Business Loans vs. Credit Cards: Making the Right Choice for Your Business

When it comes to financing your business, you’re faced with a wealth of options. Two of the most common funding solutions that land on every business owner’s desk are business loans and credit cards. But which one is right for your business? At Origin Finance, we believe in educating rather than selling, so let’s break down the key differences to help you make an informed decision.

Understanding Business Loans: The Foundation of Growth

Business loans offer unparalleled flexibility for established businesses looking to make significant investments. Funds are paid directly into your nominated business bank account and can then be used however you see fit. Whether you’re covering working capital, rent deposits, management buyouts, funds for upcoming projects, or paying VAT and tax bills, business loans provide the financial foundation your business needs to thrive.

Any loans agreed under GGS are 70% guaranteed by the government, making it easier for smaller businesses to access funding as the economy continues to recover. At present, the scheme is open until March 31st, 2026.

This guarantee means that, if your business defaults on the funding, the accredited lender can recall 70% from the government. From your perspective, as a borrower, you are still 100% responsible to pay back any debt due – which is why it’s always vital to check any small print that might apply.

You can access GGS funding in the form of invoice finance, overdrafts, asset finance, and term loans. In Great Britain, funding through invoice financing starts from £1,000, and each business group can access £25,001 to £2 million. Within the NI protocol, the minimum remains the same, but you’re capped at a maximum of £1 million.

Key Benefits of Business Loans:

• Fixed repayment terms up to seven years with monthly payments
• Competitive interest rates starting from 5.99% at Origin Finance
• Higher borrowing limits typically ranging from £10,000 to £2 million
• No restrictions on usage – use the funds however your business needs them
• Build business credit with regular, on-time payments

The application process is straightforward, and with the right broker, you can access over 120 lenders from high street banks to niche providers. This means you’re not limited to just one lender’s criteria – we’ll find the right fit for your business profile and requirements.

Business Credit Cards: The Convenience Factor

Business credit cards offer immediate access to funds and can be particularly useful for smaller, short-term expenses. They’re ideal for managing cash flow gaps, purchasing supplies, or covering unexpected costs that arise in day-to-day operations.

Key Benefits of Business Credit Cards:

• Instant access to funds up to your credit limit
• Flexible repayment options (though minimum payments are required)
• Rewards and cashback on business purchases
• Expense tracking and reporting features
• Building business credit when managed responsibly

Business credit cards typically come with higher interest rates and lower credit limits compared to business loans, making them less suitable for significant investments or long-term financing needs.

The Cost Comparison: What You Really Pay

This is where the numbers tell the real story. While business credit cards might seem convenient, they often come with significantly higher costs:

Business Loans:

• Interest rates from 5.99% depending on your business profile
• Fixed monthly repayments over 1-7 years
• No ongoing fees for most products
• Total cost of borrowing is clear from day one

Business Credit Cards:

• Interest rates typically range from 15% – 50% APR
• Variable monthly repayments based on balance
• Annual fees, transaction fees, and penalty charges
• Compound interest can significantly increase total costs

For larger amounts over extended periods, business loans almost always prove more cost-effective than credit cards.

Which Option Suits Your Business?

Choose a Business Loan When:

• You need funding above £10,000
• You’re making a significant investment in equipment, premises, or growth
• You want predictable, fixed monthly repayments
• You’re looking for the most cost-effective long-term financing
• You need funds for working capital, acquisitions, or major projects

Choose a Business Credit Card When:

• You need smaller amounts (typically under £5,000)
• You want flexibility to pay off the balance quickly
• You’re covering short-term cash flow gaps
• You want to earn rewards on business purchases
• You need a backup funding source for unexpected expenses

The Origin Finance Advantage

At Origin Finance, we don’t just offer products – we offer expertise. Our team of commercial finance veterans understands that every business is unique. We’ll assess your specific requirements, budget, and credit profile to connect you with the most suitable lender from our extensive panel.

Why Choose Origin Finance for Your Business Loan:

Business credit cards offer immediate access to funds and can be particularly useful for smaller, short-term expenses. They’re ideal for managing cash flow gaps, purchasing supplies, or covering unexpected costs that arise in day-to-day operations.

