A business credit card can be useful for everyday purchases and routine expenses. A line of credit may be better suited to larger or changing working capital needs, especially when you need to access funds at different times.

The right choice comes down to what you're paying for, how much funding you need, how often you'll need it, and how you plan to repay it.

Business credit card vs line of credit: the short answer

A business credit card may be the better fit if you’re looking for:

  • A way to cover everyday business purchases
  • Interest-free days, depending on the card
  • Rewards or cashback, depending on the card.

A line of credit may be the better fit if you need:

  • Ongoing access to working capital
  • Funds for stock or supplier payments
  • Flexibility to draw funds at different times
  • Capital to manage larger or changing expenses.

Neither is automatically better. The right option depends on what you need to fund and how you expect to use and repay the credit.

What’s the difference between a business credit card and a line of credit?

A business credit card is primarily a payment method with access to credit. You can use it for eligible purchases up to an approved limit, then repay the balance according to the card's terms.

Depending on the card, you may also have access to interest-free days, rewards points, cashback or travel benefits.

A line of credit is a funding facility. You're approved for a limit and can draw down funds when your business needs them, subject to the facility's terms.

When should you use a business credit card vs a line of credit?

A business credit card may make more sense for:

  • Software subscriptions
  • Business travel
  • Smaller equipment or office purchases
  • Advertising expenses
  • Regular day-to-day costs.

A Line of Credit may make more sense for:

  • Purchasing stock or inventory
  • Paying suppliers
  • Managing seasonal cash flow
  • Covering temporary cash flow gaps
  • Renovations or fit-outs
  • Larger or changing business expenses.

For example, if you're paying a $200 monthly software subscription and can repay the card balance within its interest-free period, a business credit card may be the more practical option.

But imagine you need $80,000 to purchase stock before a busy season. Your supplier needs to be paid now, while the revenue from that stock may arrive over the following weeks or months. A line of credit may be better suited to managing that timing gap.

Business line of credit vs business credit card: key differences

Business Line of Credit Business credit card
How you access funds Draw funds from an approved facility Make eligible purchases using the card
Common uses Working capital, stock, suppliers, cash flow gaps and larger expenses Everyday purchases and regular operating expenses
Interest-free days Generally not structured around a credit-card-style interest-free period Available on some cards, subject to terms
Rewards Generally not a feature Some cards offer rewards or cashback
Repayments Depend on the facility and provider Regular card repayment requirements apply
Best suited to Businesses that want ongoing access to working capital Businesses managing routine card-based spending

Features, fees, costs and eligibility requirements vary between providers.

Four questions to help you choose

1. What am I paying for?

Start with the expense itself. A recurring software bill and an $80,000 inventory order create very different funding needs.

2. How much do I need?

Consider both the expense in front of you and what may come next. If your working capital requirements are likely to change, having access to additional funds may matter.

3. When will I need the funds?

Timing can be just as important as the amount. If supplier bills arrive before customer revenue, for example, you may need a funding option that can help bridge that gap.

4. What will it cost?

Compare the full cost of each option, including applicable interest, fees and repayment requirements. Credit card rewards or interest-free periods can be valuable, but only if they fit the way you expect to use and repay the credit.

The product with the most features isn't necessarily the right one. The better option is the one that fits the job your business needs it to do.

Can a business have both?

Yes, depending on the business and the products available.

For example, you might use a business credit card for subscriptions, travel and everyday purchases while keeping a line of credit available for stock, supplier payments or temporary cash flow gaps.

So the more useful question isn't necessarily: Which product should my business use?

It's: Which product makes sense for this particular expense?

When could a Bizcap Line of Credit be worth considering?

If you need ongoing access to working capital rather than another way to make card purchases, Bizcap's Line of Credit may be worth considering.

Eligible businesses can access between $15,000 and $750,000, with the flexibility to draw down funds when they're needed and only pay for what they use.

That can be useful when expenses don't arrive neatly at the same time as revenue, whether you're purchasing stock, paying suppliers or managing changing cash flow needs.

Bizcap's current minimum eligibility criteria for Line of Credit include:

  • At least nine months in business
  • An active ABN
  • Minimum monthly revenue of $20,000.

See whether a Bizcap Line of Credit fits your business

Need working capital you can access as expenses arise?

Talk to a Bizcap Lending Specialist about what you're funding, how much you need and whether a Line of Credit could suit your business.

Call 1300 922 223 or start your application online.