By Matt Meuli
Undoubtedly, many budding entrepreneurs have developed winning business concepts over the years, but have ultimately given up due to a perceived lack of funding.
This may have even happened to you.
Indeed, banks are primarily interested in lending to established companies. Dipping into personal savings or using home equity credit is much too high-risk for most. Some ambitious entrepreneurs are turning to venture capital financing, but this only works for businesses with extremely high-growth potential.
But there are other options. One little-known option is to use multiple business credit cards with zero-percent interest rates over an extended period as a source of investment capital. Known as credit card stacking, such financing can be a highly effective—yet underutilized—way to get the money needed to bring your business idea to market.
You might be skeptical about using credit cards for business funding. Not only do they typically come with high interest rates, but even applying for credit can negatively affect your personal credit score.
However, credit card stacking uses business credit cards, not personal ones. By obtaining business cards that offer extended zero-percent interest rates, you’re basically getting an interest-free line of credit without putting up any collateral. And since these are business credit cards, they have no effect on your personal credit score. Unlike with personal credit cards, you can also use all of the available credit without being penalized by a decrease in your credit score, so long as you make at least minimum payments.
It’s not unusual for small business owners to qualify for $30,000 to $150,000 worth of business credit within 30 days (or less). And after a year or more, it’s even possible to access up to $250,000 in unsecured capital.
Credit card stacking is not for everyone. Most lenders only offer such credit to those with excellent personal credit scores (usually 720 or higher). The stronger your credit, the higher the credit limits and the longer the access to zero-percent financing. And to ensure your personal credit score isn’t affected, you should deal only with lenders that don’t report business credit activity on your personal credit reports. Some creditors do report your business activity to personal agencies, so you have to do your homework to find the ones that don’t.
With so many credit cards out there, finding those that offer these favorable terms can be tedious. Moreover, if you were to apply for several different business credit cards in a short amount of time, this would likely affect your personal credit.
While it’s possible to obtain startup financing on your own using credit card stacking, you’ll likely find more options and higher credit limits by working with a commercial provider that specializes in this type of financing. Sometimes these providers won’t use the term credit card stacking, and instead will advertise for unsecured business credit lines, but it’s the same thing.
Not only can these providers quickly find the business cards that you’re most likely to qualify for with the best interest rates, but they know how to strategically apply for multiple cards simultaneously, without affecting your personal credit. Because these companies specialize in business credit card applications, their credit analysts already have relationships with many of the leading financial institutions and can get you higher credit limits, even if the first offer back from a particular credit card company is low.
Such insider knowledge means they can directly negotiate with the banks’ underwriting departments to prove that your business concept is worth funding. When you go at it alone, business credit applications are often systematically denied, before someone can even review them.
Because qualifying your business for such financing may require other steps, you should consult with us as your Family Business Lawyer® to get the process started. We can ensure all of your legal bases are covered and advise you on the best ways to manage this source of funding.
If you’re looking to make your startup dreams a reality, but can’t find the funding, you should seriously consider credit card stacking. To learn more about this unique financing method, sign up to view our video, or simply contact us as your Family Business Lawyer® today and we’ll walk you through the process.
We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule. Or, schedule online.