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Pros and Cons of Using Credit Cards to Finance Your Startup


If you are looking to finance your startup it is important that you know different financial support tools that you have at your fingertips. It is also important that you know how to use it properly. Today we will talk about credit cards and we will detail the pros and cons of using credit cards.

Credit cards are a resource that can benefit you with cash flow. Especially if you are in the initial stage of your venture .

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Well used, this financial product could be extremely useful for launching your startup. Here are the benefits and disadvantages of using it for your project:

Pros

 

There are cards that offer attractive benefits

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To take advantage of a credit card, our recommendation is that you have a well-established profile of your company. Especially as far as expenses are concerned.

Once this information is defined, you will be able to visualize multiple options and it will be easier to choose the best credit card for your business.

Keep in mind the optimization of resources. By this we mean cards with programs that allow you to save and maximize your capital .

Some provide special discounts, other cash returns. And if you travel on a recurring basis, it will be useful to have business credit cards. Those that within their benefits offer miles on flights or free hotel stays.

Additionally, another benefit of credit cards is their extended terms to pay for any purchase. If you need it, you can buy what you want and you will have a period of up to 60 days to settle. Take into account the terms and conditions.

There are also cards with an introductory interest period of 0 percent. With them you could have money without interest for up to one year. And if you get a specifically business card, you would access higher credit limits and good sign-up bonuses.

It is easier to apply for a credit card than a bank credit

Usually acquiring a personal or business credit card will be easy, since its process is moderate and its requirements are more accessible.

The impediments to approval will be limited, in most cases, to your personal credit score and credit history.

On the other hand, to obtain a commercial loan in a banking institution you must allow your company to be analyzed , to determine whether or not it is a candidate for the capital you are requesting.

You must present your business plan , as well as the financial landscape of your startup and other documents that justify and support your request.

Start-up financing can become complicated and become a battle in the second option. However, business and even personal credit cards can be the strategy you need to easily manage a better cash flow.

Many entrepreneurs use them for this purpose, until they become a recurring element and an important financing resource. Well employed can boost your business very positively.

Start your credit history

Start your credit history

When you first purchase this type of financial product, one of the main advantages you will get is to start your credit history. Even if you already have one or more cards, a new one can always help you increase your record.

But what is the use of having a credit history? Specifically, it will be useful as a cover letter if you need to use loans of greater volume and with more convenient interests, before banks or other financial institutions.

This record will reflect your behavior regarding money and will reveal whether or not you make proper use of the credits. It will show if you pay on time, as well as your agility and intelligence to manage a debt.

The issue with the history is that you demonstrate, according to facts, to be a responsible person who will return the loan.

With a credit card you will have a tool that supports the launch of your business. And at the same time you can build a positive profile, which serves as a report to get new capital.

That is, by increasing your credit score, you can be favored in applying for a subsequent commercial loan.

Cons

Rates may not be competitive

Some entrepreneurs consider it risky to use a credit card as the main source of financing. Why? It can present different inconveniences.

One of them is that you will not always be able to access the best rates in the market , since there are cards with above-average requirements.

The introductory rates on some can be up to 0% on purchases and transfers. However, qualify for such options will require a very good credit score and meet other standards.

Another point is to face a high annual percentage rate, which could affect you if you cover only the minimum payments or exceed the deadlines, which can happen. Also, if your business income does not flow regularly, you will have to deal with a more limited cash flow, while your debt continues to increase.

 

If you need it, approach Speaker Loan. Our company can help you with this process, minimizing the total amount to be paid and freezing the advance of interest. So, in the end you rescue the majority percentage of your capital.

It is recommended that you get rid of any debt quickly, looking for alternatives that represent the lowest possible cost.

You might be forced to offer a guarantee

In some cases you will need to provide a personal guarantee. This means that the responsibility, in case of any breach of payment linked to the credit card, will fall under your name and personal property.

It is best to review the fine print of your contract well to know if this type of guarantee is necessary and what implications it could have on your capital.

With a judgment against you for not covering a debt, the banking institution can add your bank account, real estate and other assets to the process. With this, you run the risk of losing one or more of your personal assets.

In addition, your personal score and bank record will be greatly reduced. This fact will remain as a mark on your credit report, affecting you if you later wish to obtain new capital for your company.

If your business does not take off and the chances of keeping up with your payments get complicated, the debt will be taken by you, not your company.

It will not matter if the modality of the card is personal or commercial, only what is established in the contract will be relevant. Under these conditions, the cost of accessing cash may become too high.

Now that you know some advantages and disadvantages of a credit card, analyze whether or not your business could benefit.

This financial resource can be a good option if you require flexibility and convenience. It could help you to have an adequate cash flow, which allows you to grow.

If you decide on an alternative, make the most of the pros according to your business profile; and be careful reading the contracts well. This way you will get the best credit card for your company.

Also, if at any time a debt consumes your capital and stops your growth, remember that Speaker Loan is here to support you. Get to know us, we can help you to settle that slope and get rid of multiplied interests.

The service we provide will allow you to solve your problem with more comfortable payments and at a much lower cost.

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