As small business loans have dried up, more entrepreneurs are turning to small business credit cards to fund their ventures. Though this is a common approach, you should be careful which cards you sign up for.
Banks are now offering new cards labeled specifically for small business use. However, if the business doesn’t work out and the credit card bill goes into default, banks have a back-up source of funds - you, the cardholder.
One advantage of running a small business is that, if set up correctly, the business’s assets and liabilities are separate from your own. But with this new generation of small business credit cards, banks can come after your personal assets if the bill goes unpaid.
It’s worth noting that the new Credit Card Holder Bill of Rights doesn’t specifically protect entrepreneurs or small businesses. Experts recommend avoiding these small business cards altogether and using personal credit cards to pay business start-up costs. Then, pay the credit card bill from the business’s money.
Chase is planning to launch at least four entrepreneur-targeted cards, and other banks will undoubtedly follow suit. Weigh all of your options carefully when deciding how to fund your small business.
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