work from home

You need to raise some quick money for your home business. But it’s not easy. Maybe you’ve already got enough personal debt for your house—which is also your business establishment—a car, student loans, and the rest. But it’s critically important to access that startup capital for supplies, inventory, marketing, and more. Undercapitalization is one of the main reasons for new businesses failure. Poor management is the other.

Credit cards might be the answer. Lots of new and even established home-based entrepreneurs tap this resource with great success. And it’s not surprising, given the advantages. First, they’re easy to obtain—certainly more so than commercial loans. Even people with modest credit histories can usually get more than one card. They’re also convenient, accepted by most merchants, and often provide bonuses or rewards. Expenses are also easier to track, thanks to those monthly statements that provide so much detail.

But the biggest attraction for credit-crunched businesspeople is those introductory offers that allow interest-free balance transfers and purchases for periods of up to one year or more!

None of this is to say that there are not also potential risks. The biggest is the easy credit trap that undisciplined people fall into. And the interest rates—once they kick in—are well above those of standard loans, and can mount exponentially. Another common peril stems from the ease with which one can mix business and personal charges. Business purchases are designed to generate money, while personal purchases are not. Mixing the two will create a nightmare of confusion—especially at tax time!

The Plan                                                                                                                              

For the undercapitalized startup entrepreneur, the object is to obtain fresh credit cards that offer lengthy interest-free introductory terms to meet necessary expenses. When the first card’s interest rates become effective, the balance might be transferred to another interest-free card. The goal is to pay off the cards with business income during the first year, or as soon as possible. By so doing, you can meet your expenses, avoid interest charges, and improve your credit worthiness for less costly business loans.

This is not, however, an open-ended process that can be continued indefinitely, because too many cards acquired and dropped will harm the individual’s credit rating. Instead, this strategy is a short-term measure for financially strapped entrepreneurs who have adequate collateral to pay off the loans if necessary, and who have reason to believe their business income will suffice to liquidate the expenses within a relatively short period of time.

Your next step is to find the right cards—something that’s not hard, given how much information is available through ads and on the Internet. Still, you should browse widely and selectively, giving special attention to those interest-free periods. But also important are the ultimate interest rates, service charges, special offers, late fees and other penalties.

Whatever card you choose should be dedicated strictly for business use. Many card companies offer specific business cards for this purpose, including some that are geared to major corporate users, and even some targeted to small entrepreneurs. Four major providers that offer such cards for small business include Discover, CitiBusiness, Advanta Platinum and American Express. And yes, there are many more! The availability of different credit card options changes practically daily, along with interest rates and terms. Use targeted Internet searches to review the latest credit card options.

This is not to say that your card must be a dedicated business card, however. You may also use cards that are designated for most consumers. The idea is to pick the cards that offer you the best terms, especially for the longest interest-free introductory period.

You might also wish to obtain more than one card so that you can transfer old balances onto to new, temporarily interest-free cards. But once again, be careful how often you do this! Above all, be mindful of when those introductory interest-free periods expire!

Where to Look

The easiest place to start is the Web where you can find virtually every card company on the planet! Easier than going to each individual company is going to more general sites that provide links to major card providers, as well as tips and advice columns on credit-related matters. A few examples include:

http://www.cardratings.com

http://www.creditcardguide.com

http://www.creditorweb.com

Another good source of advice pertaining to credit cards is the Federal Trade Commission’s site at http://www.ftc.gov/credit.

This is only a tip of the iceberg. Just Google in “credit cards” to enter a bottomless pit of options and informational portals. HBM

Christopher J. Bachler is a 20+-year veteran business writer and editor, based in Drexel H