| Personal credit cards for business start up. |
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isabellaj310
First Time Poster
Cash: $ 0.50
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Joined: 16 Nov 2011
Location: Bellevue, WA
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| Personal credit cards for business start up. |
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I have questions regarding how to wisely use credit cards to partially fund a business. I am close to getting my SBA loan approved, something that has taken many, many months due to the tight credit market. I am injecting into the business a large portion of my savings and since I am not securing the loan with much collateral (another reason it took so long to find a bank that would lend to me), the SBA loan amount is a little lighter than I had hoped. Another business owner advised me to apply to many of those 0% or low interest for 12 or 18 month credit card deals and put some of my business expenses on them, make sure to pay on time at least the minimum (otherwise the rate jumps), then when the 12 or 18 months is up, pay off the card or do a balance transfer to another card. I know it all sounds crazy but I’ve looked into it a bit and it seems doable as long as I do it correctly. At the least it will give me a 30 day float to pay some of my business expenses. Am I correct? I’ve heard many business launch partly or fully with the help of credit cards, some do well (Fedex, Google) and others fail miserably causing personal bankruptcy for the founders. So I understand the risk.
My fico score is 775. I have no personal debt and pay my two credit cards (one I’ve had over 20 years) on time and in full. Using credit cards for my business and carrying a balance would be a new thing for me. I’m very organized and confident that I would make my minimum (or more) payments on time. I’m estimating I would carry a balance of $20-30k (about 10-20% of my overall start up costs) for about a year period. I know that I should not max out my cards and keep a balance less than a third of the credit limit. So I’d probably need to get several cards that total a $100k credit limit, correct? I understand that each time I apply for a new card, my fico score will go down and that I shouldn’t apply to more than two at a time and then every three months if I need more. Correct? I have been waiting for my SBA loan to go through and also I’m just about to negotiate a business lease with my future landlord and since they will be checking my credit score as well, I haven’t yet applied for any new CCs as I want my fico score to be as high as possible for my banker and landlord. As soon as those take place, I plan to start opening new CC accounts and charging some of my start up expenses to free up my cash flow. I will not be taking any cash advances on my CCs as those transactions have higher interest rates.
Would you know how much of a hit my fico score will get with each new CC application? Also, as I will be personally guaranteeing my SBA loan (and they looked at my personal fico score when deciding if I was a good risk), I believe once my SBA loan is processed, my fico score will get hit by that as well as my amount of debt will increase (from $0 to $100k). Would you know by how much?
Also do I have to give proof of income? I have taken the past couple years off from my former six figure sales and marketing career to raise my young children and then have been working full time on my business launch (and since I haven’t opened my biz yet, I haven’t earned any income yet). So I don’t have much income to show for the past couple years but have the previous 10 years tax statements showing a good income.
If you know better than I how to use credit cards wisely for a business startup, can you please tell me if is this doable or not? Any tips? One thing to note before telling me how crazy I am for putting about 10-20% of my start up expenses on CCs is that my well researched 70 pg business plan has been scrutinized by dozens of banks, small business advisors, the SBA, others in my industry, CPAs etc. and nearly all have told me the concept and my plans are sound and they believe I’ll be successful. I have 20 years of business experience in the corporate world but running a small business will be new for me. Over the past year 1/2 I’ve attended 50+ entrepreneurial workshops and have been networking with dozens of others in my business and working with multiple advisors. I just wanted to make that clear before I get any responses saying I should be aware of the small business failure rate which I am.
Thanks so much!
Isabella
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Wed Nov 16, 2011 10:47 pm |
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coaster
Senior Advisor
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Location: Wisconsin
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I think it's wise to use a personal credit account for a new business start-up as the legal protections for consumer cards exceed by far the protections for business/commercial account cards. But on the other hand, once you get going, you're better off to keep the book-keeping separate for tax purposes and other reasons, so you'll need a card for the business. You might want to look into forming an LLC; it's very inexpensive and provides legal protections and separations of your personal assets from your business liabilities.
Applying for one card will have little effect on your FICO score. pretty much everything you need to know about credit scoring is here:
www.myfico.com
~Tim~
Eye Candy : Why Whimsy
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Thu Nov 17, 2011 8:55 am |
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coaster
Senior Advisor
Cash: $ 1357.20
Posts: 6683
Joined: 11 Oct 2005
Location: Wisconsin
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| mod's note |
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please do not double-post. your duplicate thread was removed
~Tim~
Eye Candy : Why Whimsy
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Thu Nov 17, 2011 8:56 am |
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danielfal
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Joined: 17 Nov 2011
Location: PA
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| Leveraging Credit Card |
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If you can leverage your credit cards to make more money than go for it. I am a strong believer in leveraging credit. What's the point in having a great credit score if your not going to use it to your advantage. So long as you are going to be responsible with it, just do it!!! Good Luck, let me know how it works out for you.
SOLICITATION REMOVED
Daniel Falcon is the president of the debtrelieflab, the debtrelieflab is a debt elimination & financial freedom education website. For more info visit the debtrelieflab @ www.debtrelieflab.com
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Thu Nov 17, 2011 7:29 pm |
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littleroc02us
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I could not differ more then what I'm hearing in this thread. SBA states that 50% of businesses fail within the first year. Imagine if your leveraging everything because you have no money and it fails, then what? All your left with is a broken heart and more debt. Not a good plan. Do you realize Bill gates started apple from his Dad's garage, Ford built his first automobile in his garage? IMO, you don't need debt to startup a company. Start small with no employees and grow slowly until your quite successfull with no debt... Did you realize that Chic-fil-a is nearly debt free and is #375 on the Forbes 500 companies?
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Thu Nov 17, 2011 7:58 pm |
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danielfal
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Hoping you can pay something off vs knowing you can is the key. For example, I use credit to purchase homes I "know" I'm getting below market value. Then once I renovate and sell for a profit, I pay off the credit I used to make the deal happen, & I get to keep the difference, hence I leverage credit to make money. I would caution anyone who is going to use credit for a business venture to be "sure" they will be making more money than the cost of the credit, otherwise it doesn't make sense.
Daniel Falcon is the president of the debtrelieflab, the debtrelieflab is a debt elimination & financial freedom education website. For more info visit the debtrelieflab @ www.debtrelieflab.com
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Thu Nov 17, 2011 8:49 pm |
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littleroc02us
Moderator
Cash: $ 204.95
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quote:
Originally posted by danielfal
Hoping you can pay something off vs knowing you can is the key. For example, I use credit to purchase homes I "know" I'm getting below market value. Then once I renovate and sell for a profit, I pay off the credit I used to make the deal happen, & I get to keep the difference, hence I leverage credit to make money. I would caution anyone who is going to use credit for a business venture to be "sure" they will be making more money than the cost of the credit, otherwise it doesn't make sense.
Interesting, how much are you required to put down on these homes and are they bank owned forclosures?
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Thu Nov 17, 2011 10:16 pm |
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hermans25
Member
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I just know that getting the loan approval is entirely depend upon the person who is applying for the loan, he made his problems and solution in his past days.
Bad Credit
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Fri Dec 02, 2011 7:53 am |
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