A business credit card suits frequent purchases from vendors that accept cards. A business line of credit moves cash into your bank account, so it can cover payroll, rent and suppliers paid by check or transfer. Ivyview Lenders, a small-business funding broker in Greenville, North Carolina, arranges lines of credit through lending partners and does not offer credit cards.
| Both are | Revolving credit with a limit set by the lender or card issuer |
|---|---|
| Card | Spent at merchants that accept cards; billed on a statement cycle |
| Line of credit | Drawn into your business bank account; repaid under the agreement's terms |
| Ivyview Lenders | Arranges lines of credit through partners; does not offer credit cards |
How each one works
Business credit card
You spend at merchants that accept the card, and the issuer bills you once per statement cycle. Many cards don't charge interest on purchases if the full statement balance is paid by the due date; carried balances accrue interest at the card's rate. Cash taken from a card is usually treated differently from purchases, often with its own fee and with interest starting right away. Read your card's terms for the specifics.
Business line of credit
You request a draw, and the lender sends money to your business bank account. Interest generally runs on the amount drawn from the day it is drawn until it is repaid. Lines can be revolving, where repayment frees the limit for reuse, or non-revolving, where each draw is used once. Some have a set draw period followed by a repayment period, and some carry fees for opening, keeping or drawing on the line. Our line of credit page explains draws and draw periods in more detail.
Side by side
| Business credit card | Business line of credit | |
|---|---|---|
| How money reaches the payee | A card transaction at the merchant | Cash in your bank account, paid out by check, transfer or ACH |
| When interest starts | Often only on balances carried past the due date; cash withdrawals usually accrue right away | Usually from the day of each draw |
| Typical uses | Small, frequent purchases: supplies, software, travel, fuel | Payroll, rent, supplier invoices, inventory, larger timing gaps |
| Repayment | A minimum payment each statement, or the full balance | Set by the agreement, often fixed installments on each draw or a percentage of the balance |
| Owner liability | Many business cards make the applying owner personally liable | Many lines ask for a personal guarantee from owners |
| Records | A statement with itemized purchases | Draw and payment history from the lender |
How limits are set
A card issuer sets a credit limit and a lender sets a line limit. Both generally weigh the business's revenue, the owners' credit and existing debt, and either can change the limit later under the agreement. Lines are more often sized to a purpose, such as a payroll cycle or a season's stock, so expect a partner to ask what the line is for. Ivyview Lenders doesn't set limits and can't predict one.
Which tends to fit which job
- Payroll: a line of credit, since payroll runs from the bank account and most payroll can't be put on a card.
- Supplier invoices paid by ACH or check: a line of credit, or the card if the supplier accepts cards without a surcharge that outweighs the benefit.
- Software subscriptions, travel and small supplies: a card, which keeps purchases itemized and, paid in full, may cost nothing in interest.
- Restocking ahead of a busy season: a line of credit, or inventory financing for larger, planned purchases.
- A gap of a few weeks between finishing work and getting paid: a line of credit, or working capital financing when the need is a one-time lump sum.
- A major equipment purchase: usually neither. Equipment financing ties the payment to the equipment and its useful life.
Using both
Plenty of businesses carry both: a card for day-to-day spending, paid off each cycle, and a line held in reserve for payroll and supplier timing. Two habits keep that arrangement healthy:
- Avoid paying one revolving balance with the other again and again. Shuffling debt between them costs interest twice and hides the underlying cash-flow problem.
- Track both in your debt schedule. A lender reviewing a new request will count the card balance and the line's balance as existing obligations.
Questions to ask before you choose
- What will I pay for most often, and do those payees accept cards?
- How long will a typical balance stay outstanding before it's repaid?
- Which fees apply even in months when I don't borrow: annual, maintenance or draw fees?
- Who is personally liable, and does activity report to my personal credit?
- What happens to the limit if revenue drops?
What a partner reviews for a line
A line is a loan, so partners review it like one: bank statements, revenue over time, existing debt, the owners' credit and, for larger lines, financial statements. What lenders look for explains each, and a debt schedule puts your card balances and other obligations in one place before anyone asks.
How Ivyview Lenders helps
We arrange lines of credit, among other funding types, and we don't offer credit cards. If a card already covers what you need, we'll say so. If the need is payroll, suppliers or a recurring gap, we'll talk through what a line would involve.
By Ivyview Lenders · Updated