It is important to consider your financial capabilities when starting a business. Managing the operational costs can be hard without proper and sustained working capital. Financing your startup is vital for growth and expansion. Using credit cards as alternative financing options is one way to meet your expectations. But should you consider them? The guide below helps you understand how to make informed decisions.
The Pros of Credit Cards As Startup Capital
While you can consider term loans to finance your business, the process can be inconvenient for your startup. It is, however, different with credit cards as you access the funds and capital for business when you want it. It is easy and convenient to use credit cards for small businesses.
No Collateral Requirement
When applying for business, term loans, or lines of credit, providing collateral is a requirement you must meet. This is, however, different with credit cards, as you get unsecured funds necessary for starting your business. Credit cards create an avenue to use without straining your small business resources.
Favorable Interest Rates
With credit cards, you get appealing packages for interest rates and make it easy to fund your small business. Some lenders will give zero interest to startups or small businesses for a limited time. As a startup, the low-interest rates can serve your business as you settle in the market and grow.
Besides the easy application process, credit cards are readily available, making them suitable to fund your new business. You avoid moving around the market looking for the right financing option with credit cards.
The Cons of Credit Cards as Startup Capital
Potential Credit Score Damage
You should note that most startups are inherently risky. There is no surety of success despite the efforts put in. You gamble with personal and business credit scores by considering a credit card. Failure to meet the repayment agreement can damage your credit history and make it hard to seek financial help in the future.
With credit cards, you get an unsecured financial plan. For this reason, the lender limits the amount you can get and use for your startup needs. While you can borrow and utilize the funds, it is easy to remain short when handling business projects.
Choosing a credit card as a financing option can be beneficial. But should you finance your startup with credit cards? Visit DAL Commercial Capital today for professional guidance.