How a Credit Card Can Help You Start a Business

How a Credit Card Can Help You Start a Business
Reading Time: 6 minutes(Last Updated On: August 22, 2021)

You’ve got yourself a great idea but can’t quite figure out how you’re going to finance the project and translate it into a real-live functioning business.

Business loans usually require your business to have been up and running for around a year or so, not to mention making some decent revenue. And getting investors on board for a startup can be pretty problematic with no revenue to show. If you’ve exhausted these options then don’t lose hope, there is an alternative option…

How can you start a business without a business loan?

Unless you’ve saved up a wad of cash, business credit cards are one great way to get your business plan into action. You may be thinking ‘that’s a recipe for disaster – I could fall into debt and be held accountable for all sorts of fees and interest rates’. But hold your horses! You may have been looking at the wrong credit card options. Credit cards are extremely versatile and are becoming the financing weapon of choice for a growing number of entrepreneurs, most notably millennials.

A recent U.S. Trust survey found that 16 percent of startup founders use credit cards to start their business, with nearly 40 percent of those being millennial business owners.

Google did it, so can you!

There are many examples of successful entrepreneurs who built empires through smart credit card spendings, take Google for example. Sergey Brin, one of the co-founders of Google told technology review; “When we decided to start a company and we actually committed to it by purchasing disks ourselves, with our own money-we spent about $15,000 on a terabyte [a million megabytes] of disks. We spread that across three credit cards”. Of course, some cards are better than others and come with numerous benefits including cash back, rewards and could even be interest-free for the first year.

When using credit cards to fund your business is right:

Using credit cards to fund your business may not be the right choice for everyone.

But if you need a relatively small amount (less than $50,000) and aren’t at the stage where you can qualify for a bank loan, then credit cards can offer a fast and flexible financing solution.

To get a good deal on a credit card you’ll also need to have a reasonably good credit score (the higher the better). Lenders won’t have your business credit score, business revenue or financials to go off, so they’ll need to have some solid proof that you’re a trustworthy person who’ll pay back what’s owed on time. In other words, they need to see you’ve got yourself a healthy personal credit score.

Benefits of using credit cards to finance your startup

There are plenty of benefits of using credit cards to finance your startup, here are just a few…

1. Easy and convenient financing

Credit card issuers don’t really care if you started your business an hour ago, they’ve solely got eyes on your credit score to determine whether or not you’re going to be a viable candidate. You could have your credit card in hand within a week of applying – no questions asked.

A credit card uses a revolving credit system a bit like a line of credit. In plain English, this means you can borrow as much as you like up to your credit limit, pay off the balance and then borrow again – and so the cycle continues. That is, so long as you make your payments on time. You won’t need to reapply each and every time you need more money like you would when you get a business loan.

Top tip: to make sure your credit score stays in check, be extremely diligent about sticking to your credit limit, and of course, making payments on time. Once you’re no longer in the startup phase you can move onto a more secure type of financing such as specific business credit cards.

2. Rewards, rewards, rewards

Business credit cards can provide some pretty worthwhile rewards, especially if you’re able to pay off your balance in full each month. A great benefit to business credit cards (as opposed to personal) is that they usually have higher credit limits. With all the purchases being made for a startup business you’ll be raking in rewards sooner than you know.

Top tip: if you wait until the due date on an invoice and then pay said invoice with a credit card, it could provide you with up to 60 days after purchase before you actually need to pay for it (30-day invoice period + 30-day credit card statement cycle).

3. Interest-free money for over a year

By selecting the right credit card, you could bag yourself interest-free money for over a year! Keep your eyes peeled for credit cards with 0 percent interest that have a year-long introductory period. These can be a great option for startups looking for a way to fund their dream business in the new year.

Top tip: make sure you build the payments to fit in with your budget so that you can pay them off before the introductory period is up.

4. No collateral

Yes, that’s right, no collateral is needed for a credit card. When you’re starting up a business, collateral can be hard to come by and is needed in certain types of business loans. This is one thing you won’t have to worry about when using credit cards to fund your business.

5. Act alone

If your business has multiple owners, you’ll need both owners to be reviewed if you were to take out a business loan. With a personal credit card, however, you can apply as a lone-wolf and get the funds without having to rely on someone else and use them for your business as you please.

Credit cards we recommend:

There are two main types of credit cards; personal and business. Personal, or consumer credit cards, usually offer longer 0% APR introductory periods making them better for brand spanking new businesses. They give them the opportunity to save up as much as they can.

Business credit cards, on the other hand, are better suited to established businesses, they usually offer higher credit lines and will help you to build up your business credit score.

Recommended Startup Credit Card:

The Chase Freedom® card offers the longest 0% APR period on the market going up to 15 months! This would be an ideal option for startups looking to get their foot in the door.

Chase Freedom®

Earn $150 Bonus

    • 0% Intro APR for 15 months from account opening on purchases and balance transfers, then a variable APR of 17.24-25.99%. Balance transfer fee is 3% of the amount transferred, $5 minimum
    • Earn a $150 Bonus after you spend $500 on purchases in your first 3 months from account opening
    • Earn 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate
    • Enjoy new 5% categories each quarter
    • Unlimited 1% cash back on all other purchases – it’s automatic
    • Cash Back rewards do not expire as long as your account is open and there is no minimum to redeem for cash back.
    • Free credit score, updated weekly with Credit Journey℠
  • No annual fee

Apply Now

Recommended Business Credit Card:

For those who have an established business already, in our opinion, the Chase Ink Business Unlimited℠ card is hands down one of the best intro APR cards on the market. You can get 0% APR for 12 months along with a whole host of cash back rewards on every purchase you make!

Ink Business Unlimited℠ Credit Card

Earn $500 bonus cash back

    • Earn $500 bonus cash back after you spend $3,000 on purchases in the first 3 months from account opening
    • Earn unlimited 1.5% cash back on every purchase made for your business
    • 0% introductory APR for 12 months on purchases and balance transfers
    • Employee cards at no additional cost
  • No Annual Fee

Apply Now

Advice for using a credit card to fund your business

  • Treat your credit card like you would a loan – avoid bounced payments by always paying on time. We advise scheduling your payments and setting up reminders.
  • Take advantage of balance transfers
  • Make sure you check the annual fees (if there are any) and that you can afford them
  • Know how to choose a business or a personal credit card
    • Personal credit card: startups
    • Business credit card: established business

Wishing you a very happy new year, may all of your business dreams come true!



Disclaimer: The information contained in this article is provided for informational purposes only, should not be construed as legal advice on any subject matter and should not be relied upon as such. Lending Express may receive compensation from Chase. The author accepts no responsibility for any consequences whatsoever arising from the use of such information.