Should Credit Cards Be Used to Fund a Business? (Yes!)

You must have heard stories about how the foundations of certain mammoth organizations were laid with just a piece of plastic – a credit card. Charles Huang is said to have maxed out his credit card to finance Harmonix, the company that produced the highest-grossing game in U.S. history, Guitar Hero III: Legends of Rock. Sergey Brin and Larry Page used their credit cards to fund Google in its early days.

Credit cards are generally considered to be an expensive form of financing for small businesses; however, this is not really true. The average APR for credit cards is about 16%, but not for people in the know.

While credit cards can be more costly than traditional or SBA Bank loans, they are much cheaper than other sources of funds, such as Invoice Financing, Alternative Non-Bank Lending and even Non-Profit Lending. Moreover, unlike bank loans, in order to secure credit card funding, you don’t need to prove that you have been profitable for several years or that you can put up collateral. As long as you have good credit, you can comfortably raise as much as $250,000 or more through credit cards, especially when money is needed quickly and bank or SBA loans are unavailable.

Other benefits of using credit cards to finance your business are as follows:

Credit Cards are more flexible than other forms of financing. Unlike loans, you can borrow as much or as little as you need (within your credit limit), while paying only a minimum amount each month.

Interest Payments Can Be Minimized by opting for cards with a 0% interest introductory period. Citi Simplicity and Citi Diamond Preferred cards offer a 21-month no-interest period. However, such cards are available only for applicants with the best credit scores.

You can use Sign-up Bonuses and Rewards Points offered by cards to earn extra money for your business. Citi ThankYou offers a 50,000 points sign-on bonus when $3,000 or more is spent on purchases in the first 3 months, 3x points on travel, 2x points on dining and entertainment, and 1x on other purchases.

Business owners who are carrying debt on several cards can Consolidate and Transfer the Amounts to a Low Interest or 0% interest card. Chase Slate charges no Balance Transfer Fee within the first 60 days and 0% APR for 15 months.

Using credit cards to finance a business has its advantages; nevertheless, while doing so, there are certain points you must keep in mind:

A credit card should be treated as a loan and payments should be made regularly to avoid piling up balances. This will help in keeping the interest burden and amount of money owed low, and will also protect your credit score.

Avoid the annual fee. Many good credit cards such as Capital One VentureOne and Discover Cash Back, offer 0% APR for several months with no annual fee.

Ensure that you clarify credit card usage with your business partners. I recommend you have a signed and written agreement in place detailing who is responsible for what, in order to protect the named cardholder’s credit score.

While financing your business through credit cards, you are limited by your credit line. This is primarily based on your credit score; however, by following certain methods, you can increase the amount of credit available to you.

Most credit card companies are likely to bump up your credit line at least once a year if you make timely payments. In the event that your credit card company doesn’t increase the limit within 5-6 months of opening the account, try calling or emailing them with your request.

Credit cards are a great way to finance a business for a business owner who has good credit but can’t get a bank loan. However, care must be taken that it is done in a responsible manner.

If you are looking for $50,000 to $250,000, Fund&Grow has a skilled and experienced team to help you get unsecured credit at 0% interest. And what’s more, this can be done easily and quickly, without any proof of income! In order to know more about our offers and packages, contact us today at (800) 996-0270.