Jun 19, 2009

Avoid Funding Your Business With Credit Cards


An article posted in today's New York Times reported that, as of April, 59 percent of America's small firms relied on credit cards to help finance their day-to-day operations, up from 44 percent at the end of last year. Because credit card terms have worsened recently, it makes sense to find other forms of financing than credit cards. 

One innovative new company that provides financing for small businesses, OnDeck Capital, offers loans up to $100,000 based on a business's cash flow and/or credit card transactions. OnDeck collects the loan repayments by automatically debiting your bank account for a small amount (typically $100) each day, assuring you won't get behind on loan payments.

OnDeck's small loans are easier to qualify for than a traditional loan and more quickly processed, but interest rates aren't low -- usually 18% to 20% -- and you still must have sufficient cash flow to repay them. One note of caution: OnDeck requires that business owners sign a personal guarantee, meaning your house, savings, and other assets are at risk if your business fails while you still owe them money and you don't have the cash to pay it. But definitely worth a look -- they're at www.ondeckcapital.com.

To learn more about raising capital for your business, see Nolo's Business Financing, Loans & Capital area.