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"Ben, I want to say one word to you--just one word:plastics." Thirty years after that succinct career advice waspressed on Benjamin in "The Graduate," another kind ofplastic--credit cards--is launching thousands of businesses eachyear.
About 70 percent of small businesses are funded by credit cardsand personal savings, according to NEBS, a Groton, Massachusetts,provider of business and computer forms.
"Credit card start-ups don't necessarily remain smallbusinesses for long," says Kelly Presta, spokesperson forVisa. Be warned, however, that credit card financing can carrysizable transaction fees and higher interest rates from the day thefunds are accessed.
"Another [idea]," says Presta, "is to reserveyour credit card for making purchases [such as office equipment]and paying vendors."
Craig Ford--who, lured by opportunity, left his job in 1992--hasa different view. In 1993, he and a partner invested in a medicalbilling business that promised healthy profits but delivered sicklylosses. The Los Angeles entrepreneurs reached for the plastic,amassing debts of $40,000 on about 10 Visa cards andMasterCards.
"Today, Billex is thriving," Ford reports, "butwe're still saddled with thousands of dollars in high-interestcredit card debt. For us, it means reduced earnings--but for abusiness with only marginal profits, it could meanfailure."
Others are taking advantage of banks that offer low teaser ratesto entice new applicants. Instead of short-term loans, resourcefulentrepreneurs are taking cash advances at rates as low as 4.9percent. But the teaser rates usually last for only six to 12months. Be sure you can repay the balance before theinterest rate skyrockets to as much as 21 percent, or be preparedto transfer the balance to another low-interest card.
Paul DeCeglie is a former staff reporter for Journal ofCommerce and American Banker. He can be reached atMrWritePDC@aol.com
Easy Does It
You don't have to be a programmer to operate a computer, andyou needn't be an accountant to keep good financialrecords--not with the Big E-Z Bookkeeping System (Big E-ZBookkeeping Co., $45, 800-650-3279). Designed for numbers-shybusiness owners, the handbook provides a few pages of simpleinstructions and requires you to fill out only four clearly labeledforms. The 100-page book includes three optional forms (which theskittish may ignore), examples of completed forms and an envelopefor receipts.
"It's an effortless tool that will keep your businesson track for an entire year," promises Michelle Carley,president of Big E-Z Bookkeeping Co., and a former corporatecontroller and veteran bookkeeper. Her tips:
1. Keep daily records and monitor them to detect andcorrect problems immediately.
2. Keep an audit trail--a record, in numeric order, of allinvoices and checks (including voided checks).
3. To save time reconciling, open a business checkingaccount with month-end cutoff dates for statements.
The Loan Arranger
Who says you can't get low-cost start-up capital withoutcollateral? B&O Funding Sources Inc. has arranged for banks andother lenders to provide entrepreneurs unsecured, simple-interestloans with no pre-payment penalties. Unsecured loan amounts rangefrom $3,000 to $25,000.
There's one catch: funds are available only to affiliates of40 B&O clients--franchisors, distributors and vending-machinebusiness opportunities. "They're expansion-orientedcompanies seeking affiliates across the country," says B&OCEO Guy L. James, who founded the Boca Raton, Florida, firm lastJanuary. "We check out each company carefully before acceptingthem as clients, then we source start-up capital for theiraffiliates."
The process gives entrepreneurs easy access to funds basedsolely on their creditworthiness. Unsecured loans, with interestrates of 12 percent to 16 percent for up to 45 months, may be usedto pay for equipment, machinery, merchandise, supplies andshipping. 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
