Using A Credit Card Loan For Business

Using a credit card loan for business takes only a signature ... and smarts.

It is becoming harder and harder to acquire a small business loan through many banks and other methods. Because of this many entrepreneurs are looking for a credit card loan. In fact, a recent article in the Wall Street Journal reported that nearly 80% of entrepreneurs financed their businesses with credit cards.

But be careful when going this route to start up your business.

The Credit Card Loan for Business: Two Major Pitfalls

When your mom warned you about using credit cards, she was right.  Most credit card companies are up to no good, especially when business is involved.



A Credit Card Under The Business Name

There are two real dangers with a credit card loan for business use.  First, the very high interest.  Actually, it is astronomical.  Absurd.  Ridiculous.  And read the fine print.  Any time you miss a payment, or are even a day late, the interest rate can skyrocket even higher.

The second major issue is that credit cards for business are not required to provide any special disclosure or interest rate control like with personal credit cards.  That's right:  the banks don't have to tell you what the "real" interest rate is, and they can raise it any time, with or without notice.

Also, even if you can swing a credit card in the business name, rest assured that you will be held personally liable for its use and payment.

So use these cards sparingly.  They can be helpful in tracking costs and allowing a specified employee to purchase items, and even for some travel, but using a credit card as a loan for your business is not especially smart.

Using A Credit Card In Your Own Name

Pulling on any cash value in a personal credit card is, sadly, a very common act for an entrepreneur, especially in tough money markets.

The drawbacks are obvious:  high interest and limited access to funds.

But realistically, as long as small business owners have personal credit cards, and as long as banks are tight on lending, odds are pretty good that you will find yourself using your personal cards from time to time.

The Credit Card Loan: The "No Collateral" Loan

Whether the credit card is a business card, or a personal one, odds are that you won't need to provide collateral for it.  This is one of the primary reasons many burgeoning entrepreneurs are looking to credit cards in order to fund their business ventures.

However, definitely "shop around" and try to find the best terms for your credit card loan for business. There are some credit card companies which will penalize you very heavily for late or missed payments. In some cases a late payment has resulted in the interest rate more than doubling. By being sure to read the fine print on the credit card loan contract you can negotiate many of these terms.

Finally,  make sure that you strictly adhere to the dollar limits set by utilizing the credit card loan. One of the major credit card companies that routinely provides credit card loans will ask for repayment in full if you inadvertently spend more than the set limit. Again, reading the contract very carefully could save you thousands of dollars in the long run.

One thing more:  Don't assume that the rates will never change.  Check the terms of the credit card often to make sure there are no substantial changes.

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