The Easy Small Business Funding Option

Small business credit cards supply an simple way to subsidize a new or existing company. That's the procedure I used when launching my business, but I did make some miscalculations en route.

Since my business organization is mostly online, I did not require tons of start up money. I did not want to go to a bank or credit union to get start up money or open a business line of credit.

Online businesses don't need much start up cash since things like web hosting is very affordable. I could also establish my own blogs using WordPress, which is free. All I needed was a few thousand dollars for every little thing to start my business, including a small-scale place to work, business insurance, utilities, and web services.

Since I could get more than enough principal via small business credit cards. I decided that would be the best solution to cover all my start-up and ongoing my costs.

Small business credit cards ended up providing more than enough capital and it was uncomplicated to acquire. The first card I applied for and obtained was a US Bank Business Visa. There was an annual fee of $75 but I made a case for it with the points I'd earn. These points could be used for travel and other rewards like gift cards to major hotel chains. I found the Visa card controllable for the first few years as I was able to payoff the balance in full and prevent the 9 % interest on balances.

Over time however, I found myself using the card more than I would like to. I would validate the cost with the points I'd get. Once you start putting up interest of $ 5,000 or more the points never make up for the interest you pay month-to-month.

When it comes to business credit cards, get as low an interest rate as possible and stay away from rewards credit cards unless you are 100 % sure you can payoff the balance in full each month.

Another slip-up I made when I was starting my business was transferring balances from a higher rate credit card to my new small business credit card. This actually cost me money overall. Here's how:

When you transfer a balance not only is there a premium to accomplish it, that balance that you now have at 0 % or 1.9 % or whatever the promotional rate offer was, now changes into the balance that all forthcoming payments apply to first.

So, let's say you have a business bank card with an APR of 9 %, that has a $5,000 balance. And you have another card that you owe $3,000 on that has a 15 % yearly interest rate. You transfer the $3,000 balance to your business card during a "0 % for a year" promotion to save interest.

What the financial institutions don't go out of their way to explain (read small print) is that now every installment you make to your business credit card gets applied to that portion of your balance that is at the 0 % rate. And now that your balance is $8,000 you can't manage to pay the complete balance off each month.

That $5,000 you owe them keeps racking up interest at the regular 9 % APR. So fundamentally you're now paying down a 0 % balance month after month while the bulk of your balance is not being paid down at all. Do the calculations and you'll find that consequently you did not save much if any money, especially after you pay the "processing fee" for transferring the balance. The best way to save money when doing a balance transfer is to transfer a balance from a high interest card to a credit card that has no balance on it. That way all you pay out is the fee for transferring the balance. Financing a business with small business credit cards is easy and can provide enough capital for many types of business. Just make sure you shop for a good low interest cards, weigh the points and rewards options carefully and above all, look out when doing balance transfers!