(855) 558-8433 info@hedgecommcap.com

Entrepreneurs often find it difficult to obtain startup financing. One solution that many arrive at is to fund their business using credit cards. Here are some issues to consider if you are planning to use credit cards as a primary source of financing for your startup.

Take Advantage of Low-Interest Rates

One of the major advantages of startup financing with credit cards is the favorable interest rates that banks offer when you open a new account. Many banks even have zero percent interest for limited time periods. Funding on these terms can certainly help your company get off the ground.

Avoid Offering Collateral

Banks typically want collateral of company assets such as property, equipment, or inventory when they offer loans or lines of credit. Credit cards are usually unsecured, though, so you can borrow the funds you need without risking the assets of your business.

Maintain Equity

Some sources of startup financing demand equity in your business as the cost of loans. However, when you finance your company using credit cards, the equity remains with you, and you will be able to oversee your business without interference.

Be Aware of the Drawbacks

Despite the important advantages of using credit cards for startup financing, there are also some drawbacks. For instance, you can easily spend too much and go into debt. If you overspend and then miss payments, your credit score will go down, which will make it difficult to obtain other types of funding. You are liable for whatever debts you incur, and creditors can sue you for unpaid balances. To avoid these difficulties, you need to resolve to pay your credit card balance in full every month when it is due.

Consider Alternatives

Before you fund your business through credit cards, you may want to consider other methods of startup financing. Many entrepreneurs use their savings, funds that they have set aside in investment accounts or money they have borrowed from family and friends. Others use crowdfunding platforms or obtain funding from venture capital firms or angel investors. You can also apply for a business loan from a credit union, bank, or online lender.

For more advice on obtaining startup financing, contact Hedge Commercial Capital.