Tuesday, January 14, 2014

Should You Get Cash from Credit Cards to Start a Business From Home?

Credit cards are a ready source of funds for most adults nowadays. For people who are interested in starting a business, it may be tempting to just take the start up costs from their card. Is this really a financially sound option?

Credit card companies usually charge high rates of interest. People sometimes end up paying for a set of equipment for years when they have interest added to that purchase. Credit cards might be a ready source of cash and they can be good to have in a crunch but they should never be a primary source of capital for a business.

First of all, most businesses generate unexpected expenses. That means that you may plan to only use a set amount to get your business off the ground but usually, the real amount of money that you need works out to far more than that which you planned.

People usually estimate that their business will start turning a profit fairly quickly and they will be able to make the monthly payments on the credit card using the money that they get from their business. However things don’t often work out that way.

Credit card
Credit card-via Wikimedia, CCA 3.0
Quite a few people find that they use their credit cards, put all the effort they can into their business and still don’t meet their goals in the time they planned. In the meantime, the money that they spent is attracting interest that piles on more along with late payment fees and other charges every month.

It is better to get money from somewhere else. In fact, if you can delay starting your business for about seven months, and concentrate on getting an additional job to earn money to star the business, this will work out better for you. Seven months spent earning extra cash is better than seven months struggling to make ends meet in your business and worrying about where to get the funds you need.

If you run into any emergencies after you have funded your business with the money from that job, then you might consider using your credit card. However if you use your credit card as your primary source of income, you won’t have anything to run to when you need emergency funds.

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