Note: Funding your business on credit cards should only ever be considered as a temporary measure while other forms of funding are sought. It is a high-risk option, and if you don’t keep on top of it, the interest payments could quickly scupper your business and/or personal finances – whilst seriously damage your personal credit rating too. Always seek professional financial advice for before deciding on a credit card as a source of finance whether short or long term.
Credit cards have long been an entrepreneur’s secret weapon when all other forms of funding have failed to materialise (asset finance, business loans, business overdraft extensions). Many successful entrepreneurs have confessed – after the event – to getting started this way.
Explained
Up to the credit limit allowed on your card. This once might have been £5000-10,000, but credit card providers have considerably tightened their limits over the past couple of years, and a limit of between £300 and £500 is now typical for someone who has never had access to credit before. Obviously, if you have several credit cards, you could theoretically borrow up to the limit on each one.
- It will cost you dear if you don’t manage to pay off the full monthly amount owed each month, or if you are not able to find another 0% credit card to switch your balance to. Credit card providers have become increasingly wise to people constantly moving balances between cards in search of free credit and so may block your application. Credit cards typically charge between 16.9 and 19.9% APR interest rate, in some cases much more and if you do not repay the outstanding amount owed each month it will quickly mount up.
- Some business bank accounts which are available for start-ups, offer the option of a business credit card which also provides free credit if you pay off your outstanding balance each month.
