We all can agree that starting a business is difficult. It even gets more difficult if you don’t have cash to
finance the startup phase. Some entrepreneurs are fortunate to have angel investors or have friends or
family who provide access to cash, but most are on their own. Using credit cards is one option available
to fund your company.
Traditionally a business owner applies for a bank loan to get funding to fund the startup phase,
unfortunately usually banks decline them. An easy option is to use credit instead which provide fast and
easy spending ability for a new and growing business. There are good uses of credit cards, there are also
downsides. Careful use of credit cards can make them attractive as an option.
First, some advantages to using credit cards to fund your business operations:
• Easier to get funds
• On time payments improve credit scores for the business owners and the business
• There are rewards and benefits such as gas discounts, airline miles, cash rebates
• Record keeping is easier. It helps the owner separate and identifies his personal and business
finances, trace employee’s spending, lower the time spent on checkbook balancing, and making
financial reporting simpler.
These are downsides with credit cards that will hurt any business. It’s important to avoid the pitfalls at
all costs:
• Your personal credit will often be tied to the businesses ability to get access to credit. Make sure
your personal credit is in order before applying, and also know that any negative aspect of the credit
cards (such as a late payment) will impact you personally on your credit score.
• Rewards are over emphasized. While its nice to get 1% back on all purchases, if you excessively use
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...ss card.
• Check your credit cards if they have baggage insurance, employee-expense tracking or airline clubs
access and concierge services. Take full advantage of the benefits.
• Take advantage of zero percent interest balance transfers and introductory periods with no interest
expense.
• If you have multiple cards, use the one that best suits the transaction. For example, airlines often
give double or triple points for spending made with their airline, encouraging you to use their card for
booking travel with them.
Businesses need funding and credit cards are the easiest solution. Credit cards are very helpful with any
start-ups as long as business owners are equipped with what these plastic cards can give them and can’t
give them. While not a good long term funding solution, they can provide month to month liquidity for
you and your business.
In this country, there are three major credit bureaus: Experian, Equifax and Trans Union. They offer information to lenders about a person�s credit score. The lower your credit score, the less likely you are to get credit. Each credit report comes with �score reason codes� to explain why your credit score is where it is.
Credit cards have a history stemming back to the mid 1900's, when there were two types of cards, both of which are still around, the card for specific stores, such as Sears, and the card for the occasional convenient spending when you didn't have the money you needed right away. The difference, however, between now and then is that only the extremely financially stable were using the latter of the two cards. The cards, such ...
In the Spring of 1949, Alfred Bloomingdale, Frank McNamara, and Ralph Snyder came up with a new plan for a modern type of credit card. While out to lunch one day in New York, the President of the New York Credit Card Company Frank McNamara had forgotten his wallet at home (Evans 53) . He had a thriving business yet credit cards at the time were only given to selected people. The first modern credit cards was introduced by Diners Club Inc. because of this. The modern day credit card is a small, plastic, rectangle, more than three inches. There is an account number and a name that is embroidered on the front. The first credit card did not look much like what credit cards look today. They were made out of paper not plastic, and they weren’t cards they were a lot like a tiny booklet that had all the same information the modern day credit card has now(Weiss 38). The modern day credit card can carry up to a $200 line of credit meaning you can buy anything you want at that certain time and pay it back at a later date such as months or a year after that time. Some companies require you to pay the full amount of your charge on the card at once, but some allow you to pay in small amounts. In order to apply for a credit card you must be at least eighteen years of age and if you are not you must have an adult sign the paperwork to apply for one. Prior ...
off their holiday expenses. Unfortunately, there are more ways to use a credit card than ever before, making it very hard
Credit cards are something that are almost needed in everyday life now, as most dont have the money available to purchase a car or house and so need credit, thus needing credit cards to help build that credit. Those cards are hard to handle, and receiving applications in the mail daily, and commercials appearing on television don’t seem to make the struggle of staying away any easier. This starts to spark an interest. So people begin to think, "I think I 'm responsible enough to get a credit card, I 'll only use it for emergencies." Then the application process begins and it may take a couple times to finally be approved for one. This only makes it worse, of course, because realizing how long a credit card wasn’t applicable to life, but now
Credit cards: for some they are the paths to financial freedom, for others they are a necessity for daily purchases. During the recent economic crisis, many have sought out to find the cause. One common suspect is the credit card industry, which is comprised of more than six thousand card issuers (Clayton 209). This issue is debated in the two-part article “Should Congress Regulate Credit Card Rates and Fees?” “Yes” and “No.” Tamara Draut, Director of Economic Opportunity, Demos, argues yes, claiming the credit card companies’ ability to adjust terms and interest rates traps cardholders in everlasting debt. On the contrary, Kenneth J. Clayton, Managing Director of Card Policy for the American Bankers Association, argues no, stating that regulating credit card companies would hinder many people from obtaining credit and further damage the economy. Although both Draut and Clayton present strong evidence for some aspects of their arguments, both writers make assumptions which they fail to support and ignore the complexity of the issue, making their arguments overall unpersuasive.
Adelman, P. J., & Marks, A. M. (2010). Entrepreneurial finance. (5 ed.). Bedford, Texas: Prentice Hall.
Credit card debt, can be easy to get into, but yet can take years to get out of. Credit card usage has become an increasing occurence in the 21st century for any person above the age of seventeen. Carrying cash has become uncommon for the average man or woman and unlike cash where someone is limited to only what they have in their wallet, credit cards can have upwards to thousands of dollars on them. Granted, there are great things about owning a credit card. For example, in case of an emergency and there is not enough cash to cover the expense, a credit card can be a great back up plan. However, with all the positives there are negatives, the biggest one being, a person can wind up in debt. Thus, credit debt is an individual’s fault, derived
Also, if your credit rating is low, you might receive the worst pre-approved offers from
Are they tempting fate by inviting the potential for problems? After all, one unexpected expense, and the credit card user won’t clear his/her balance…and before you know it…credit card debt.
By offering consumers both a means to pay for goods and services and a source of credit to finance such purchases, credit cards have become the most widely used credit instrument in the United States. As a payment device, credit cards are a ready substitute for checks, cash, and debit cards for most types of purchases (Federal Reserve, 2013).
Access to capital and credit at various stages in the business life cycle is identified as the major hurdle by the entrepreneurs. For many small firms and most start-ups, the personal funds of the business owners and entrepreneur and those of relatives and acquaintances constitute as the major source of capital. For many small businesses, especially during the early years of their operation, credit is simply not available. For many others, the limited available credit is not through bank loans. Due to this many of them rely on multiple credit card balances and home equity loans as major sources of credit for start-up firm. Because banks are bound by laws and regulations to prudent lending standards that require them a risk management assessment for each loan made. These regulations were made more vigor during the late 1980'' and early 1990 . Banks always found that lending to manufacturing firm with hard asset such as property, equipment, and inventory has always been easier than lending to today's expanding service sector firms. Because the service sector firms own few hard asses, therefor lending judgment have to be based in terms of character, markets, and cashflow, which make it difficult to the bank to meet the regulations for the approval of the loan. Additional, the banking industry, as well as the entire financial sector of the
Starting and building a prosperous business is an ambition of many entrepreneurial minds and has for
Credit may have some advantages over cash, but cash has more advantages. Credit has fees, debt, and no emotions to go along with it. One is more emotionally attached to cash. The debt one can go into using credit is unreal. The way that credit card companies make their money is with the unnecessary fees they tack onto using credit. One should think twice before getting drawn in by the hounding credit card companies; they are not a multibillion dollar industry for no reason. “When you pay with cash you “feel” the money leaving you” ().
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