Financing is often the biggest obstacle faced by people
planning a home business. Initial expenses like setting up
a home office, buying equipment and advertising all require
money -- which, for the typical small start-up, can be in
limited supply.

The Small Business Administration reports that most home
businesses are capitalized with an investment of $5,000 or
less. While banks are willing to lend great sums of money
for major ventures with bang-up business plans, it is
difficult for the typical solo entrepreneur to obtain a
business loan.

Although banks have no means of reporting how many micro
businesses are financed with personal assets and credit,
the SBA recognizes that for many, this is the case. The only
statistic I was able to find on this issue came from the
National Foundation of Women Business Owners, who reported
that more than half the members they surveyed in 1992 used
credit cards to finance their ventures.

While I don't recommend plastic as your first choice in
obtaining business financing, there are times when it can
make sense in the short-term.

The reasons are many:

==>No long application process - There is nothing easier
than using an existing card or taking a lender up on an
offer for a new card

==>Protection against theft and defective merchandise- If
your card is lost or stolen, the most you'll ever owe is
$50, even if you don't report losing the card. If
merchandise you receive turns out to be defective, you
may be legally entitled to refuse to pay. (The item
must cost more than $50 and the purchase must be made
within 100 miles of your mailing address.)

==>The ability to use the "float" - Depending upon when you
make your purchases, you could have up to 45 days to
pay.

==> Added value - Some cards offer programs that give you
points towards merchandise, travel or automobiles. Some
even offer cash rebates. Others include extras like
extended warranties on purchases, collision insurance
on rentals and travel insurance on airline tickets.

Note: You can quickly accrue points by charging items
you usually purchase on a cash basis (like gasoline).
Just be sure to pay these charges in full each month.

==> Convenience - With a credit card, you can make almost
any purchase quickly, without offering payment up
front. This is especially true when making travel
arrangements. For instance, when a guest indicates he
or she will be paying in cash, hotels typically
require payment in advance for the entire stay; while
nothing is taken out of pocket when guaranteeing with
a credit card -- you are not liable for the charges
until the bill arrives.

Note: When making a reservation at a hotel, be sure to
use an actual credit card for a guarantee instead of an
ATM card. Your bank will treat the charge as cash out
of your account, which could deplete your resources
pretty quickly.

==> Record Keeping Ease -- Dedicating one card for your
business makes it a snap to track your expenses.

Of course, there are dangers to using credit cards
indiscriminately. Aside from the high interest rates and
annual fees, many credit card companies are getting
creative with extra consumer fees.

Consumers must also be aware of the big picture: Too many
lines of credit -- even empty ones -- can be just as
harmful to your credit rating as owing too much.

Make sure all payments are made on time, especially if
you're using a card with a low teaser rate. One late
payment could trigger a rate increase of 10% or more.

The Internet has some excellent sources to help you better
manage your personal credit:

Credit Information Center: Information on how to repair
credit, choose the best credit cards, decode credit reports
and more.

<http://www.creditinfocenter.com>

Free Credit Analyzer: Calculate your credit-worthiness
without submitting inquiries to a credit bureau.

<http://www.freecreditanalyzer.com>

The Fannie Mae Foundation: This organization's mission is
to help make home ownership affordable to as many Americans
as possible -- they do an excellent job of educating
consumers on how to make their credit history palatable to
a mortgage lender. You can order their free Credit Guide
online. It is a "must-read," even if you already own your
home:

<http://www.homebuyingguide.org/credit_e.html>

When used responsibly, your credit cards can be a tool to
help you stretch the dollars you have on hand, and keep
your business operating smoothly.

This article may be reprinted with permission by including
the following resource box:
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Donna Schwartz Mills is the Editor/Webmaster of the
ParentPreneur Club <http://www.parentpreneurclub.com>,
"where those who are doing the most important job of all
hang their hats." She can be reached at
mailto:donna@parentpreneurclub.com.
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