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Are credit cards a good way to fund my start-up?

We hear of many stories from Silicon Valley of start-ups getting millions in venture capital, but the reality for most start-ups is you are going to have to fund your early days with your own money.

 

Credit cards can be a risky way to finance your business, but if managed correctly, they could also be a great help.

 

They can help you bridge the gap from raising capital through to achieving positive cashflow.

Despite the risks involved, many entrepreneurs have no other choice but to fund their start-up with a credit card.

 

There are so many options available, it can be confusing as to which is the right credit card for you. The biggest thing you need to realise is this: If you are sure you’re not going to repay your balance every month, get a low interest credit card.

 

Why is a credit card a good idea?

 

Even bearing in mind the risks, credit cards can be an ideal way to get your start-up running. Here’s why:

 

The application process is much simpler with fewer requirements to commercial finance options. A credit card can help you buy the things you need from day one. Getting the right tools and equipment to help improve productivity and assist in earning revenue, will help give your business a better chance of success. If you have an existing credit card, you can look into getting a credit limit increase to help get the initial funds you need for your start-up. Credit cards allow you to redraw funds after you’ve made repayments. This is a good thing, and a bad thing. It can help with cashflow, but if you’re not careful you could end up in a bad cycle where you don’t repay your balance each month. Key factors in choosing a credit card for your start-up

When it comes to choosing your balance transfer option, you have to be realistic and ask yourself if you’ll be able to pay your balance off in the introductory period, otherwise you could be stuck paying a much higher interest rate. Some cards revert to the purchase rate, and others to the cash advance rate so you’ll need to check the terms and conditions when applying. It’s also important to cancel the other credit card as soon as the balance transfer is done.  

 

 

 

With some financial diligence you can make a credit card work for you, instead of you working for your credit card. Picking a great low interest offer, and following a repayment plan will help keep your credit card under control.