Views On “Small Business Credit Cards Now Carry Sizeable Risk”
I run a small online business marketplace Biz2Credit.com that connects entrepreneurs with possible lenders money and personal finance financing options. We’ve seen that many small businesses use credit cards to finance their business startup or expansion and many small businesses disqualify for traditional bank financing for this reason.
A recent article in the LA Times reported that new business owners that use credit cards to finance their expansion plans increase their failure rate substantially. According to the article, for every $1,000 in unpaid credit card debt, a start-up business increases the probability that it will close by 2.2%.
And of course using personal credit cards to foot business expenses is a good way to destroy your own credit. High credit card balances increase an entrepreneur’s debt to income ratio and decrease the likelihood (in a lender’s eyes) that loan will be repaid. The good news is that businesses can talk to their bank and roll high credit card and balances into new loans – not just to reissue business credit cards. Biz2Credit.com has resources to help small business owners find lending options.
