Sunday, June 10, 2012

Using Credit Cards for your Small Business Financing

I see many, many small businesses that use the business owners' personal credit cards to finance their business. Although this is often an easy source of cash it can be a terrible way to manage and grow your small business.

Often the biggest issue we see is that the business owner doesn't understand the relationship between the interest expense on the credit card debt as it relates to the net profits the business generates. We regularly see businesses where they are guaranteed to lose money on the sale of an item which the business owner set the price. Meaning the business owner thought he had priced the product to make a profit but in fact the price guaranteed a loss.