Finding financing for your small business can be a horrific challenge. Without significant cash flow or assets, banks and investors are usually not interested in giving you money. Credit cards can provide a quick and easy way to purchase the things you need to grow your business in Calgary.

There are several advantages to using credit cards when starting out with your small business. They are easily obtained, in most cases, and unless they charge an annual fee there is no cost just to have the credit lines available to you. At critical times, this can be a lifesaver for your business.

Credit cards should always be viewed as loans, with very unusual terms. A conventional loan will give you a set interest rate and amount that you can borrow, and a regular payment that will pay off the balance in a matter of years. Credit cards do not usually have fixed interest rates, nor do they have set payment schedules.

If you only make minimum payments on a credit card balance, the monthly payment typically pays for 3% of the balance plus any interest accrued since the last statement. While this means it can take decades to pay off a high balance, your payments are significantly lower than those of a conventional loan for the same amount. Over the years, this will make the things you buy on your business credit card more expensive, but at a much lower impact to your cash flow in the short term.

Credit cards do not accrue interest if you pay your balance in full with each statement. This means that for short term loans, such as those that you can repay in two to three weeks, a credit card will let you borrow money at no interest. Once you are carrying a balance on a card, that advantage is lost. You can use a credit card for regular purchases that you know you will pay off at the end of the month, perhaps earning rewards points or miles. Using a credit card instead of your debit card also means that if your card number is stolen, funds will not be immediately removed from your checking account.

Due to the particular nature of credit cards, you should not use them for advertising, speculative inventory, or payroll. They can be useful in the purchase of equipment or assets that will help you generate income, but are hard to otherwise finance. Credit cards can help you take advantage of short-term large purchases that you know will provide a return on the investment in a few weeks.

The danger in using credit cards for your small business is that they can quickly become expensive if too large a balance is carried. For each card on which you carry a balance, a new monthly expense is created. If not aggressively paid off in the near future, credit cards can add thousands of dollars each year to your business expenses.

If you manage your accounts carefully, using credit cards for your small business can assist you in achieving your goals faster. Used unwisely, they can significantly hamper your growth in the future.

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