Whether you’re starting an ECommerce business for the first time or are looking to finance some elements in order to improve, you are currently considering various options for doing so.
If you do not have the funds upfront to finances the expenditures, you can look into a few possibilities. One option is to use a credit card to finance your ECommerce business. Keep a few considerations in mind when deciding if this method of financing is the right one for you.
Assess the Amount
The amount of money that you need plays in a role in whether or not you should use a credit card. If a large sum of money is involved, you may not even have enough of an available balance on your credit card to do so
On the other hand, you may want to integrate less expensive changes, in which case a credit card can work well. For larger expenses, looking into a loan can make more sense.
Obtain a Business Credit Card
What you don’t want to do is to start mixing your personal and business finances together if you can avoid it. For example, you might have your family members on your credit card, which could mean that charging this expense to the card may hurt their credit scores as well.
Check to see what deals are available on business credit cards in the event that you do not already have one. This move can help you in more than one way.
Note Interest Rates
Putting expenses on a credit card can mean that you are subjected to high interest rates. The amount of interest that you are charged on a monthly basis can make it extremely difficult or even impossible for you to pay the bill in full.
Compare the interest rate on the credit card that you are considering using to the interest rate for a loan. Opting for the lowest interest rate is typically the smarter decision in these types of situations.
Still though, your credit card might offer you rewards that a loan would not. For example, you might get cash-back rewards with your credit card. You could take this cash and immediately put it toward paying off the bill.
While the cash you get back isn’t going to be enough to cover the entire bill, it can help. What you should do is weigh this option against the probable lower interest rate with the loan.
Probability of Paying
You also need to have an honest conversation with yourself about what the odds are of you paying more than the minimum amount on the card each month.
If you put a huge expense on your credit card and pay only the minimum amount each month, you could end up paying off this bill for years or even decades. When you cannot afford to pay off the bill quickly, reconsider your decision to potentially use the card.
Predict Your Earnings
Of course, if the changes that you make to the business help you to bring in a significant amount more money or if you expect that the business will be a grand success, you may then feel more confident about using the credit card.
What you can do is take the earnings and put them toward paying off the bill. After all, it is sometimes necessary to invest money into a business in order to earn it. In this case, the amount that you are charging to your credit card can be the investment.
Develop Low-Cost Products
If you are thinking about ways to increase earnings so that you can pay off the credit card bill, you might want to start considering ways to sell some products that are at a low cost to you.
For example, in the event that you think customers would have an interest in gift cards for your business, these items can go up for sale without costing you a great deal of money. You might find that your sales of the gift cards really help you to pay off that credit card bill in a reasonable amount of time.
Review Your Credit Score
You also do not want this charge to do major damage to your credit score. Therefore, pulling your credit score to assess it is a smart idea before you make this charge. You may also have the ability to use a simulator to see the effect that the charge would have on your credit score.
In other words, you could plug in the amount of money that you are expecting to charge so that the simulator can tell you what your credit score would be after the charge.
Assessing the current financial situation of your business is also important. If you are starting a business for the first time, you will assess your personal financial situation. In the event that either one is in disarray, you may not want to add this extra charge to the credit card because you could just end up causing more problems.
Ultimately, what you want to do is to keep the business as healthy as possible and not ruin your own personal finances along the way.
Deciding whether or not to finance these changes with a credit card isn’t necessarily an easy call to make. You’ll need to take a deep look at your finances before deciding if this move is right for you.