From the June 1998 issue of Startups

"Ben, I want to say one word to you--just one word: plastics." Thirty years after that succinct career advice was pressed on Benjamin in "The Graduate," another kind of plastic--credit cards--is launching thousands of businesses each year.

About 70 percent of small businesses are funded by credit cards and personal savings, according to NEBS, a Groton, Massachusetts, provider of business and computer forms.

"Credit card start-ups don't necessarily remain small businesses for long," says Kelly Presta, spokesperson for Visa. Be warned, however, that credit card financing can carry sizable transaction fees and higher interest rates from the day the funds are accessed.

"Another [idea]," says Presta, "is to reserve your credit card for making purchases [such as office equipment] and paying vendors."

Craig Ford--who, lured by opportunity, left his job in 1992--has a different view. In 1993, he and a partner invested in a medical billing business that promised healthy profits but delivered sickly losses. The Los Angeles entrepreneurs reached for the plastic, amassing debts of $40,000 on about 10 Visa cards and MasterCards.

"Today, Billex is thriving," Ford reports, "but we're still saddled with thousands of dollars in high-interest credit card debt. For us, it means reduced earnings--but for a business with only marginal profits, it could mean failure."

Others are taking advantage of banks that offer low teaser rates to entice new applicants. Instead of short-term loans, resourceful entrepreneurs are taking cash advances at rates as low as 4.9 percent. But the teaser rates usually last for only six to 12 months. Be sure you can repay the balance before the interest rate skyrockets to as much as 21 percent, or be prepared to transfer the balance to another low-interest card.


Paul DeCeglie is a former staff reporter for Journal of Commerce and American Banker. He can be reached at MrWritePDC@aol.com

Easy Does It

You don't have to be a programmer to operate a computer, and you needn't be an accountant to keep good financial records--not with the Big E-Z Bookkeeping System (Big E-Z Bookkeeping Co., $45, 800-650-3279). Designed for numbers-shy business owners, the handbook provides a few pages of simple instructions and requires you to fill out only four clearly labeled forms. The 100-page book includes three optional forms (which the skittish may ignore), examples of completed forms and an envelope for receipts.

"It's an effortless tool that will keep your business on track for an entire year," promises Michelle Carley, president of Big E-Z Bookkeeping Co., and a former corporate controller and veteran bookkeeper. Her tips:

1. Keep daily records and monitor them to detect and correct problems immediately.

2. Keep an audit trail--a record, in numeric order, of all invoices and checks (including voided checks).

3. To save time reconciling, open a business checking account with month-end cutoff dates for statements.

The Loan Arranger

Who says you can't get low-cost start-up capital without collateral? B&O Funding Sources Inc. has arranged for banks and other lenders to provide entrepreneurs unsecured, simple-interest loans with no pre-payment penalties. Unsecured loan amounts range from $3,000 to $25,000.

There's one catch: funds are available only to affiliates of 40 B&O clients--franchisors, distributors and vending-machine business opportunities. "They're expansion-oriented companies seeking affiliates across the country," says B&O CEO Guy L. James, who founded the Boca Raton, Florida, firm last January. "We check out each company carefully before accepting them as clients, then we source start-up capital for their affiliates."

The process gives entrepreneurs easy access to funds based solely on their creditworthiness. Unsecured loans, with interest rates of 12 percent to 16 percent for up to 45 months, may be used to pay for equipment, machinery, merchandise, supplies and shipping. For a list of B&O clients, call (561) 347-9150.

Contact Sources

B & O Funding Sources, Inc., fax: (561) 347-9229

Big E-Z Bookkeeping Co., 37637 Five Mile Rd., #217, Livonia, MI 48154

Billex, P.O. Box 39988, Los Angeles, CA 90039, billex@loop.com

NEBS, (888) 228-6327, http://www.nebs.com