A La Card

Charge it, balancing the books, the loan arranger.

"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

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