I financed my small business which is mostly an online business using small business credit cards. I did not want to go to a bank or credit union to get start up money for my business simply because I had enough credit available to me via business credit cards.
Online businesses do not require much start up capital since things like web hosting is inexpensive and I could develop my own blogs using WordPress, which is free. All I needed was a few thousand dollars for everything I needed to start my business, including a small place to work, all business expenses including insurance, utilities, and web services.
Small business credit cards provided more than enough capital and it was easy to obtain. The first card I applied for and obtained was a US Bank Business Visa. There was an annual fee of $75 but I justified it with the points I’d earn. These points could be used for travel and other rewards such as gift cards to major hotel chains. All in all I found the card manageable for the first few years as I was able to pay off the balance in full and avoid the 9% interest on balances.
Over time however, I found myself using the card more than I wanted to. I would justify the expense with the points I’d get. Once you start paying interest of $5,000 or more the points never make up for the interest you pay monthly.
When it comes to business credit cards, get as low a rate as possible and stay away from rewards credit cards unless you’re 100% sure you can pay off the balance in full each month. Business credit cards with no personal guarantee can be an attractive means for funding a business but they can still get you into a financial bind.
Another mistake I made when I was starting my business was transferring balances from a higher rate credit card to my new small business credit card. This actually cost me money in the long run. Here’s how:
When you transfer a balance not only is there a fee to do it, that balance that you now have at 0% or 1.9% or whatever the promotional rate offer was, now becomes the balance that all future payments apply to first.
So, let’s say you have a business credit card with an APR of 9%, that has a $5,000 balance. And you have another card that you owe $3,000 on that has a 15% annual interest rate. You transfer the $3,000 balance to your business card during a “0% for a year” promotion to save interest.
What the banks don’t go out of their way to explain (read small print) is that now every payment you make to your business credit card gets applied to that potion of your balance that is at the 0% rate. And now that your balance is $8,000 you can’t afford to pay the entire balance off each month.
That $5,000 you owe them keeps racking up interest at the regular 9% APR. So in essence you’re now paying down a 0% balance month after month while the bulk of your balance is not being paid down at all. Do the math and you’ll find that in the end you did not save much if any money, especially after you pay the “processing fee” for transferring the balance.
The best way to save money when doing a balance transfer is to transfer a balance from a high interest card to a credit card that has no balance on it. That way all you pay is the fee for transferring the balance.
Financing a business with small business credit cards is easy and can provide enough capital for many types of business. Just make sure you shop for a good low interest cards, weigh the points/rewards options carefully and most of all, be careful when doing balance transfers!
Online businesses do not require much start up capital since things like web hosting is inexpensive and I could develop my own blogs using WordPress, which is free. All I needed was a few thousand dollars for everything I needed to start my business, including a small place to work, all business expenses including insurance, utilities, and web services.
Small business credit cards provided more than enough capital and it was easy to obtain. The first card I applied for and obtained was a US Bank Business Visa. There was an annual fee of $75 but I justified it with the points I’d earn. These points could be used for travel and other rewards such as gift cards to major hotel chains. All in all I found the card manageable for the first few years as I was able to pay off the balance in full and avoid the 9% interest on balances.
Over time however, I found myself using the card more than I wanted to. I would justify the expense with the points I’d get. Once you start paying interest of $5,000 or more the points never make up for the interest you pay monthly.
When it comes to business credit cards, get as low a rate as possible and stay away from rewards credit cards unless you’re 100% sure you can pay off the balance in full each month. Business credit cards with no personal guarantee can be an attractive means for funding a business but they can still get you into a financial bind.
Another mistake I made when I was starting my business was transferring balances from a higher rate credit card to my new small business credit card. This actually cost me money in the long run. Here’s how:
When you transfer a balance not only is there a fee to do it, that balance that you now have at 0% or 1.9% or whatever the promotional rate offer was, now becomes the balance that all future payments apply to first.
So, let’s say you have a business credit card with an APR of 9%, that has a $5,000 balance. And you have another card that you owe $3,000 on that has a 15% annual interest rate. You transfer the $3,000 balance to your business card during a “0% for a year” promotion to save interest.
What the banks don’t go out of their way to explain (read small print) is that now every payment you make to your business credit card gets applied to that potion of your balance that is at the 0% rate. And now that your balance is $8,000 you can’t afford to pay the entire balance off each month.
That $5,000 you owe them keeps racking up interest at the regular 9% APR. So in essence you’re now paying down a 0% balance month after month while the bulk of your balance is not being paid down at all. Do the math and you’ll find that in the end you did not save much if any money, especially after you pay the “processing fee” for transferring the balance.
The best way to save money when doing a balance transfer is to transfer a balance from a high interest card to a credit card that has no balance on it. That way all you pay is the fee for transferring the balance.
Financing a business with small business credit cards is easy and can provide enough capital for many types of business. Just make sure you shop for a good low interest cards, weigh the points/rewards options carefully and most of all, be careful when doing balance transfers!
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