Credit cards are a means of payment like cash or checks. You can use it to make payments for purchases, bills and even investments (mutual funds) made using your credit card. While credit cards are of many types, this article is on using credit card to fund your business.
If you want to use a credit cards to fund your business you can do so by paying some upfront fees. Now you need to decide between using 0% APR credit cards and cash advance on credit cards.
Can I Use Credit Cards to Fund Business? this is a question almost every business owner asks themselves when starting out in business. The answer to this question is yes, however there are usually certain conditions that have to be met before being able to successfully use credit cards to fund business.
There are multiple benefits of using credit card to fund your business. First, you can make transactions using your credit card and secondly, you can get an instant loan (credit limit) immediately if your business needs one. For instance, you need to buy raw materials for your product; however the supplier will only deliver after 60 days. In such a situation if you have access credit card you may pay in advance so that they supply the material when you need it.
Low Interest Rate: Another reason for using credit card is that when you are funding your business the interest rates are usually low when compared to loans. Loans can have interest rates of up to 14% but most credit cards charge between 10%-15% APR (Annual Percentage Rate). This can be a great way to fund your business especially if you do not want to go through the hectic process of getting a loan approved.
Managing Cash Flow When you are starting out your business: It is always advisable to keep track of cash flow. You need money to start with, so if credit card can help you get that money immediately it can be a great way to fund your business. In fact, you may even repay the money back in installments and hence, fund your business in a phased and controlled manner.
Repayment: When you use your credit cards to fund your business, the payments are made only when you have all the money. In fact, there may be a credit limit for your business and you can pay back as and For instance, if there is a need for an immediate cash injection in your business due to unforeseen circumstances, you can always opt for this option provided you have good credit history and you are not turned down.
It is important to compare the various credit cards available in the market before you apply for one so that you get one with the most competitive interest rates and also flexible repayment period. At times, you may be able to negotiate better terms by approaching your bank or credit card issuer directly since they want your business.
Nowadays, a number of options are available for making the repayment. You can set up a monthly installment plan or else you can pay it online easily from your home without any hassle. For those who prefer paying in cash or checks, there is an option to remit payment through electronic bank transfers as well.
In case you have unpaid bills on your credit card there may be some charges levied. Hence it is advised not to use up all the money in one go, you can always keep some for your business needs.
There are also some disadvantages of credit card funding your business; however they are negligible in comparison to the advantage. If you cannot repay the money due on your credit card, then it will have a negative impact on your credit history and it may be difficult to get a loan from banks or any other financial institutions in the future.
In case you have irregular business income, it may be difficult to make the repayment. If your business is regular and you can apply for a credit card with good credit history then you should go ahead and use the option of credit card funding for your business. In this way, it will help expand your business since you will get immediate access to funds.
Finally, if you are thinking of expanding your business through credit cards, remember that more money does not necessarily mean success. You need to have a sound business plan which you can execute successfully and make your business sustainable.
All Day Slimming Tea