For short-term cash flow, a business credit card and a line of credit solve different problems. The card usually costs nothing in interest on purchases you clear by the due date, while the line is built for cash needs and for balances that will sit longer than one statement. This guide compares the two on limits, interest, grace periods, cash access, fees and personal liability, then gives a simple rule for which expenses go where.
How a business credit card and a line of credit differ for short-term cash flow
Both are revolving credit, so you borrow up to a limit, repay, and borrow again. They differ in how you get at the money and in what a balance costs once it's more than a month old.
| Feature | Business credit card | Business line of credit |
|---|---|---|
| Limit | Set by the issuer from its review of the owner and the business | Set by the lender from revenue, cash flow and any collateral |
| Interest | None on purchases paid in full inside the grace period, then the card APR | Accrues from the day of each draw, on the amount drawn |
| Cash access | Cash advance, usually with a fee and immediate interest | Draws are typically paid into your business bank account |
| Common fees | Annual, cash advance, late and foreign transaction fees | Origination, draw, maintenance or renewal fees, depending on the lender |
| Security | Usually unsecured, often with the owner personally liable | Unsecured or secured by business assets, often with a personal guarantee |
Limits, fees and terms vary by issuer and lender, and both will assess the owner's credit and the business's ability to repay. Our guide to how a business line of credit works covers draws and renewals.
Business credit card interest rates and grace periods compared with a line
The grace period is the card's main advantage. The CFPB describes it as the time between the end of a billing cycle and your payment due date, during which you may not be charged interest if you pay the balance in full (CFPB, read October 2026). It also notes that card companies aren't required to give a grace period, although most cards provide one on purchases. Pay less than the full balance and you're charged interest on the unpaid portion.
On a business card, the grace period is a contract term. Regulation Z lists "an extension of credit primarily for a business, commercial or agricultural purpose" among its exempt transactions (12 CFR 1026.3(a), as in effect October 1, 2026). Its statement-timing rule, which has issuers adopt reasonable procedures so statements are mailed or delivered at least 21 days before the payment due date, is written for consumer credit card accounts (12 CFR 1026.5(b)(2)(ii)). So read the card agreement for the grace period's length and the rate-change terms.
On rates, the Federal Reserve's G.19 release of September 8, 2026 put the average commercial bank rate on credit card plans at 20.94% for all accounts and 22.15% for accounts assessed interest in the second quarter of 2026. That series tracks consumer credit, and each issuer sets its own business card APR. Lines of credit are commonly priced as a margin over the prime rate, and the bank prime loan rate was 7.00% on October 5, 2026 in the Fed's H.15 release. The margin depends on the lender, your credit and whether the line is secured, as our breakdown of line of credit rates by lender type shows.
What $20,000 costs on a card and on a line: three scenarios
| Scenario | Business credit card | Line of credit |
|---|---|---|
| $20,000 supplier order, paid in full by the card's due date | $0 interest | $200 draw fee + $164.38 interest for 30 days = $364.38 |
| $20,000 balance carried for 90 days | About $1,084.93 in interest | $200 draw fee + $493.15 interest = $693.15 |
| $20,000 in cash for payroll, repaid in 30 days | $1,000 cash advance fee + $443.84 interest = $1,443.84 | $200 draw fee + $164.38 interest = $364.38 |
For the 90-day row, $20,000 x 22% x 90/365 comes to $1,084.93 on the card and $20,000 x 10% x 90/365 comes to $493.15 on the line. For the cash advance, $20,000 x 27% x 30/365 comes to $443.84, on top of the 5% fee.
Paid inside the grace period, the card wins by the full cost of the line. Carried for a quarter, it costs roughly $390 more in this example, and for cash the gap is more than $1,000. The CFPB explains why: the issuer may charge a flat fee or a percentage of the advance, you'll commonly pay a higher rate than on purchases, and interest "starts as soon as you withdraw your money" (CFPB, read October 2026).
▦Estimate your lines of credit paymentsRun the numbers in the lines of credit estimator →▸Which expenses belong on the card and which on the line
| Expense | Better fit | Why |
|---|---|---|
| Software, travel, fuel, small supply orders | Card | Paid off monthly, so the grace period makes the float free |
| Inventory you'll sell through before the due date | Card, if the supplier takes cards without a surcharge | Free float, as long as you can pay the statement in full |
| Payroll, rent, tax payments, loan payments | Line | These need cash, and card cash advances are expensive |
| A 60 to 90 day wait on customer invoices | Line | The balance will outlast any grace period |
| Equipment or a build-out repaid over years | Neither | A term loan or equipment financing matches the asset's life |
A neutral rule that works for most owners:
- Use the card when the vendor accepts it and you can pay the statement in full by the due date.
- Draw on the line when you need cash, when the amount is bigger than your card limit, or when you already know the balance will last past the next due date.
- Keep both if you have steady card spend and occasional timing gaps. Pay the card in full each month and hold the line in reserve for the month a big customer pays late.
For needs that stretch past a year or so, look at business term loans. A business line of credit should rise and fall with your cash cycle, and our guide on how big a line of credit should be can help you size it.
Can a business credit card replace a line of credit? Pros and cons
A card can stand in for a line, especially at a new business with few other options, as long as you know its limits.
Pros of relying on a card:
- Interest-free float on purchases when you pay in full
- No draw fee, and typically no lien on business assets
Cons of relying on a card:
- A high APR on any balance you carry
- Expensive cash, which makes payroll and rent hard to cover
- Limits that are often smaller than a line sized to your revenue
Personal liability, credit reporting and fraud rules
A business card doesn't automatically keep the debt away from you personally. Small business card agreements often make the owner liable alongside the company, and lenders commonly ask for a personal guarantee on a line of credit, which may also be secured by business assets. Our explainer on the personal guarantee covers what you're signing.
Credit reporting differs by issuer and lender. Some report to commercial credit bureaus, some to the owner's personal file and some to both, so ask before you apply if you're building business credit or protecting a personal score.
Two Regulation Z card rules do cover business cards. An issuer can't send out a card nobody asked for, apart from a renewal or substitute, "regardless of the purpose for which a credit card is to be used, including business, commercial, or agricultural use," and the same section caps a cardholder's liability for unauthorized use at the lesser of $50 or the amount obtained by the unauthorized use before the issuer is notified (12 CFR 1026.12). For these two rules, a cardholder includes anyone issued a card for business use. When an issuer provides 10 or more cards for an organization's employees, the two may agree to liability beyond that cap, but an employee can be held liable only within it. These are US federal rules, so Canadian owners should confirm grace periods, fees and liability in the lender's agreement.
Does the SBA offer business credit cards?
The SBA guarantees loans made by lenders, and its page on the types of 7(a) loans (read October 6, 2026) lists no credit card product. The page describes revolving lines of credit under several 7(a) programs, including SBA Express, Export Express, CAPLines, the Export Working Capital Program, MARC loans for manufacturers and the Working Capital Pilot. SBA describes two of them this way:
- SBA Express: a maximum loan amount of $500,000, a maximum SBA guarantee of 50%, revolving lines of credit of up to 10 years, and a credit decision made by the lender.
- CAPLines: in SBA's words, "an umbrella program that helps small businesses meet their short-term and cyclical working-capital needs."
The same page notes that with a line of credit, "interest is only charged when the loan is in use," so you pay interest only while money is drawn. If a lender offers you a business card alongside an SBA loan, ask whether the card is the lender's own product or part of the SBA-guaranteed loan, and read its agreement separately.
If a line of credit fits, EQ Funding routes one application to a network of lenders that compete for your business. EQ is a marketplace and doesn't lend, so approval and terms come from the lenders.