Should You Use a Credit Card to Bankroll Your Small Business?

June 21st, 2025

Entrepreneurs eager to get their small business off the ground often find capital is hard to come by.

Traditional loans often involve mountains of paperwork, strict credit requirements and long wait times — if the bank will deal with you at all. And outside of the tech sphere, it’s difficult to find investors who want to put their capital to work in nascent businesses.

Thus, it’s no surprise that some small business owners reach for something that’s already in their wallet: a credit card.

That brings us to today’s pressing question: Is putting business expenses on a credit card a savvy strategy … or a slippery slope into burdensome long-term debt? Let’s take a closer look at the pros, cons and alternatives to using a credit card to fund your business.

The Case for Using a Credit Card

Using a credit card for your small business comes with a few advantages, especially when you’re starting out:

1. Speed and convenience: Compared to applying for a bank loan or a line of credit, getting a credit card is fast and relatively simple. In fact, many entrepreneurs already have one. If you need immediate access to funds — say, for inventory, equipment or startup costs — a credit card can offer a quick fix.
2. Builds a credit history: Responsible use of a business credit card can help establish or improve your business credit score. That can pay dividends later when you’re applying for more substantial financing from a bank or investor.
3. Separation of personal and business finances: Using a dedicated business credit card (rather than your personal one) can help you keep your books clean, making it easier to track expenses, file taxes and manage budgets.
4. Perks and rewards: Depending on the card, you could earn cash back, points, travel perks or other rewards. Some cards offer introductory 0% annual percentage rate (APR) periods, giving you interest-free time to pay off your purchases.

The Case Against Using a Credit Card

The problem, of course, is that using credit cards to fund your business poses significant financial risks:

1. High interest rates: Even with good credit, many cards carry double-digit interest rates, often 20% and above. That means if you’re unable to pay your balance in full each month, your small purchases can snowball into large debts quickly.
2. Limited capital: Credit cards are best for smaller, short-term needs. If your business needs tens of thousands of dollars for equipment or payroll, a credit card won’t take you far … and trying to stretch it that far can lead to trouble (in large part because of the aforementioned high interest rates).
3. Risk to personal finances: If you’re using a personal credit card, you’re on the hook for all the debt. That said: Business credit cards will frequently include a personal guarantee in their terms and conditions, ensuring that you’re still liable if your business can’t pay. That can in turn damage your credit score, impact your ability to get a mortgage or car loan, and lead to serious financial strain.
4. It can encourage bad habits: Credit cards make it easy to overspend. If you’re not disciplined about budgeting and repayment, you might find yourself financing wants rather than needs, or delaying the hard decisions every business owner must make about their expenses.

When Does It Make Sense to Use a Credit Card?

While credit cards aren’t ideal for major funding needs, they can be a strategic tool in certain scenarios.

Take short-term cash flow gaps, for instance. If you’re waiting on a client payment and need to cover short-term costs such as supplies or marketing, a credit card can serve as a temporary bridge — as long as you can pay it off quickly.

Entrepreneurs will also sometimes use them for startup expenses such as paying for a website, logo design or basic setup costs. But again, only do this if you’ve budgeted for repaying the car and aren’t carrying a balance over the long term.

Credit cards also make sense when you can get 0% interest for a prolonged period — typically 12 to 18 months, though you’ll occasionally see offers of up to 21 months. If used carefully, this can act like a no-cost loan (provided you pay the balance before the interest kicks in).

Alternatives to Consider

Before leaning on your credit card, here are some other financing options that might offer better terms and/or lower risk:

• Small business loans: Small Business Association (SBA) loans, microloans and term loans from banks or online lenders typically offer lower interest rates and higher credit limits than cards.
• Lines of credit: These work similarly to credit cards in that you don’t need to use the credit until you need it, but lines of credit usually feature better rates and more flexible repayment terms.
• Friends and family: While tricky, borrowing from people you trust may come with fewer financial strings. However, it’s crucial to put agreements in writing to avoid misunderstandings.
• Crowdfunding: You can try to raise funds via platforms like Kickstarter or GoFundMe. This typically works best for businesses with an exciting or fun product, or businesses that serve a local need.
• Grants: Depending on your business type, you might qualify for local or national grants. In some cases, these are targeted at specific subsets of business owners: you can find grants and other aid women-owned businesses, minority-owned companies and entrepreneurial veterans.
• Angel investors or venture capital: These aren’t viable for every small business, but if you have a compelling business model and growth plan, it’s worth looking into.

Credit Cards: Tool or Trap?

Credit cards can occasionally be useful as a source of small business financing. But the instances are few and far between, the risks are fairly high and the consequences can be severe. Discipline and knowing what you’re getting into are necessary for any type of debt, but they’re particularly important if you ever choose to use plastic to help fund your business’s growth.

Your financing choices today can have long-term implications for your business’s health and success. Whether you’re bootstrapping, expanding or just trying to keep your budget in balance, good guidance matters.

McManamon & Co. is an accounting, tax, fraud, forensic and consulting firm that serves small and midsize businesses. Our experienced consulting team can help you evaluate your financing options, assess risks and develop a financial strategy that fits your business goals and cash flow realities.

Call us at 440.892.8900 or contact us online today to get expert help tailored to your needs.

Tags:  financial literacy, financing, McManamon, small business, small business banking, small business finances, small business financing | Posted in Financing, McManamon & Co., small business