• Access to over 120 lenders, including those who only accept broker applications
• Experienced dedicated Account Manager as your sole point of contact
• Business loan rates starting from 5.99% with terms up to seven years
• No broker fees – we’re remunerated directly by lenders
• Applications assessed within hours, funding available within 24-72 hours

Making the Right Decision

The choice between business loans and credit cards isn’t always black and white. Many successful businesses use both as part of a comprehensive funding strategy. A business loan might fund your major growth initiatives, while a credit card handles day-to-day operational expenses and provides a financial safety net.

The key is understanding your business’s specific needs, cash flow patterns, and growth objectives. Don’t let the convenience of credit cards mask their true cost, and don’t assume that business loans are out of reach for your business.

Ready to Explore Your Options?

At Origin Finance, we’re here to guide you through the process without the fuss. Our approach is simple: we educate rather than sell, ensuring you make the best decision for your business’s future.

• Check your eligibility with our commitment-free eligibility checker
• Calculate your repayments using our online calculators
• Book a discovery call with one of our experienced Account Managers

Whether you choose a business loan, explore other financing options, or decide that credit cards better suit your immediate needs, we’re here to ensure you have all the information needed to make the right choice.

What is the Growth Guarantee Scheme (GGS)? Find Out if You’re Eligible

In Spring 2024, the UK government announced it would be extending the Recovery Loan Scheme, or RLS, which initially aided small businesses at the height of the COVID-19 pandemic. 

During this period, many business owners struggled to access funding, faced having to furlough employees, and even considered having to shut down completely, in the face of an uncertain route out of lockdowns.

Thankfully, that time has long passed – but SMEs can still access government-backed lending through the RLS under its current name, the Growth Guarantee Scheme, or GGS.

In this guide, we break down what the GGS does, how to check if you’re eligible, and how to apply.

What does the Growth Guarantee Scheme do?

The GGS is a borrowing scheme that allows eligible UK businesses to access up to £2 million per facility (£1 million for businesses within the Northern Ireland Protocol). 

It’s administered via the British Business Bank, and is available through accredited lenders (who our team can connect you to).

Any loans agreed under GGS are 70% guaranteed by the government, making it easier for smaller businesses to access funding as the economy continues to recover. At present, the scheme is open until March 31st, 2026.

This guarantee means that, if your business defaults on the funding, the accredited lender can recall 70% from the government. From your perspective, as a borrower, you are still 100% responsible to pay back any debt due – which is why it’s always vital to check any small print that might apply.

You can access GGS funding in the form of invoice finance, overdrafts, asset finance, and term loans. In Great Britain, funding through invoice financing starts from £1,000, and each business group can access £25,001 to £2 million. Within the NI protocol, the minimum remains the same, but you’re capped at a maximum of £1 million.

Who is eligible?

The Growth Guarantee Scheme is open to limited companies, limited partnerships, sole traders, corporations, community benefit societies, limited liability partnerships, and co-operatives.

You must:

• Operate and be incorporated in the UK
• Have been actively trading within the UK for at least two years
• Turn over less than £45 million each year
• Make at least half of your company revenue from trading activities (actively selling – unless you’re a charity or are based in further education)
• Intend to use funding purely for business purposes
• Have a viable business proposition
• Not be in any form of ‘difficulty’ (e.g., insolvency)

Beyond this criteria, accredited lenders will undertake full credit checks and check your case for fraud. The way checks are carried out will vary depending on the lender we arrange for you.

What’s more, in some cases, you may be able to secure funding through the GGS with a personal guarantee – but certain assets may not be eligible for security. As always, terms and conditions will vary based on the lender.

You won’t be eligible for the GGS if you run:

• A bank or building society
• A body in the public sector
• A school funded by the state
• An insurance company or reinsurer (brokers, however, are admitted)

You won’t be eligible, either, if you apply as an individual, but are not a sole trader.

How can I use funding through the GGS?

A ‘viable business proposition’, in the eyes of a GGS lender, can take on a few different shapes and forms. For example, you could use GGS funding to:

• Purchase equipment for your business
• Fund growth opportunities
• Pay for a large one-off purchase or fee
• Help balance your cash flow
• Invest in marketing or other resources

Ultimately, provided your borrowing intentions are legitimate and you have a clear plan for the funding you wish to access, there may be flexibility depending on the lender you work with.

