Using Credit Cards for Business Financing

Should you use a credit card to finance your new writing business?

Well, as usual, I have to say, “It depends.” I usually tell people to save the credit card for the “last resort” and look first to a bank. It’s always a good idea to find a friendly local bank and establish a relationship with them. Since you’re a professional in a local community, this relationship is a valuable point in your network of other professionals. A bank can steer business your way, and vice versa. Having that relationship in place is helpful when you need more funding in the future, for expansion, for example. A good local bank can also help you with SBA funding, if necessary.

On the other hand, it is possible to get a good rate (under 8 percent) on a business credit card. If you already have a credit card with a low rate, you could use that too.

You might also find that a combination works. Maybe the bank will loan you enough for startup but not enough to carry you through those first tough months with working capital. The credit card line can serve this purpose.

I always encourage people to look for the lowest interest alternative, because interest is “wasted” money; it doesn’t benefit you and it’s just money out of your pocket.

This discussion assumes that you have good credit, and that you don’t have your credit cards maxed out. If your credit is not good, you probably won’t be able to get a good rate, and you won’t be able to use your cards for business expenses. It’s best to clear up credit card issues before you start looking for that business loan.

If you are considering canceling a credit card, it might be a good idea, if you have a lot of credit cards that you’re not using. On the other hand, if you’re going to be applying for a business loan, canceling a card might hurt your credit.

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