Credit Tips: Using Credit Cards to Fund Yours Business

Posted On: September 7, 2006

Author: lisapark
Posted: Thu Sep 07, 2006 3:26 am
Post subject: Using Credit Cards to Fund Your Business

This article is from space.bosslink.com
Although it is not written by me, it’s so useful!!

Using Credit Cards to Fund Your Business

Most surveys of entrepreneurs show that credit cards are among the most popular sources of startup financing. The Pioneer Institute, for example, found that loans from relatives and borrowing against credit cards were the two most common financing techniques used by startups with less than five employees. Despite this high rate of usage, the terms of credit-card financing are poorly understood. How many entrepreneurs take the time to read the card issuer’s Terms of Use when they respond to a new credit-card offer in the mail? This month’s column provides some guidance to entrepreneurs who plan to use credit-card debt as a financing echnique and wish to understand the implications of its personal guarantee.

Most entrepreneurs shudder when faced with signing a personal guarantee for a business credit card for the first time. I’ve never really understood how banks can market a product as a “business line of credit” when it’s really a personal line of credit. However, since the vast majority of businesses in the country are sole proprietorships, the difference between personal credit and business credit is murky from a bank’s perspective. Unless your business is incorporated, you’re the de facto guarantor of all business debts. So if your business has a slow sales quarter and you fall behind on your credit-card payments, your personal credit rating and your personal ability to borrow are at risk. (For more
information on how to build your business’s credit score, read “Do You Need Excellent Credit to Start a Business?.”

Read more please space.bosslink.com/showtopic.asp?id=218&forumid=8

Author: NightStar
Posted: Thu Sep 07, 2006 9:33 am
Post subject:

Thanks for the link, I have added that to my business message boards for later reference.
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Pammila Phillis
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http://www.CardRatings.com
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