GGS funding is classed as a subsidy. It’s worth keeping in mind that any subsidies you have already claimed over the past rolling three years may restrict how much you can access.

What will I need to apply with?

To apply for any GGS funding, you’ll always need clear accounts of your business’s management, with books made up to at least the last three years. Do also make sure you have a clear business plan in place, so you can reassure lenders that you’re able to pay back what you borrow, plus interest, within timescales agreed.

As mentioned, it’s also wise to have a clear record of any subsidy you might previously have received to hand, so your lender can allocate the right amount of funding.

In the event of a secured loan, you should also have a list of any assets you own, should you wish to use them as collateral. However, not all lenders will offer secured funding via the GGS.

Can I apply if my business has bad credit?

Yes – however, be prepared to expect that lenders offering GGS, along with other funding options, will have fewer opportunities available if you have poor or bad credit. 

Lenders assess GGS applications case by case, meaning there are still opportunities for businesses with bad credit to potentially find funding. If, for example, you have a strong enough business plan and/or the means to pay back the amount due under a GGS application, you may be successful.

However, if your business is currently in difficulty – i.e., it’s undergoing insolvency – you won’t be eligible to apply.

There might be a million and one reasons why you want to find finance for your business this year – but, at the same time, looking at all the different options and avenues available to you, getting started might seem like a pretty daunting task.

What kind of financing option should you choose for your business? How do you know if you’re prepared enough to apply for funding? What if your credit rating isn’t up to scratch?

We want to help you find the funding your business needs so it can grow to the next level. That might mean funding equipment finance, funding some commercial vehicles, or even getting enough money together to start a franchise. 

Regardless, our team wants to line up lending options that don’t just give you the capital you need, but at repayment rates and terms you can comfortably manage.

Let’s run through a few key points you might want to consider before applying for any kind of commercial finance, and reaching out to our team.

Think carefully about what you need the money for

It might be easy to assume that a basic business loan will cover most needs. That’s not exactly true – for instance, there are many different types of commercial finance out there to suit short and long-term borrowing, and to help you bridge gaps while you wait for money to clear.

Working with a commercial finance broker means you’ll have access to tons of knowledge on different niche products and services. You won’t have to worry about having to fit into a basic business loan unless it’s absolutely right for you – especially when there are so many other options available.

Here’s a quick breakdown, for example, of some of the business finance products we can help set up for you:

• Flexible business loans: Whether you want to buy out a company, access working capital while you find your feet, or simply put money towards some upcoming projects, we’ll help you find the right solution from over 120 trusted lenders.
  

• Equipment finance: Want to spread the cost of heavy duty equipment or tools over the next few years? Consider equipment finance, where you can find money for furnishings, fittings, machinery – and save money on upfront purchasing.
  

• Fit out finance: Similar to equipment finance, if you have an empty office or are taking over a shop or warehouse – and need some money to get it fitted out, fast – fit out finance can spread the cost of shelving, flooring, IT equipment, and more.
  

• Commercial vehicle finance: If you run a business that relies on you getting from A to B in commercial vehicles, or if you run a vehicle-based enterprise such as a catering van, it’s worth considering a commercial vehicle loan.
  

• Franchise finance: Growing your business into a franchise can be exciting, but can also require a lot of financial backing. Go beyond basic business finance and find a funding solution tailored to your franchise’s future growth and returns.
  

• Invoice finance: Customers owing you money on unpaid invoices? We can help you source financing options where you get the money now – and your invoices work as collateral.
  

• Profession loans: If you run a professional business – e.g., if you’re an optician, a dentist, or a vet – a profession loan can help you get started while you support your first patients and customers.
  

• Refinancing: Refinancing can be a fantastic option if you want to release money from machinery, equipment, and other assets already in your business portfolio or premises.
  

• New business finance: Whether you’re a start-up or a sole trader, everyone has to start somewhere – and this type of finance can give you a fair start regardless of the industry you’re stepping into.
  

• Growth Guarantee Scheme (GGS): The GGS is the current name for the Recovery Loan Scheme (RLS), which was originally set up to support businesses during COVID-19.
  

