White Mountain Partners Discusses If You Should Put Your Business’s Tech Product Purchases on Your Credit Card
According to the Small Business Administration, even a decade after the Great Recession, 46 percent of small businesses are resorting to personal credit card utilization in order to fund their small business. Also, 27 percent of small business owners are still unable to get the credit they need to grow their enterprise. This has led to the sad situation that many small businesses are considering funding their technology purchases on a credit card.
At White Mountain Partners, a firm that provides solutions for small business owners who are struggling with debt, we field a lot of calls about how to reduce credit card debt. The following provides some ideas on how to fund one’s business technology purchases without resorting to carrying a balance on a credit card.
Why Carrying Balances on a Credit Card is Bad
According to The Balance, the current average interest rate on consumer credit cards is just under 22 percent. The average rate for a business credit card is just under 20 percent. Those rates are up considerably from the height of the Great Recession when they were around 13 percent. At such high-interest rates, business owners are finding it tough to pay off the balance, incurring more high-interest charges each month. This eats away at the cash flow of a small business.
In fact, Nerdwallet suggests that small businesses endeavor to get out of debt in the first year of their startup period. Otherwise, they suggest that the business will have a higher likelihood of eventually filing for bankruptcy.
When It is Okay to Buy Technology With a Credit Card
If you can use the plastic to buy the technology item and then pay off the balance at the end of the billing period, then you have not incurred any fees, so you will not be at any loss for placing the purchase on the card. In fact, if you have a credit card that provides rewards or cashback on purchases, then you will have saved money. Also, the purchase and prompt payment will improve your credit score. This is really the only safe situation when you should use your credit card to purchase technology for your business.
Enter Microloans
Since banks have been very stingy, even to this day, since the Great Recession, in lending to small businesses, the Small Business Administration and micro-lenders have stepped in to fill the void. A microloan is typically a loan for less than $50,000 that is designed to help small businesses start-up or purchase needed items for expansion.
The SBA Microloan Program
The U.S. Small Business Administration’s microloan program provides loans to small businesses for up to $50,000. The average loan amount is $13,000. You need to have both collaterals and make a personal guarantee of repayment. The maximum loan term is six years and the average interest rate is 8 to 12 percent. The SBA provides the loan proceeds to community lenders who are non-profits that often assist the small business owners with training as well.
Other Micro-Lenders
Balance Careers has a list of micro-lenders that supply loans to disadvantaged small business owners. Minimally, you will need to show a history of financial stability and good choices in order to qualify for the loans.
At White Mountain Partners, we have solutions for small business owners who need to grow their businesses and solutions for small businesses that are already heavily in credit card debt. Call us today for answers. Credit card debt is just too expensive a means of finding one’s business these days.
