As strange as it sounds credit cards have been used over the years to help build the foundations of businesses. Some of the world’s leading businesses have started out with nothing more than a credit card and it really is quite astonishing. However, most see credit cards as a bad lending line because it can easily spiral out of control; then again, there have been many credit card users who have gotten to grips with their spending.
Sometimes, credit cards can be used in the right way to help anyone get through a tough financial period from Christmas to unemployment and even to help fund a small business. This isn’t crazy, many have tried and succeeded and if you approach it correctly it could work for your small business also.
Finance without the Hassle
Credit cards are actually a lot easier to obtain than loans and funding. There may be a host of lending streams available however many of them are difficult to be approved. For instance, getting a small business bank loan can be particularly tough because you have to prove you have the profits to pay back and it requires lots of paperwork and it’s very costly time-wise. Some loans also require collateral and if you haven’t got anything that is worth what you need it will be rejected.
However, credit cards can offer up a new form of credit. Of course, if a small business were to use credit cards to help fund their day to day running’s, it would need to be used carefully. For example, credit cards shouldn’t be used to go out to lunch but rather to make important office equipment purchases like computers. If used correctly, credit cards can offer most businesses a great funding source and if all payments are made on time, it shouldn’t become an issue.
Borrow As Much As You Need, Pay Back When You Can
Flexibility is what most borrowers get when they take out a credit card and it isn’t difficult to see why. When you use a credit card you have a limit and you can spend anything up to that limit but at the end or the beginning of each month when the payment is due, you only have to pay the minimum amount. Now, this might not seem to be such a good idea but it can be.
The reason why is simply because until you can afford to pay the entire balance off, you can make the smallest payment for the time being. This not only allows you to fund the business but builds up an established line of credit which can go into your credit history. You may not have all the money to pay back now but once you start turning a profit the entire amount can be paid off.
Interest Doesn’t Need To Kill You and Rewards Are Possible
Also, there are a lot of cards which don’t have an interest amount for a certain introductory period. Some can offer a year of zero interest while others can offer twenty months or more; Citi Simplicity offers twenty one months of zero interest for new users. Of course, you need to have an impressive credit score but the point is there are lots of good credit cards that could potentially help.
You aren’t always stuck paying out thousands each year in interest, not if you choose a credit card with a zero interest introductory period. There are even a lot of credit card companies who offer new customers bonus points and rewards.
Balance Transfer Is Possible and No Fees
If you have a balance on an old credit card you could potentially transfer that over to the new credit card. There are lots of credit cards which charge no interest for the first year and it could help you to avoid the debts piling up. Of course, getting the credit card balance paid off as quickly as possible is always important. Also, look for credit cards that don’t charge an annual fee.
Treat a Credit Card like a Loan
However, don’t make the mistake in believing a credit card offers you a free ride because it doesn’t! Credit card balances are going to be something you have to pay back and the longer you wait to do so, the more you will have to pay. You should always consider a credit card as a loan because if you don’t take the cards as seriously as you do a loan, payments can be missed and soon the balance gets out of hand.
Always make the payments at the end of the month and if you can, pay more than the minimum, even if it’s an extra $20, it all counts. Repaying the debt off will allow you to keep your credit in fairly good shape and will avoid potential problems with finances in the future.
Have a Set Agreement about Finances
Credit cards are going to be used by most people however they can still be tricky especially when used in a business. When there are two or more people using the cards in a short period of time the charges can rack up and there can easily be disputes. However, when you have a written agreement set out about how the card should be used and who is responsible for what payments, everything can be a lot easier. This will not only help protect the name on the credit card but ensure no unnecessary fights occur.
Credit Lines Can Be Increased
Let’s say your credit line limit was $25,000. This is a great deal of money but if you continue to make steady payments and show a good history with the credit card company, they may decide to boost your available credit. Basically this means your credit line could increase to $30,000 but only if your credit is good and you show you can continue to make payments.
If the company doesn’t increase the limit you could always request for the limit to be raised. This may work if the company believes you are able to repay the amount and whether your credit is clean. It is unlikely if your credit history is poor you will be issued with a high balance credit limit but it can vary depending on where you take the card out from.