Monday, November 28, 2011

Financing a Start-Up on a Personal Credit Card


(2) But, if you have a cheque in the bank that has cleared but it is on hold, and you need cash flow for one or two days until the bank releases the funds, you may use a credit card, but only if you pay back the money drawn on the card in the two or three days following the transaction.

(3) If you have reason to believe that the value of your share of the start-up will grow at faster than the 20-ish % (that the credit card is offering) you may want to infuse your start-up with this type of borrowed money.  Even if you have a card that offers you 0% for a few months, or with some transaction fee of 1% or even for a smaller %-age like 12%.  You really have to believe that your company will be growing at an astounding rate.  But remember, even if your company will grow at such an astonishing rate ... are are giving that 20 points to the credit card company.  You take all the risk and they make all the money.

So where do you find money with assets at your disposal?

  • Operating Loan
  • Line of Credit

Where do you find money without assets?

  • Government Grant
  • Low-Interest Loans
  • Partner Programs
  • Angels
  • Friends
  • Family
A lot of people even put their own money in!  I know that seems like a novel idea, but I certainly appreciate the people that do this.  I think people that follow on with investment also like to see some equity put into the prototype/product by the founders before they show up.

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