Open company or business using credit card?
- The costs of starting or creating a business of your own
- Types of credit cards available in Brazil
- The Advantages of Starting a Business Using Credit Cards
- The Disadvantages of Starting a Business and Starting a Business Using Credit Cards
- Is it possible to use a credit card to start a business?
Open company or business using credit card?
With no cash or loans, no commercial financing, no alternative business loans, you may never bring your business to life. So the real questions we had from several readers here at Grana Smart is, ” Is it possible to create a business using a credit card ?”
There are many conventional and alternative routes to finance your business, but most of them have major drawbacks:
Commercial Loan. Having to apply for a small business loan or personal loan to start a business is one of the most common methods among entrepreneurs due to their availability and simplicity to be requested.
However, being stuck at a high interest rate can be stressful, and not everyone has the potential to be approved by a private lender.
Investment Angel. The angel investment relies on finding a rich or very rich investor who is willing to own a stake in your company in exchange for money.
An Angel Investor is generally apt enough to give you the money needed to get things started, on the other hand, you will lose a part of your stake in your company, that is, you will have a partner – so you will lose some of your decision-making power .
Venture Capital. Venture capitalists or venture capitalists function in the same way as angels. You can get a massive cash injection, but you lose part of the control of the company or business organization.
In addition, you will need to go all the way to launch your business, stabilize and expect to be one of the chosen candidates in a selection.
Crowdfunding. This is another form of financing for companies . It is an option that does not require the loss of your autonomy, however, the pursuit of crowdfunding funding is far from a guarantee of success, and you still need some way to partially compensate your investors and sponsors.
So what if you can take on all the business costs with your own money and through your private means or even with friends and family – perfect, otherwise, use credit cards to cover the difference between your own savings and actual expenses to start.
The costs of starting or creating a business of your own
Let’s start by looking at the costs of starting a small business . The average cost of a startup is between R $ 50 and R $ 100,000, but this amount varies uncontrollably, based on many of the following costs:
- You’ll need somewhere to house the store, whether it’s a formal retail location or an office building to accommodate your products and your employees. You also need to have several hundred or thousands of reais with the rent (unless you start a company in your own home).
- Ranging from a personal laptop to complete manufacturing equipment, the costs to start a business vary enormously.
- Business start-up, licensing and fees. Licensing, opening, taxes and accountant usually cost many reals, but may cost more for certain types of segments.
- Working alone can be inexpensive, but if you have someone on the payroll, you will need to consider those costs.
- Marketing and advertising. Although some mechanisms for using techniques with the best means for marketing are free, you should still have a dedicated budget for local and national marketing and advertising. Start with little money and increase as interest grows.
- Starting stock and raw materials. If you are selling physical products, you should have some stock to get you started. Establishing the quantity of products will surely demand many real, if not hundreds to several thousand dollars.
- Do not forget the first few months of utility costs, including water, electricity and even the Internet.
- It is almost impossible to start a business without at least a few hours of consulting with accountants, lawyers and other professionals to adjust your business laws and regulations.
- Hypothetically, you should be able to reduce these collective costs enough to fit directly within the limits of your credit card, assuming at least a few thousand reais per credit card despite being risky.
Types of credit cards available in Brazil
We also need to consider the types of credit cards available.
There are different credit cards based on a few factors:
- Types of Issuers.
- Your credit score on Serasa and SPC.
- If you are requesting them in your own name or on behalf of a company.
- The kind of rewards and benefits they offer.
- Its characteristics and limits released.
Your choice of credit card can make a big difference in terms of how much your limit will be, what types of things you can afford to buy, and what deadlines you will be responsible to repay.
Before venturing out, you should do a thorough review of the best available credit cards and decide which ones are best for you to use with your company.
The Advantages of Starting a Business Using Credit Cards
So what are the advantages of following a template using a credit card to start a business or business ?
- Speed and simplicity. One of the biggest advantages of credit cards is how fast they work, from start to finish. If your credit score is relatively above average, that is, good, you can get approved on credit cards immediately or within a few days to a few weeks. You will have at least a few thousand free dollars to be able to spend while using them to start building your own business. Transactions generally do not need to undergo a verification and approval process. You’ll get what you need almost immediately and you’ll be able to pay for the expenses you find convenient.
- Credit cards are also extremely flexible, capable of being used for almost any purchase you can imagine. All your purchases are kept in a single record, so you can keep your company’s finances organized, and if you need to change things (by switching to a card with a lower interest rate or a higher limit), you can. There are dozens of different providers of credit cards and virtually limitless card options. So it should not take long to find a perfect card for your company.
- Talking of perfect settings, credit cards are highly achievable. In addition, the process of finding an angel investor or a venture capitalist who is interested in your project can be long and complex. Getting a loan for business also has significant hurdles that not everyone can overcome. With credit cards, even people have restrictions or low scores, they can be approved on credit cards without consultation with relative ease, making it clear that you are willing to make some sacrifices (like having a higher interest rate).
- Credit cards also offer greater autonomy. Few credit cards have specific limits on what you can buy, instead they have general limits to the amount in reais that you can purchase. When using a credit card, you do not have to go through any kind of credit analysis. That means you have control at all times.
The Disadvantages of Starting a Business and Starting a Business Using Credit Cards
Of course, there are some drawbacks to consider also when using a business card to open a business:
- Personal responsibility. You usually can not get a business credit card if your business is not established. It may be easier to use personal credit cards or touch your personal credit to get a line of credit. This means that if your business is unsuccessful, or if you are not generating enough revenue, you can be personally held accountable for everything you bought and owed. If you do not have an emergency fund, this can devastate your financial life.
- Interest rate of the cards. Credit cards also come with much higher interest rates, sometimes larger than a commercial loan or other lines of financing and lending money. Although rates vary, and you can negotiate lower rates, you can expect to pay the average rate of 10% to 15%, which is especially expensive if you plan to pay thousands of dollars with furniture, utensils and equipment that can not be paid for long months or years.
- Your credit score. You can damage your name and your credit score. This is especially true if you do not have the resources to pay off on time. And it will make managing your personal finances even more difficult (and you face all the challenges that usually a new business owner faces). If you are unable to pay your credit cards at maturity, or if you delay payments, in addition to multiplying the debt, you will still have the CPF enrolled in Serasa, SPC and SCPC Boa Vista.
- Long-term payment. Credit cards do not have much room for growth for your company or business in the long run. You can not continue to take on more and more credit cards when you need to buy more products, raw materials or items. Nor take over when the demands of your business begin to expand beyond normal. You will certainly need some other financial system to accommodate this growth. It is worth mentioning that interest payments should eat a very large portion of your monthly income. For this reason, it is usually best to have a viable long-term solution from the start of the business. That is, unless you plan to use credit cards only as a temporary measure.
Is it possible to use a credit card to start a business?
So, is it possible to start a business or start a business using only credit cards? The technical answer is yes, and many entrepreneurs have done it or are trying to do it.
Using a card or more than one to start a business does not mean it will increase personal debt wildly or if form of financing is the right choice for you.
However, credit cards as the primary mode of financing are the best alternatives for people who do not like other financing options.
In general, small business owners who are willing to take a significant personal risk, use the credit card as a means of financing to advance the business of their companies.
For people who are opening low cost startups who want to get things done as fast as possible.
For all other entrepreneurs who do not have enough money to open and start their business, credit cards are the best emergency option to complement your start-up expenses and financing.
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