the required amount for large expenses.
• Impact on Credit Score: Mismanagement can adversely affect your business and personal credit score.

Dover Federal Credit Union Business Credit Cards

At Dover Federal Credit Union, we understand the unique needs of emerging and growing businesses. That is why we offer a variety of business credit cards.

Business MasterCard® Credit Card

Dover Federal offers the flexibility and control you need to help your business succeed. Features include:

• Ability to Control Card Purchasing Limits
• Immediate Access to Line of Credit
• Card Control with Card Valet: Set spending limits, location limits, and turn the card on/off.
• No Annual Fees and Contactless Technology

Advantage Business Credit Card

This card offers an amazing rate lower than the national average, allowing you to pay down balances at your own pace without penalties or hidden fees.

• 25-Day Grace Period for Purchases
• Accepted at Merchants and ATMs Worldwide

Cash Back Business Credit Card

Earn cash back on everything you buy. Everyday purchases add up quickly whether you're shopping online or in-store.

• No Annual Fees
• Contactless Technology

Business Loans

What is a Business Loan?

A business loan is a sum of money borrowed from a financial institution like Dover Federal Credit Union, which you repay with interest over a set period.

Types of Business Loans

• Term Loans: Lump-sum amount repaid over a fixed period.
• SBA Loans: Government-backed loans with favorable terms.

Advantages of Business Loans

• Larger Sums: Access to substantial funding for significant expenses.
• Fixed Interest Rates: Predictable monthly payments.
• Build Credit: Timely repayments can improve your business credit score.

Disadvantages of Business Loans

• Qualification Criteria: Stringent requirements and extensive paperwork.
• Collateral: May require assets as security.
• Repayment Pressure: Fixed repayment schedules regardless of business performance.

Dover Federal Credit Union Commercial Loans

Residential/Commercial Real Estate Loans

A Dover Federal Credit Union Real Estate Loan provides the opportunity to invest in your business and take your company to the next level.

Business/Commercial Vehicle Loans

From delivery trucks to school buses or fleet vehicles, Dover Federal Credit Union’s Business/Commercial Vehicle loans help local businesses get on the road to success.

Equipment and Machinery Loans

Dover Federal Credit Union can provide funding for equipment and machinery to help your business succeed.

Diversity Lending Program

Geared toward women, veteran, and minority-owned businesses, the Diversity Lending program helps manage operating expenses and drive success.

Line of Credit for Small Business

What is a Business Line of Credit?

A business line of credit provides flexible funding up to a certain limit, allowing businesses to borrow, repay, and re-borrow as needed.

Advantages of a Line of Credit

• Flexibility: Borrow only what you need, when you need it.
• Interest Only on Withdrawn Amounts: Cost-effective as you pay interest only on the funds used.
• Emergency Fund: Ideal for unexpected expenses or cash flow management.

Disadvantages of a Line of Credit

• Variable Interest Rates: Can fluctuate and increase borrowing costs.
• Renewal Fees: Potential fees for maintaining the credit line.
• Creditworthiness: Requires good credit history for favorable terms.

Dover Federal Credit Union Working Capital Lines of Credit

As a business owner, you need immediate access to cash flow, and a line of credit is the perfect solution. Get help maintaining cash flow so you can grow your business with access to funds anytime you need them. Dover Federal Credit Union has you covered.

Comparing Funding Options

When to Choose a Credit Card?

Opt for a credit card if:

• Your funding needs are relatively small.
• You can repay the balance quickly.
• You want to take advantage of rewards programs.

When to Choose a Business Loan?

Consider a business loan if:

• You need a large sum of money for significant investments.
• You prefer predictable monthly payments.
• You meet the stringent qualification criteria.

When to Choose a Line of Credit?

A line of credit is ideal if:

• You need flexible, ongoing access to funds.
• You want to pay interest only on the amount you borrow.
• You have a good credit history.

Conclusion

Choosing the right funding option is vital for the success and growth of your small business. Whether you opt for a credit card, loan, or line of credit, each has unique benefits and drawbacks. Assess your business needs, financial situation, and long-term goals to make the best decision. For personalized advice and tailored funding solutions, consider reaching out to Dover Federal Credit Union.

Dover Federal Credit Union

For 66 years, Dover Federal Credit Union has served as a member-owned financial cooperative, designed to provide access to equitable financial products and services that create stability and lead to establishing generational wealth.  Today we serve over 44,000 members, encompassing the military, Delaware families and Workplace Partners. Serving Camden, Dover, Middletown, Milford & the New Castle areas in branch & online.