Credit card applications – a tool for your financial independence

Have you ever dreamed of owning your own business? I bet most of you did. I even bet some of you have tried to find a financial source to realize your idea. But in today's world of financing, where banks are trying to minimize their risks, it is very hard to receive a loan without putting against a house or any other large asset.

Of course there are other possible ways to get the money. You can try to lend it from a family member or a friend. However, not all of us are given such an opportunity. Moreover, certain financial institutions take time to issue a loan.

This is where a credit card might prove to be useful. Having a credit card with a large credit line might help you emerge your business. Besides that, you might want to apply for more than one card to increase your capital. But this is where it gets tricky. You must clearly understand and plan your actions when using business credit cards for this purpose. What's more important is that managing your debt afterwards is a whole different story.

In general, there are two ways how you can use your card to help yourself with the business. First of all, your available credit line on a card could be used to pay for the acquisition of office supplies and equipment. The key principle in this strategy is that the gain in revenues from increased productivity and sales can be experienced in less than a year. So, even at a 20 percent APR, six to nine months of holding the balance will cost between 10 to 15 percent.  

Another advantage of this approach is that you can pay off the debt using balance transfer with another card. This way, you can buy some time until enough revenue is generated. However, keep in mind that this should only be a temporary solution.

One other way to effectively use a credit card in a business environment is to charge costs of goods sold to the credit card. This way the bank can sometimes provide grace period during which no interest is paid. You then will have to match the day at which you will receive payments from the buyer with the due date of the grace period.

Apart from the above guidelines, there are many other tips that one can add in his arsenal. To keep up with your credit card obligations, you might want to keep your daily job. And as long as you are making big enough payments on your balance on time, financial institutions will be more than happy to increase your credit limit. Educate yourself on all the terms and conditions and take time to compare different kind of cards. A wise thing to do would be to plan in advance the sum that you will be able to repay monthly.

On the other hand, financing business operations can be extremely risky.  Even if at some time you will be able to cope with late payments, it may seriously damage your credit score, resulting in higher interest rates on future credit card applications. Many entrepreneurs found themselves chained by the credit obligations without any possibility to continue with expanding their business.  

To sum it up, credit cards are a great way of financing your business at the start as long as you keep track of your duties. There have been countless examples of people failing to repay their debt, who in the end had to declare bankruptcy. But on the other hand, even such a risky venture as Google wouldn't have been established without a credit card. And this is true, Sergey Brin and Larry Page (the founders of Google) used plastic as a mean of financial resource to start their company. Once again, credit cards can help you make money and get a better life but only as long as you are reasonable and realistic about your future plans.

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