Dapio Blog

Could SMEs use credit cards for loans?

Many small businesses struggle to navigate the post-pandemic waters and avoid becoming too affected by the financial crisis that seems to engulf the world. In light of this uncertain future, SMEs might not get access to the loans they need to keep their businesses running. We ask, what if a merchant uses their personal credit card as a financing source for their business?

How could SMEs use credit cards for loans

The idea would be that a small business finding itself in need of fast cash (to pay salaries, bills, taxes, rent, and so on) could pay itself. A merchant would tap their own personal credit card on a SoftPOS app, introduce the amount they need, and move the money to their business account. This method could theoretically be life-saving for small businesses as they would free the capital they need to keep their line of work afloat.

Potential benefits for business-intended credit card payments

Paying regular, monthly bills via credit card can make sense for businesses as long as they manage to:

  • Make sure to pay the balance at the end of the month

  • Never pay more than it is affordable

Paying routine bills by using a credit card can have some benefits, besides the obvious one of obtaining the much-needed cash. According to a FintechOS webinar, SMEs often don’t even apply for loans at a bank to avoid the hassle; of those that build up the courage to apply, 30 per cent don’t manage to secure the credit line they wished for.

Also, paying with a credit card that features a reward system allows you to benefit from cashback or points. Signing up for a new credit card can also entitle you to a welcome bonus that packs some value.

If businesses rent their headquarters from companies with more advanced bookkeeping, merchants can pay via their credit cards. Also, there are some taxes which can be paid through the use of a credit card. However, both solutions presented in this paragraph can come with some fees which merchants should account for.

In theory, credit cards could be used as short-term loans for business expenses as long as the merchant looking to do this takes their time to inform themselves and find out about different fees and scenarios.

Some companies base their whole business model on paying invoices for merchants by using their credit cards, which definitely proves that using credit cards as lending sources is a solution for businesses that are strapped for cash.

This represents a revolutionary use case for POS machines. Paying bills through their personal credit cards would allow merchants to take better care of their businesses without going through the hassle of applying for loans at banks.

We invite our readers to read more about our Tap to Pay app, which uses NFC technology that completely changes the POS checkout experience of customers and improves the business lives of merchants.