originally published: 2022-03-22 11:27:24
The startup funding series was created to help you learn about the different funding options available for your startup and how to successfully apply each of them. There are countless ways to raise capital for your startup!
In part IV of the series, we want to discuss tips on how to use business credit cards successfully.
When using a business credit card to fund your startup, it’s important to discern and understand exactly what expenses will be paid for with this card.
Primarily, business credit cards are meant for smaller expenses that can be easily and quickly paid off. They are not meant to pay salaries or rent, as this option can quickly lead to the accumulation of debt.
So, is a business credit card the right move for your startup? Depending on the circumstance, this card can either be useful or dangerous.
A business credit card can be a great way to improve your credit history in order to receive a bank loan later on.
This funding route will allow startups to fund their daily development and growth costs.
Specific advantages include:
Be mindful of the interest rates that you are responsible for, should your startup fail.
Business credit cards are one of the most expensive business funding options available, given that interest rates are much higher than the traditional loans.
You do not want to misstep during the process of paying them back because failing to do so could cost your startup an important partnership or business credibility.
As a result, this costly debt can drain a startup during difficult times.
Specific disadvantages include:
When used correctly, business credit cards are one option for successfully funding your startup.
In order to alleviate the difficulties that could arise with having a business credit card, it’s important that your startup is not spending more than you bring in. High interest rates can quickly eat into the profits that you do have!
Create a tracker document to make note of how much money is spent, read the fine print on all business credit card contacts, and continue to use it to pay for expenses that you can pay off in less than one or two months.
Remember: not all business credit cards are created equal.
Scaling and developing a startup requires strategic funding. Every entrepreneur and founder desires to see their ideas accelerate and grow from a mere incubator to an established organization.
As a leader and innovator, it’s up to you to understand and evaluate the advantages and disadvantages of different funding options.
When it comes to a business credit card, make sure that the profits on equity saved will be significantly higher than the interest payments.