Probing Into The Fact Or Fiction Of Funding Startup Business With Credit Cards

You may not be sure when one says that you may start your business even by using your credit card to raise the necessary funds for it. The fact may seem like fiction to you simply because you do not have proper knowledge about business funding and managing debts.

Both these things are essential for any business whether it is a startup or an established one with the only difference that a startup may need a lot of money right at the beginning while a successfully running business can space its funding requirements along with the pace of the business.

In order to enlighten you up a bit, it is required to go back down the lane a couple of decades. Way back in the early 1990s, a gentleman named Kevin Smith was frantically looking for a way to fund a movie called Clerks. Naturally, success was hard to come by as the person did not have an established reputation which is primarily important for any traditional loan provider or an investor.

However, undeterred with the turn of event and being habitually imaginative, Kevin took the help of his last resort: his creativity. Surprisingly to many he utilized his credit cards to get the desired fund for his film to the tune of over $27,500. The film was a success and Kevin went on to direct several other movies down the lane starring Matt Damon and Ben Affleck!

This story emphasizes two things:

  • Success is hard to come by and
  • When it comes it is always sweet in nature.

However, you may still have one question in your mind. The concept of raising funds with credit cards may have worked for Kevin because it was a movie that required money one-time but business will need it continually to keep it running. So the question is whether or not you can launch your business with your credit cards just like Kevin?

Well, to make a long story short and before delving deep into the subject it is good to say that using credit cards for any purpose can prove to be the most viable option provided you have all its ends covered. Apart from the benefits of using your credit cards, you will need to know the risks and the severe consequences that it may have on your credit and business reputation. You will also need to know about the ways in which you can deal with and minimize these risks to make your venture successful.

Such knowledge and clear perception will keep you far away from the vicious debt hole of credit cards. You will not need to consider settling or consolidating your credit card debts and visit several websites to read several debt consolidation reviews and choose the right one for your purpose.

Start with the positives

Since every project must be taken on and started on a positive note and perspective, it is better to know the positive side of using your credit card to raise your startup business capital.

Funding speed:

Everyone wants to have cash in hand fast when in need and credit cards happen to be one of the fastest ways to get it to raise your business capital. Using this you can substitute for a startup business loan that may take some time, even months, to get approved, evaluated, processed and disbursed, if at all that is. Moreover, knowing the fact that actual “startup business loans” do not exist using credit cards seems to be the only available option for you to get your money right away. Just make sure that you apply for the right kind of business credit cards at major banks. You will get it and use it within seven to fourteen days.

Low-interest rates:

You will even get credit cards carrying 0% interest. These specific cards can turn out to be your most useful and significant tool when it comes to funding your business. Imagine you have a very good credit of over and above 680 and have three such credit cards each having a credit limit of $10,000. You will have $30,000 in hand and ready to use. You simply have to make sure that you pay it off within a year as 0% interest is valid for 12 months only. Therefore, know your resources well to repay them.

Flexible payments:

You will also have the most flexible payment terms in such type of lending. Your balance will never become fully due at any point in time. Credit card debts are more like an installment loan. You will need to pay the entire amount back within in a predetermined period of time and every month need to make these huge payments in full without having any redraw capabilities.

The cherry on top is that these debts are mostly in the form of unsecured lines of business credit. That means you do not need to put your house or car on the line or give a lien to anyone on your equipment. As long as you repay it responsibly there are absolutely no downsides in using a credit card.

Minimize the risks

Just like a coin has two faces, using the credit card to raise capital for your business also has a few potential risks. However, knowing this and caring for it will prevent you from being disheartened and allow you to go ahead with it. Take the following precautions to minimize the risks:

  • Make sure that your business is ‘revenue ready’ to make the monthly payments
  • Arrange for resources to make at least the minimum payments to prevent interest accrual at the rate of 29% or more
  • Get rid of the high balances to keep your FICO score undisturbed.

Moreover, make sure that you do not use up the entire credit limit as that will affect your credit score even if you make the minimum monthly payments. Therefore, use the amount that you actually need and do not overspend knowing that you have lots of available credit as this can be your worst nightmare. Otherwise, the credit card is the best to use to take your business off the ground.

Marvin Power is a freelance writer who has been writing for various blogs. he has previously covered an extensive range of topics in her posts, including business debt consolidation, Finance, Entrepreneurship and start-ups.