Why Businesses Should
Never Borrow Using Credit Cards?
Act I: Grandmother Isn’t Always Right
One of Steve Martin’s earliest routines went something like this. “I’ll never forget what my grandmother taught me. She said ‘Always…,’ no wait, ‘Never…,’ no it was, ‘Always…take a litter bag in your car. It doesn’t take up much room and when it gets full you can just toss it out the window.’” That comes to mind when I hear people say things like, “Never…amass credit card debt.” If you can get better terms on a credit card than on a bank loan or a mortgage, than heck yeah you should amass credit card debt. If you borrow on a credit card at X% interest and make Y% with that money, where Y is greater than X, then let’s do that all day long!
And guess what. Ever since the current economic outlook improved and the market eased up, banks have been looking at various ways to increase their earnings. Banks and federal associations are not quite as anal in their approach to risk, and want to find ways to generate some more business. The result is that some avenues of acquiring financing are now easier than ever.
One of the easiest, and, if done correctly, least expensive ways to get financing is via credit cards. I know this flies in the face of everything we’ve ever been told. Sure, many credit card companies still charge near-usurious interest rates, and most of us would be hard-pressed to make good use of capital at 20% and higher interest. But guess what. There are thousands of credit card offers at favorable rates for small businesses.
In fact, when the office of the Comptroller of the Currency released their 19th annual “Survey of Credit Underwriting Practices” during the period ending June 30, 2013, they reported that among all loan products, credit cards had the greatest easing of underwriting standards.
Act II: Sometimes Things Too Good to Be True Are, in Fact, True
You’ve gotten another no interest credit card offer in the mail. “Sure,” you sardonically think. “Add in those hidden fees and crazy post-promotional-period interest rates and I’ll be giving them my house, car and boat in 12 months.”
But many of these offers are bonafide, great deals! And if you can benefit from access to financing, you should jump on these.
“But how does that even make sense for the bank?” you might say. Excellent question. The thing is, if banks don’t lend money, they don’t make money. Banks themselves can borrow at historic lows (they borrow at near zero percent from the Federal Reserve!), so they have access to lots of capital. Add this to the notion that banks have a lot of ways to make money, and you can start to see how this makes sense.
Banks want to have a relationship with you – and if they already have a relationship with you, they want to surround you with services that will keep you from going to the competition. So, providing you with great credit card offers costs them very little, and allows them to start shoving other promotions into your mailbox.
Moreover, although many zero percent interest terms appear to be capped, I am here to tell you unequivocally that if you know what you’re doing, that’s just not the case. Banks hope you’re not savvy enough to realize that if you know who to talk to and what to say, you can keep rolling over zero interest introductory offers for the foreseeable future. Business owners are the “crème de la crème” in the banking community and can take advantage of special promotional codes and techniques that aren’t available to the regular borrower.
Act III: Get Some
Here are some things you can do to take advantage of low- and zero-interest credit cards.
- If you don’t have a business entity, get one. It’s easy to acquire and anyone can do it. You want to be smart about it, as some entities are far more lendable than others. For example, having Marketing/Advertising or Business Management in your business name, indicates you are (on average) a better risk than someone with Real Estate in their title. There are also important nuances in terms of what type of entity you set up.
- Know how to elucidate what your business does. If you’re stuttering, stammering or seem unsure of your business, don’t expect the bank to lend to you.
- If you have personal credit issues, get them cleaned up. There are many agencies, such as Kaydem Credit Help, that can assist you. (PS: Join Credit Card Builders & Kaydem credit repair is included. Watch this webinar today on how to get started. Call Marsha Yearian, 512.270-0957, if you have questions or concerns about the effectiveness of this program.)
- Search the web for credit card offers for businesses.
- Do your homework to sort through various offers, identifying any hidden fees.
- Explore existing relationships and see what they’re willing to do. I once went to my bank to open up a checking account and was offered a $17,000 credit card for being a loyal customer.
- Consider requesting line increases or exploring promotional rates for those cards that you already have. Many banks won’t hesitate to reward good customers with increased credit lines.
- If you’re looking for low interest business credit lines, visit Credit Card Builders.
Article written by Ari Page, Business Funding Expert
Published to MonteFeSelfStorage.com with permission through Credit Card Builders Affiliate program
Ari Page is CEO of Credit Card Builders, a company that helps small businesses raise unsecured, zero percent business financing. A voracious reader, Ari constantly scours the market for new techniques and strategies to identify creative and profitable borrowing strategies. Because of his unique insight and approach, Credit Card Builders has raised millions in funding for small businesses nationwide, with the average amount ranging from between $50,000 and $250,000.
This is a program in which Marsha Yearian and Alberto Bernardoni have personally participated. It has been very beneficial in restoring and building both personal and business credit. Credit Card Builders works!
Marsha Yearian, CEO of Monte Fe Investments, Management & Consulting is an affiliate of Credit Card Builders. Affiliates may earn commissions from Credit Card Builder sales.