The gift boutique that Donna Bollinger opened here in the shadow of the Blue Ridge Mountains in November 2008 is her first entrepreneurial effort, already profitable—and financed on plastic.
"Credit cards made this possible," says Ms. Bollinger, who put about $30,000 in start-up costs on credit cards.
For Ms. Bollinger to put all that money on plastic may seem risky, but she illustrates a financing trend running strong through many small businesses these days: With other sources of credit hard to come by in the wake of the financial crisis, more entrepreneurs are financing their new ventures with credit cards. According to a survey by the National Small Business Association in April of last year, 59% of those responding said they had used credit-card financing for their businesses in the past 12 months, up from 49% who said they had done so in a December 2008 poll.
To be sure, says association spokeswoman Molly Brogan, "there's a perception that credit has eased some" since last April, which might reduce credit-card use by entrepreneurs, but her group found in a December 2009 survey that 39% of those questioned said they still couldn't find "adequate financing"—up from 38% five months earlier.
So, credit cards still seem to be an important option for many small businesses. But basing a small business on credit-card debt is shakier than in the past because card limits and rates can be so volatile.
"It's so easy for a business owner to start planning on credit cards for cash flow," says Steve King, a partner in Emergent Research, a small-business-financing consulting firm in Lafayette, Calif. "Then one month, if you get overextended and miss a payment, the credit-card company jacks up the rate or cuts the limit that you were counting on to meet expenses next month—and things tend to spiral down quickly."
Read the complete article at http://online.wsj.com/article/SB10001424052970204251404574342061922085456.html?mod=WSJ_Small+Business_LEFTTopStories
|
