Credit cards have a bad reputation, and this is justified if you’re using them for the wrong purposes.
However, there’s nothing wrong with using credit cards to finance your business. If you have a solid business plan, you know your numbers and you’re prepared to treat your business like a business, go ahead.
If you’re producing regular income to make your repayments, and you know how to use credit cards properly, you can be the next in a long line of successful entrepreneurs who financed their ventures with credit cards.
In this video, filmed at the Titanium Mastermind in Jamaica, Russell Whitney shares 4 of his insider tips if you’re going to use credit cards to finance your business.
1. USE PEER-TO-PEER LENDING
A lot of MOBE students have worked with a peer-to-peer lending service called CreditNav.
A peer-to-peer lending service is a network of hard money lenders. They often accept lower credit scores than other forms of personal loans, but they still have a set of criteria that you need to match to get approved.
They like to know that you have a stated income, either from your own business and investments or from employment. In other words, you have money coming in to pay back the personal loan.
Peer-to-peer lending services often approve funding with the condition of a pay-down. This means that you must pay down your credit cards, usually to a maximum of 45% of your limit, to access the funding.
2. FOLLOW THE 45% RULE
The best thing you can do to keep your credit in good condition is to keep them below 45% utilization.
For example, if your credit card allows a charge up to $10,000, you want no more than $4,500 charge on it at any given time.
The algorithms that determine your credit score don’t discriminate based on who you are and how you’re using your credit. They won’t take into account whether Sally is a good mom and whether she deserves credit. They will simply look at your utilization, and deem that a good credit user keeps their utilization below 45%.
3. TRANSFER YOUR BALANCES
Transferring your balances between credit cards can help you to access as much credit as possible while keeping your utilization below 45%.
You may think it’s smart to charge all your expenses to your Discover card because it has a 0% interest rate, while your other card has an 8–10% interest rate and earns you points if you don’t charge it. However, you’re hurting your credit score because you’re maxing out one card.
If it’s your priority to keep your credit in good condition, spread your charges evenly amongst your cards.
4. DON’T BE AFRAID TO ASK FOR A LOT
When you request an increase in your credit limit, don’t be afraid to reach for the stars.
If your current limit is $10,000, ask for $50,000. Go for 5 times your current amount. They may say no, or they may say yes, or they may offer you $25,000. If they do, take it.
One of Russell Whitney’s students heard this advice, ignored it and regretted it. She only asked for $5,000 and they immediately granted it to her. If she’d asked for $10,000, would they have granted that to her too? She’ll never know.
Provided you follow the experts’ guidelines, you can have your credit cards serve you instead of you serving them.
You can access more beginner business strategies like this one, and learn how to model the “thinking patterns” of the world’s most successful business owners and entrepreneurs, in the MOBE Silver Masterclass. To learn more about the Silver Masterclass, click HERE.