Inc Well | Small Business Advice for Chicago Entrepreneurs
A how-to blog for Chicago business

Use Caution When Using Credit Cards to Finance a Startup

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    NEWSLETTERS

    If you started a business and think you can start over or gloss over your personal credit history, think again. If you used or use credit cards to finance your startup, remember that your ability to borrow money for your business depends on your personal credit score. Most entrepreneurs use credit cards to help finance their business at the beginning (and the middle, and 10 years later). 

    Is that a good idea? 
    It doesn't have to be a bad one, financial advisers say. But just as you would in your personal life  -- keep up with your bills! Establish procedures to pay your bills on time every month, even if you aren't paying balances in full, and watch your cash flow carefully.
    Visit a business adviser or lender before using personal credit to start or expand a business, because a business owner who has maxed out personal credit will not qualify for a business loan.
    Introductory credit card interest rates are appealing, but eventually the rates will rise and a business owner is left with expensive debt. If personal credit cards are used as startup capital and the business fails, the owner is still responsible for paying off the credit card debt and could damage their credit for future purchases -- including a mortgage refinance or even a car.
    Just as you would in your personal life, remember that credit card debt is not a replacement for cash or capital in building a business (or buying a car, a new wardrobe, or booking a vacation).