Credit Card Funding For Business Start-Ups and Entrepreneurs

Credit cards are often touted as an evil spending device and it is true that you can very quickly and very easily get into trouble if you use your credit card incorrectly or inefficiently. However if you are looking at funding the start-up of your business as an entrepreneur then not only does the business credit card makes a lot of sense to help you get your business dream and unique product or idea up and running, you are also in good company.

Why Use A Credit Card As An Entrepreneur To Cover Start-Up Costs For A New Business?

We’ve all heard the business adage that you have to spend money to make money, however you may be wondering about how clever it really is to use the bank’s money to cover the start-up costs of your new business. Consider the benefits and reasons that you can benefit from as an entrepreneur with a new business to fund:

  • Many successful businesses have used credit cards in their start-up periods. The founders of Cisco Systems for example use their personal credit cards in the early stages of starting their business, and so too did the founders of Google who needed to cover the costs of computers and office equipment, so consider where we would all be if the founders of Google had decided not to take the risk of using their credit card to start their business, because those debts are well and truly paid by now.
  • You don’t have the opportunity or want to get a loan. Borrowing money from family and friends to start up a business can get messy down the track and you may also not want to worry with the hassle of a personal loan or a business overdraft in the early stages, and more importantly you may not even qualify as a start-up business for a loan. However your credit card can help you find the business items you need to bring in customers and of course income.
  • You already have a credit card. The reality is that most of us have at least one credit card in our wallets already and if you are careful in your spending and plan your repayments you can use your personal credit card to fund your business start-up. While it is not always wise to use a personal credit card for business expenses, in the case of a business credit card the debt will still be your personal responsibility unless your business is an incorporated company, and sometimes this does not even remove you from all liability.

How To Use A Credit Card For Funding

As with your personal credit card spending, there is also a right way and a wrong way to use a credit card to fund the start-up of your business. No matter how much of an innovative or creative entrepreneur you are, you can still benefit from following these few simple business credit card funding tips:

  • Choose a dedicated business credit card. A credit card designed specifically for business use will allow you higher credit limits which can be especially useful in the start-up period where there are a lot of equipment, advertising and wage expenses. A business credit card will also offer you more flexibility in the number of additional cardholders you’re able to have seen you can monitor your staff spending as well. Business credit cards will also offer you business rewards, such as discounted or free travel or discounts or special offers on office stationery will stop
  • Manage your account online. This allows you to always keep up-to-date with your spending and the spending of your staff, and ensured that you don’t spend more than you can reasonably afford to repay.
  • Compare interest charges. While the interest charges on your business credit card will be largely tax-deductible, you still want to shop around for a business credit card with a lower interest rate or a long interest-free period because you have to pay the interest before you can play it back at the end of the financial year.
  • Check the debt accountability. Unless your business is a company there is little doubt that you will be held personally responsible for any debt the business gets into. However even as a company you may have to go guarantor for your business credit card and can still be held liable for your business debts. Therefore try and exclude your personal assets, or look for a guarantor option where the guaranteed portion declines as the business grows.

No matter how many brilliant business ideas you have they will remain just ideas unless you can get them out there to your customers and for that you will need funding. Using credit cards to fund a business start-up has proved successful for other entrepreneurs in Australia and around the world but that doesn’t mean that using your credit card for your business start-up will automatically be successful too. Instead make sure you maintain the same financial responsibility with your business credit card and business debts as you do for your personal ones to ensure success now and long-lasting success into the future.


Filed Under: advice