You don’t have to know exactly what type of funding to apply for straight away. That’s why it’s worth partnering with a broker who can offer a range of options to narrow down the field.

Consider how much you need

Deciding upon the exact amount of money you need to borrow, naturally, depends on what you’re going to use it for. 

You need to consider how much you can repay over a certain period of time. You can use our financial calculators for estimated repayment options.

Being transparent, honest, and concise about your funding amount shows lenders that you’re responsible, which again helps to build confidence. Start by considering how much you bring into the business each month, and how much you can guarantee to pay back from funding. Don’t depend on money that might come in – the last thing you’ll want to do is risk defaulting.

Start making a plan

Alongside carefully calculating how much money you want to borrow, you should have an ironclad business plan in place. Think of this as a growth plan that shows lenders where your business is projected to be over the next few years.

Again, this is a confidence-building exercise. Lenders won’t offer finance to just anybody – meaning that, along with some supporting documents, they’ll want to see that your plan ensures they get the money back that you’ll owe, along with interest.

Writing a business plan isn’t a precise exercise, but it’s something you should ideally get into if you’re just starting out. That said, even if you’ve been trading for a while, it’s also worth laying everything out flat so you have a clear roadmap of where you’re going – and, ideally, you should be thinking ahead by at least the next three years.

Ideally, your plan should include:

• A summary of what your business does in as much specific detail as possible
• Specific business targets that you aim to achieve over the next few years (financial or otherwise)
• Details about your target market, customers, and your competitors
• If you’re already in business, details on your revenue, loss, and expenses
• Information about what makes you qualified to run your business and stimulate growth (e.g., if you’re a web designer, you might want to draw on previous experience, a portfolio of work, and some professional qualifications)
• Details on how you run your business from day to day (do you have suppliers, insurance protection, and any back-up plans to support your business if all else fails?)
• Marketing tools and strategies you already (or intend) to use (to show lenders how you’ll bring money into your business)

Of course, all of these points will be words on a page – lenders may want you to supply some hard evidence of claims you make, which takes us to the next section.

Gather the right documents

Essentially, any documents and receipts you can bring together to support the above will help lenders make a more informed (and hopefully accepting) decision from your application. Ideally, you should bring together all of the following along with your plan:

• Detailed financial statements and accounts showing your cash flow
• Clear balance sheets that give a gradual overview of how your business is performing
• Tax returns, if applicable, to show your income and tax payments
• Proof of your ID, business ownership, and premises
• Asset details (for example, if you’re applying for a secured loan, you might offer proof that you own a property or vehicle that you’re putting up as security)
• Legal details relevant to the business (e.g., Companies House documentation)

This list is by no means exhaustive – meaning it’s a good idea to speak to an account manager at Origin before you apply if you’re unsure.

Understand the key terms

Of course, whenever you enter into a business finance agreement, you’ll have access to all the terms and conditions you need to help you understand when you need to pay money back, and how much. As a broker, we only work with lenders we know and trust – meaning you can trust them, all the same.

Key terms you should keep an eye out for when applying for business funding include interest, which refers to how much your lender will charge per year on top of your repayments.

There’s also collateral, which refers to an asset or security you might need to supply to secure your loan (and which the lender can seize if you miss payments or break the arrangement). Secured loans always use collateral – again, as another type of confidence for the lender.

You should also keep an eye out for terms such as early repayment fees, which might apply if you’re able to pay back before the end of your agreement, and variable rates, which can mean that the interest you pay throughout your repayment period is subject to change, based on market fluctuation.

There’s quite a bit to consider – but don’t worry. When applying for finance through Origin, you’ll have a complete breakdown of everything you need to know before signing and agreeing to funding.

And, to prepare you even further, we’ve put together a large glossary of some of the most important terms you’ll come across when researching and applying for funding.

Take your time

Financing any kind of business can get stressful sometimes. However, we aim to make finding the right lenders and solutions as worry-free as possible.

Regardless of where you are in your business journey, and no matter what you need commercial capital for, we will help you line up a supportive and feasible plan to help you grow your business as efficiently as possible.

If you’re ready to find out what funding might be available to you, contact Origin for a free quote with no obligation – and start making big plans to get your business going places.