8/21/2007
Credit Cards as Financing Sources
by James Atkinson, Market Researcher Specialist, UALR Lead Center
Credit-card use is soaring among small businesses. Many entrepreneurs find it faster and easier to sign up for a credit card rather than apply for a bank loan. Others turn to plastic because they can’t qualify for bank loans. Visa USA reported that for the 12 months ended February 2007, card spending by small businesses to pay taxes and tax preparation increased 80 percent.
Business owners should bear in mind using credit cards as sources of working capital bypasses knowledgeable professionals who can provide feedback on sound borrowing practices. When you borrow funds from a banker, you are typically getting feedback from a loan officer who has extensive experience with small business lending.
Experts advise avoiding the use of credit cards for business financing, if at all possible. If you do use them, use them sparingly. Only charge relatively small amounts easily paid off within a year out of current cash flow. (Dale, Arden. “Small Firms Are Using Credit Cards for Capital.” The Wall Street Journal Online. 7 July 2007.)
Interested entrepreneurs can read more about wise credit card use at: http://www.startupjournal.com/columnists/enterprise/20070725-dale.html.
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