| Almost once a week someone will ask me whether or not they can finance a new business with a business credit card. Each and every week I give them the same response. The question isn't only "can you" finance your new business with a business credit card. The question is also "should you?" They Don't Just Pass Them Out First things first... Ask yourself why you're thinking of financing your business with a business credit card. Is it because you can't get a business loan and you don't want to risk your personal credit rating? If you can't get a business loan, you probably can't get a business credit card. They don't just hand them out to everybody. Unless you have an established business with a proven profit record, chances are you're going to have to guarantee any business credit card with your own personal credit. And why shouldn't you? If you're not willing to put your good name up for the sake of your business, why should the bank be willing to put up the funds? On the other hand, if you want a business credit card in order to keep your business start-up costs separate from your personal credit card transactions, a business credit card might be a good way to do it. But remember, you're probably going to have to use your personal information in addition to your business information in order to get the business credit card you need. Is It Worth the Price? When it comes to start-up costs for your new business, a low-interest business credit card can be just what the doctor ordered. However, not everyone qualifies for a low-interest rate. If you're stuck paying 20 percent on the card, you might be better off going with a small business loan. Check small business loan rates in your area and see if any local small business associations or organizations offer grants or low-interest loans. If they do, you might be better off using those for your start-up costs and saving a small business credit card for other operating expenses. The Bottom Line The bottom line is this... Every business should have a business credit card. Whether or not you should use that card for start-up costs will depend on your specific situation. If you want to start a business that is almost sure to succeed with relatively low start-up expense and no other means of financing, a business credit card can actually be the ideal solution. |
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