At Lendified, we speak with a lot of small business owners who use their personal credit cards for business purchases. This is understandable because of the convenience; however, the risks aren't worth the reward. Here are some problems we see entrepreneurs running into and why you should avoid them.
High interestrates - Credit cards typically have much higher rates than other forms of financing such as a bank loan or online business loan. This can spell trouble in the long run if your business relies too much on credit cards as you will quickly rack up very expensive debt. If you pay your credit card bills on time this will not be an issue, but depending on your circumstances that may be easier said than done.
- Missed or late payments - Businesses owners using credit cards to finance their business often end up paying late or missing a payment due to the complexity of keeping track of multiple cards. Usually, the cards are from different financial institutions and have different limits, payment dates and monthly minimums. This can make it tricky to pay on time and avoid hurting your credit.
- Low personal credit score - If something happens in your business and you aren't able to pay your credit card debt, you could ruin your personal credit. This would not only make it more difficult and expensive to get funding for your business, but it could affect your ability to make purchases for your family. Here are 5 tips to help you build a strong personal credit score and make sure that never happens.
- Low business credit score - Some small business owners use personal credit cards because their business credit score is low and they can't get a business credit card with a sufficient limit. Unfortunately, by using a personal card they continue to keep their business credit low and be stuck without financing options. We recommend you get a business credit card and use it in small increments to help build business credit.
If you are using your personal card for your business and want to avoid these issues, an online business loan from Lendified may be an option for you. Lendified offers fast and affordable loans to consolidate your credit card debt (and potentially other debt). To see if Lendified is a good fit for your business and receive a free instant quote click here.