COMMENT
Finance A Home Business For Nothing

By David Kuo (TMFDragon)
July 22, 2005

Many of us dream about running our own business - and why not? But as more of us hanker to be self-employed, it's important to examine financing options carefully. In this article I looked at various places where small businesses can apply for start-up capital.

But did you know that once a business is up and running, personal credit cards are some of the most popular sources of additional working capital? After all, obtaining a small business loan at an attractive rate can be difficult, and it's hard to beat a 0% deal.

In fact, it is estimated that as many as seven out of ten small business owners use personal credit cards to part-finance their company. That's not entirely surprising given that it can be easier to apply for a personal credit card than it is to get a company loan approved!

However, it's important to tread carefully if you don't want to fall foul of the taxman. That's because goods bought for personal use through a company, even if it's your business, may be viewed as a gift in kind by the taxman. Consequently, if you plan to use a personal credit card to make purchases for your business then its best to have a separate credit card for the purpose.

Additionally, it can be advisable to draw up a formal contract between you and your business stating that a specific card will be used solely for purchases on behalf of your company. It may seem a little convoluted, but meticulous accounting can avoid needless headaches with the taxman later on.

Interestingly, there are suggestions that company credit cards have slowly been superseded in popularity by personal credit cards. That's because the law can look more favourably on the latter. For instance, an individual is protected by consumer law but purchases made by companies aren't. So, a private individual is entitled to automatic recourse if a supplier fails to deliver, but a company may not.

Now, it may be easy to pull out your own credit card to pay for your company's purchases, but it is important to remember that you are still incurring a debt. As such, you will be held personally responsible for the loan. Therefore, you should always set a limit on the amount you intend to use to finance your business. Going beyond that limit may cause you to lose control of debt, and ultimately your business!

Whether you are in business or just looking around for a new card, make sure you get the best rates with our credit card comparison table.

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