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How to Finance Your Marketing Campaign: Unsecured Business Loan or Credit Card?

How to Finance Your Marketing Campaign: Unsecured Business Loan or Credit Card?

Free marketing strategies do exist, but there may come a day when you need money to market your products and services to generate more revenue.If you don’t have cash, a loan might be an option. But you may not have or want to put up the collateral such as stocks, a savings account, or a vehicle that lenders require to secure a loan.

So if you don’t have available cash to use, what do you do then?

Unsecured business loans and business credit cards are viable, alternative options to get cash faster without offering collateral. By using these two types of funding, small business owners can gain access to cash without needing to put up assets as security.

Read on to find out about these types of funding and how you can use them to finance marketing campaigns. You can read a more in-depth financial comparison of the two in Camino Financial’s blog.

What Are Unsecured Business Loans?

When a lender requires assets such as those mentioned earlier to secure a loan, they gain access to your assets in case you default on repaying the loan. Then, they can seize the assets (called collateral) to recover any losses they incur.

If you’re just starting, the only collateral you may have might be a checking account and unpaid invoices. You may not own a home, real estate, or equipment that traditional lenders prefer as collateral.

For that reason, unsecured business loans, offered by alternative lenders, are a valid option when you don’t have or want to offer collateral as security. They are usually more expensive (you pay a higher interest rate) because you’re considered a greater credit risk by the lender.

However, they have definite perks:

  • Unsecured business loans are offered to borrowers with lower credit scores.
  • Getting a loan with a traditional bank can take months, at which time you may find out you weren’t approved for the loan. In contrast, with unsecured business loans, you can have access to funds within days.
  • Another advantage of unsecured business loans is that while you repay the loan, you build personal and business credit.

How Can I Use an Unsecured Business Loan for Marketing?

Unsecured business loans are suitable for making larger purchases that you intend to repay in 2-5 years. Once you have funds in hand, you can hire a marketing specialist or even a marketing team (complete with computers and the needed software).

By developing one or more marketing campaigns, you have money to target social media audiences, send emails to customers, or create video tutorials. You can purchase marketing software to keep tabs on lead management or to integrate campaigns. Use the funding to create tip sheets about your business or offer educational seminars to the public on the benefits of your product or service.  You can even pay for bus-stop ads if you feel that would help you attract customers.

Your overall goal is to use the money to increase awareness among consumers to generate more revenue. Even so, when you get an unsecured business loan, you need to make sure you’re in a position to repay the loan comfortably based on the interest rate and terms you qualify for.

What Are Business Credit Cards?

Because they are as easy as taking out your wallet and grabbing a card, business owners see business credit cards as a convenient way to gain access to cash.

When you qualify for one, you can increase your working capital within minutes. According to a Mercator Advisory Group 2018 report, small business credit card purchases are expected to increase from $493 billion in 2017 to $686 billion in 2022.

One reason for their popularity is that a business credit card is similar to a revolving line of credit that you use and pay off at the end of each statement cycle. Unless you make regular payments, that courtesy comes at a high cost, since the annual percentage rates can be 12-22% and more when you carry balances.

Then, of course, introductory 0% business credit cards are equally popular when business owners make large purchases because they expect an influx of revenue in a few months to pay off the debt. Moreover, you can save your business money when the APR on a business credit card is lower than one offered by a lender for a loan.

Likewise, in addition to a high-interest rate, credit card companies may charge annual, cash advance, and over-limit fees, which add up quickly.

How Can I Use a Business Credit card for Marketing?

Most business owners make sure their return on investment when using a business credit card warrants using it. They may be reluctant to use a business credit card for a marketing campaign because it may not guarantee a profit. Even so, many entrepreneurs enjoy the convenience of using business credit cards to keep business and personal expenses separate when making sporadic purchases.

You can use it to purchase promotional business cards to place in a marketing packet or to pay a graphic artist to design your website. Buy a new client dinner or draw attention to your business by purchasing holiday decor. Use a business credit card to overhaul an e-commerce site to optimally market your product or service. You could even use it to buy editing software for your design team, that way your social sites will have beautiful images that will attract more people. Or you could use it to pay for Facebook ads.

What’s Better for your Business, Unsecured Business Loans or Business Credit Cards?

As you can see, each type of funding has merits and drawbacks specific to the type of business you own. You can use an unsecured business loan to improve your business’s installations (which can do wonders to attract customers) or a business credit card to purchase marketing items like greeting cards or a magnetic sign for your company car.

When it’s all said and done, you must weigh each funding option’s pros and cons.

Which one provides the most financial flexibility based on how you run your business and your needs?

There’s no reason you can’t take out an unsecured business loan and use a business credit card for unexpected purchases. As long as you have sufficient cash to repay a loan or a credit card, one or both options can help you grow your business.

Why not find out today what’s the best way to finance your business?

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by Lottie Pritchard // Lottie Pritchard is a contributor to Businessing Magazine.

Opinions expressed by contributors are their own.