Hey guys Sean Mory here welcome back for another session of LenCred Credit Geek Q&A. Joined by once again Dustin Weitzell, answering your questions. The question comes from Rob from South Carolina. Rob asks, “How to finance a business with credit cards?” (sarcastically) I would have to sit back and think about that because I have never been asked that before. (laughter). Honestly I mean it is the number one way small business owners get startup business capital. It is not the way you envisioned; as a kid you envisioned going to the bank, parents went to go get the money they come out, they could write a check, and have cash to start their business. Anymore going to a bank they are going to try or attempt a SBA loan which approves about 0.0002% which leads into the fact that most people start their business on either personal credit cards or business credit cards. Obviously the key that we want to do is separate and have business credit cards so we are not ruining our personal credit with the debt we are trying to use to start, build, and grow. To that point, when I saw this question there was a couple things that I wrote down that I thought were really important that I want to make sure that I covered real quickly. First, debt separation, you need to know which cards report to your personal credit, which ones report to your business credit, and before that find out why that matters. If you do not know why that matters then it would not be important to you and you run the risk of ruining your personal credit and potentially your business.
The second thing I thought was you need to understand responsible spending habits. What reports where? How can I utilize this credit for cash if I need it? Should I try to get cash off these? Should I take a cash advance? Are there other ways I can get cash capital or other avenues? Knowing your product and knowing how to spend it responsibly and safely. Finally, the value behind the product itself. You can not go get the SBA lets say, you can not go get anything else, but you can go get $100,000 to $150,000 in a couple different business credit cards. Think about what that does for the credit establishment and building that corporate portfolio.
According to the SBA about 80% of small business fail in the first 5 years. 83% of those use their personal credit and do not separate their personal and business credit. It is not surprising that there are a lot of small business owners failing because they are not separating their personal and business credit. If you do this part right you can almost flip the odds and say as long as you know how do your business, if you can get this piece under control now you have a 90% to 100% chance you can be successful. 0% interest. Let’s talk about that for a minute. Even if you collateralize your house, you put your marriage,your family, and everything at risk. There is still not guarantee that you are going to get a good interest rate is going to between 4 and 7 percent typically. 0% give you an opportunity for 10-15 months to start building a paper trail, show the banks how you can use money, how your business uses money, and how you pay it off.You are not going to go get a $50,000 to $100,000 credit card from any one bank but with the right people who know how approach lenders at different banks you can do distribution of risk. Maybe if each card give you $25,000 thousand, you go to 4 banks you have $100,000. They say it is not always they most attractive but it is highly effective and you are not alone. Majority of business use small business credit cards to start their business. I hope that answers your question Rob from South Carolina. Thank you for joining us for another LenCred Credit Geeks Q&A. Please keep those questions coming.