Credit Card Financing Risky for Start-Ups

For modern small businesses, plastic is a way of life– over 80 percent of small businesses use credit cards to finance their companies. However, there are several misconceptions about small business credit cards that a recent Inc.com article clears up, including the following:

  • Business credit cards do not shield owners from personal liability
  • An owner’s personal credit standing is key to landing a credit card
  • Interest rates on business credit cards can rise at any point
  • For start-ups, even $1,000 in debt raises the probability of shutdown by 2.2 percent

    Start-ups especially depend on credit cards, because they are easier to come by than a business loan or an investor. It is very easy to become quickly overburdened by interest and vulnerable to economic shifts.

    Small business startups might want to consider other sources of financing before turning to credit cards. Detailed descriptions of other financing options can be seen in a previous blog post, Alternative to Bank Loans. In a nutshell, they include asset-based lending, lease-backs, and cash advances.

    See the original article: The Credit Card Mistake That Can Destroy Your Company.

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