According to those in credit card companies, companies are doing this to very great extents. However, this is not done to pay for any business costs which they can claim from their company accounts. Shockingly, it is used for entertainment and travel. They are also used to fund the day-to-day functioning of a business, and to pay for the cost of running the company car.
This is the result of credit card companies making it all too easy for people to have a credit card by having quick and easy access to funds of credit card lenders. Considering this, it’s not surprising that people are using their personal credit cards to fund their small businesses rather than go over to the neighborhood bank and apply for a loan in the conventional manner. Not to mention getting guarantors to back you in your venture. With the guarantees you offer, the bank is in a position to get its loan amount back, even if it means that you put up your only home as collateral.
So, if you consider your credit card the gateway of all your financial problems vis-a-vis your start-up money, then starting a business is a piece of cake. Already, your card can fetch you liquidity worth $85,000. So, why should you take a sheaf of documents to the bank with a business plan and waste time with the bank manager who will mull over your papers before approving your proposal?
However, if you do go to the bank and apply for a loan, you get the protection of the bank from any overspending that you might incur when using your card. Perhaps you might incur a huge debt from which you cannot emerge unscathed. If you take the personal credit card route, within no time you’ll have bailiffs at your door who will pick up valuable items from your house to work off your debt.
In the course of your business growth, you would set up a credit line with your small loan bank. If you do this, you could also negotiate a deal whereby that some of your assets be excluded from the guarantee or that loans from friends and family be negotiable. This room for negotiation will be absent with a credit card company who have a take-it-or-leave-it attitude.
While yours is still a small business that’s hungry for funding, to borrow against a credit card can not only be tempting but also perhaps your only option. To dabble into this is a risky business, but for many smart businessmen, it has also proved successful. So, if you’re convinced that by using your personal credit card to raise funds for your business is the best option for you, be very careful to read the fine print before calling up the credit card company who pushes in a mailer under your front door. You need to first understand the risks involved before accepting the offer of a credit card company—one that will keep you away from any financial trouble in future.
