Financing a Business with Credit Cards

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Post subject: Financing a business with Credit Cards

Paul Taylor
Date: 2/14/2001 12:50 am CDT


I posted a question earlier regarding rolling over low interest rate debt to lend the money out at a higher rate in order to earn the spread. Or if the credit card companies figured this out and the music stopped, putting this debt into a low interest rate credit card.

On a related topic, how does a credit company underwrite to establish credit limits? Specifically, while I know they initially look at current taxable income, how much weight do they give to demonstrated performance to make monthy payments? What I am driving at, is in my case if initially secure a credit line that can be supported by my current income and inturn put this money out in high interest loans. However, as payment history is established will I be able to increase this limit beyond what my taxable income can support in order to go out and buy more loans?

Playing this game, how much money is it possible to borrow either at low rates or introductory rates....$25K, 50K, 100K, 200K?

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CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!

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Tim
Date: 2/17/2001 11:23 pm CDT

Sounds like a risky scheme but not impossible. Most credit card companies use numerous factors to "underwrite" a limit, not just taxable income or ability to pay monthly payments. They also consider additional sources of income, but most importantly credit history. Solution, see how much yoy can get at the lowest interest rate and with the less amount of associated fees.I have seen clients carry as much as 50K to 150K on a credit line but there is usually a collataral requirement for a line that high or higher.

An alternative plan for you would be to get a 2nd or 3rd mortgage. Take the money from that and roll it over to high interest loans. This way you can avoid the finance charges and fees that the credit card companies charge and actually write most of it off. If your house is already paid for, even better, make a loan against that and make the profit off of the rollover.

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CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!

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