Why using personal credit card for business not a good idea
For budding entrepreneurs, it can be very easy to pay the initial expenses of their business with a personal credit card. In fact, many entrepreneurs follow this strategy.
However, this is not the best way to start. It is true that financing a small business is difficult and extremely important to keep it going, but that is not the way to use a credit card.
There are several risks you run into, if you start financing business expenses with personal credit card. One of them, and probably the most obvious is that, you combine the personal expense debt with the business expenses. It is a great risk, because you lose the total control over the debts and keep on accumulating both the debts as business expenses are very frequent, generating problems in personal and business financials.
The greatest danger: The initial motivation to get ahead and grow with an exciting business for you becomes tedious as your focus is on paying debts.
So how to pay for business expenses?
There are a number of much smarter ways to keep your business going. The first, is to have control over the debts, so that you will live much more peacefully.
Apply for Business Credit Card
If your business is in the start up phase or you already have a successful business running, one of the best financing tools to continue with the growth momentum is to have credit card for business. This will allow you to finance the purchases of goods and services only for the business. Many banks offer credit cards for SMEs.
In addition to the line of credit, many banks offer other corporate benefits such as reward points, access to private lounges at airports, gifts and travel, among other things. Rewards points can actually turn out to be a good saving tool for the new business. All the payments made with the business card will earn points that can be redeemed in many ways: air tickets and hotel rooms, office stationary items and much more.
Remember to use these business credit cards responsibly. Even if you are enterprise, don’t mix personal expenses with those of the company and pay the bills fully on time.
Ask for a loan
If your credit score is good, don’t hesitate to ask for a business loan. You can also opt for peer to peer lending as the interest will be lower than if you spend with a credit card.
Borrow from Family/Friends
Another option is to borrow money from family members or friends to avoid high interest charged by the financial institutions. But do not consider it as a donation. That is, in return, you can give them small interest. This way, they would be happy too.
Money, business and family do not usually get along well
First of all, learn how to use your personal credit card. Credit cards must be taken care of and respected; try to have control over them without using them to pay for whims or luxuries. The way to take advantage is with expenses on necessary and planned things, that you know with certainty that you can pay in a short term.
You won’t learn about the world of entrepreneurship overnight as it requires an efficient strategy and a plan and experience. For that, don’t hesitate to look for an experienced mentor you trust who can help you move your idea forward.
Hi, I am Nikesh Mehta owner and writer of this site.
I’m an analytics professional and also love writing on finance and related industry. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business.