Debt or Savings? Deciding Which is Best for Your Small Business

October 28, 2021

Lines of Credit  

Often, when we think of lines of credit it's impossible to not think of debt and the crushing weight of when it when it gets out of control. However, not all debt is bad debt. Debt can actually provide flexibility and freedom for those who manage it effectively. Small businesses, especially, can benefit from debt financing to help build business credit for potential future financing needs and also help secure better deals with their vendors. Small business owners who choose the right type of debt for their businesses can benefit greatly from establishing and managing their debt to increase their purchase power. is a great resource for businesses considering debt financing, and offers advice on how to start building business credit:

  1. Determine whether you have business credit on file with Dun & Bradstreet
  2. Establish a business credit history by using lines of credit associated with your business  
  3. Pay bills on time and understand other factors that influence your credit rating
  4. Keep your credit files current and monitor for ratings changes
  5. Know your customers' and vendors' credit standing

Credit Cards

One type of debt financing that can be useful to a small business are Business Credit Cards. Unlike personal credit cards, business credit cards carry higher balances and may often provide extended repayment terms, providing more flexibility to your business.  

Some advantages to using a credit card for your business purchases are:

  • Build your credit rating: Using a credit card consistently for business purchases and paying off the balance on time can help boost your credit rating, making it possible for your business to receive better financing terms and negotiating power in the future.
  • Tax deductible: When used for business purposes, the interest accrued on a credit card can be deducted as a business expense.
  • Rewards for your business: Business credit cards often offer great benefits and rewards, such as cash-back, travel miles, and purchase protection.

Here is a Breakdown of Pros and Cons of Business Credit Cards


  • Easier to qualify for a card than for a loan
  • Convenience
  • Provides a financial cushion
  • Useful online
  • Helps with bookkeeping
  • Rewards and incentives
  • Tool to build credit


  • More expensive than a loan or credit line
  • Personal legal liability
  • Security issues
  • Less protection than consumer credit cards offer
  • Fluctuating interest rates

Strategies for managing Credit Cards

Despite its advantages, business credit cards have the potential of spiraling out of control without proper management. Investopedia offers great strategies on how to effectively manage lines of credit:

  1. Ensure Accountability - Pre-approving credit purchases and requiring receipts is a great way to maintain accountability for card usage.
  2. Decides who receives a card - By limiting the number of people using the business credit card and creating set rules for usage helps keep tabs on who and how cards can be used.
  3. Set Credit Card limits - Creating a written policy that clearly states the rules and restrictions of using a company card allows users to manage their usage responsibly
  4. Monitor Credit Card usage - Setting up systems of controls can help keep businesses on top of card usage. One way is to set up purchase alerts in order to stay informed of card activity. Another way is to have the accounting department verify each purchase, making sure they are all approved charges.

Benefits of an SBA Loan

Are you looking for a loan with favorable terms to finance your business? The Small Business Administration (SBA), a U.S. government agency, can help! The SBA’s loan program is designed specifically to assist small-to-medium sized businesses with business expansion and growth. Although the application process for an SBA loan is deemed as lengthy and complex, there are still many benefits in getting this type of loan. The agency collaborates with many lenders to give out loans ranging between $500 to $5.5 million. In lieu of lending directly to business owners, the SBA establishes guidelines for loans created by its partnering leaders, micro-lending institutions, and community development organizations. The agency minimizes risk for lenders by guaranteeing repayment of a certain percentage of the loan, which further makes it easier for lenders to lend to businesses that would not have been able to borrow money otherwise. The funds can be used for most business purposes, including start-up, expansion, working capital, equipment purchases, and inventory or real estate purchases. In comparison to traditional bank loans, SBA loans have lower interest rates, require low monthly payments, and do not penalize you for making prepayments. Some loans include counseling and education to assist you with starting and running your business while others do not even require collateral. An SBA loan could be the financing solution for your business so consider submitting an application today!      

Click here for more info: The SBA Helps Small Businesses Get Loans, SBA Loans and Learn the Advantages and Disadvantages of an SBA Loan  

Keeping things Liquid

Despite Lines of Credit providing businesses with financial flexibility, nothing beats maintaining high liquidity for your business. Liquidity measures the ease with which an individual or company can meet their financial obligations with the liquid assets available to them—the ability to pay off debts as they come due. Since cash is the considered one the most liquid asset, here are some Banking and savings options to help put your money away safely.

Chase Business Complete Banking is a checking account for small business owners! HTH encourages our clients to use checking accounts for deposits from sales, funding payroll, making payments, and keeping track of cash flow.  


  • Avoid a monthly service fee by maintaining a $2,000 daily balance.  
  • Convenient and easy to use Mobile Banking App
  • Multiple Branch and ATM locations accessible for service needs
  • Accept payments from customers using QuickAccept feature
  • Use Bill Pay feature to add payees and schedule payments

Business Savings Accounts for Small Businesses

What is a business savings account?

  • It is a business bank account that gives you the ability to earn interest on your funds
  • Limited monthly withdrawals
  • Great for long-term savings
  • Best business savings accounts?—those with high-yield accounts, above-average interest rates

Some of the top business savings accounts for high-yield savings (June 2021):

Live Oak Business Savings

  • No monthly maintenance fees
  • No minimum balance requirements
  • Earning interest 0.55%
  • Free online banking
  • 6 fee-free withdrawals per month

First Interest Bank Business Money Market Savings

  • Can be opened with only $100
  • Interest 0.4% ($10M or below), 0.25% (above $10M)
  • $5 monthly maintenance fee
  • 6 free monthly transaction
  • Free online and mobile banking

TAB Bank Business Money Market

  • Interest 0.25%
  • Minimum opening requirement $25
  • No monthly fees
  • Online, mobile and text banking
  • 6 fee-free withdrawals monthly

Axox Business Savings

  • Interest 0.2%
  • Minimum opening deposit $1000
  • $5 monthly maintenance fee
  • 20 fee-free items per month (debits, credits, and deposited items)
  • 6 fee-free withdrawals/transfers monthly
  • Free online and mobile banking
  • Offers a $100 welcome bonus for small businesses incorporated after June 1, 2020

NBKC Business Money Market

  • No monthly fees
  • No minimum opening deposit
  • Interest 0.05%
  • No transaction fees
  • No overdraft or non-sufficient funds fees
  • Free online and mobile banking
  • Can also request a business debit card
  • Limited to 6 fee-free account withdrawals monthly

Weighing up different business savings accounts, what to look for?

  • Minimum opening deposit
  • Monthly fees
  • Minimum balance requirement
  • Monthly withdrawals or transfers
  • ATM access
  • Interest

Click here for more info: Best Business Savings Accounts of June 2021