Anyone who’s been paying even the slightest attention to the media in the last couple of years will know that it’s harder than ever for small, and start up, businesses to get funding from the banks.
That doesn’t mean, however, that if you’ve got a good idea and you think you can make something of it that you simply have to sit around until the economic climate clears up and banks start lending more liberally again. A lot can be done for someone who is determined and organised using nothing more than a good credit card. You do, however, have to be careful about which credit card, Santander, for example, have a good deal at the moment.
The key with credit cards is to be clever with them. If you struggle to keep on top of debt, it’s not a good way to borrow and especially not for a business purpose. But if you’re self-disciplined they can be a useful tool to get your business going.
The first thing to do is to find a credit card with a good, low, introductory rate, preferably zero. These rates traditionally last for six months to a year and are the cheapest way of borrowing money in any format (although, they’re often only suitable for relatively small amounts).
Then the process is simple – pay off what you can whilst the interest rate is zero, and as you’re reaching the end of this holiday, switch providers to another card that has zero balance transfers and purchases. In theory, you can keep doing this for as long as you need to pay the card off; however, in practise, it doesn’t always work as smoothly, which is why you need to borrow carefully and stick to relatively small amounts. If you do happen to switch onto a credit card with an interest rate you’ll want to start paying down the debt as soon as possible. At the point where you’re paying the full APR on a credit card, they stop being a good way of borrowing and suddenly get very expensive. If there’s no way you can pay off the card, or swap to another, then it’s worth looking at longer-term forms of debt, as they’re usually cheaper and the interest won’t mount up quite so quickly.
In conclusion, if your business needs only small expenses to start then credit cards can be a good way of borrowing this money. For larger sums, the best thing to do is spend a few extra days on your business plan and projected income, maybe hire an independent financial adviser, but most importantly go and see your bank manager.