Financing a business start by credit card
Posted on August 7, 2007
If you remember my guest posting on the bootstrapme.com blog about keeping personal and business finances separatelly, I’ve summarized in several examples the ways in which you might get into financing problems that might need your personal money investment. Of course the examples where made mostly from my Eastern European perspective, where banks are not so keen in offering loans.
That’s why I tried to find out more about other ways to finance a new business, and with all the controversy around, it seems that some entrepreneurs decide to finance their start-up using credit cards. That’s why I found this article on Financing a small business with a credit card interesting.
I especially enjoyed these ideas:
- Don’t mix your expenses
- Limit the number of cards that you have
I don’t really think building a business on credit is a way to start for most bootrapers. You are not really sure of the outcome and you might need to personally cover the loses. Hm. Still, interesting to read if you want to go this way.
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7 Responses to “Financing a business start by credit card”
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cdorob -I agree with you wholeheartedly! It makes no sense to finance your new business on credit cards alone, unless you have plenty of cash to pay off the cards while your business is, hopefully, growing. If you succeed, then great, but if your new enterprise crashes and burns, then, obviously, you’re far worse off than when your start-up concern was initiated. Too many people do this and that is why so many small business fail. When I started my first company, the rule of thumb was to have at least 3 years of ’start-up money’ in the bank - that way the pressure to make money right away was lessened. That rule might be antiquated due to the internet, but, in my opinion, you should, at the least, have enough money to see you through for a year.
Hi Morgan,
I completely agree with you, and I believe we have 2 sets of questions:
1. How much difference in the ways to finance a start-up is there related to the business environment? I’m sure people think differently about financing in USA and Eastern Europe.
2. I just got a piece of a very interesting newsletter from the http://www.goBIGnetwork.com. It says: “it would be better to own 1% of Google than 100% of your new company? There is rarely ever a consolation prize for failure. In fact, it’s more likely that you’ll wind up with a massive amount of debt than with a pile of cash in your back seat.”
So besides having put aside some start-up money, sometimes it might be better to invest in something that already works.
cdorob - Hi yourself. Regarding your closing line in response to my post - Truer words were never spoken. But would you rather have 1% of Google or 1% of Microsoft? Moot point. Later.
That’s easy! I think that for the question on having 1% of Google or 1% of Microsoft we have a classic answer: never put all your eggs in one basket. I would go for 0.5 of both!
Actually when I’ve started my business I had the same dilemmas in terms of financing, risks, chances of success and expected revenue. My decisions where:
- bootstrapping - I never had a bulk investment in my business
- part time entrepreneurship - still keeping my 9 to 5 job
- owning only 34% from the company and sharing the rest with 2 great partners that had the skills to make things work.
It’s always a question of balance.
Touche.
thank you for the great information.
Well, I think that business credit cards can be of great use for businessmen. First of all these cards let them keep their personal and business expenditures separately. They say that these plastics are very convenient. Moreover, they are easy to get, as major credit card applications ( http://www.requestcredit.com/Immediate-credit-card-care-service-881973-page_7.php ) can be found in the Internet.