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In the early 1990s, Kevin Smith was looking for a way to fund the movie &l;em&g;Clerks&l;/em&g;. With no major successes or established reputation, he was not able to find any financing for his movie via a traditional loan or investors. Not to be deterred, and always the imaginative one, Kevin used his creativity and &l;a href=&q;https://www.foxbusiness.com/features/credit-card-movies-how-to-fund-cinematic-dreams&q; target=&q;_blank&q;&g;utilized credit cards&l;/a&g; to finance the film. Through credit cards, Kevin &l;a href=&q;http://www.dazeddigital.com/artsandculture/article/28972/1/kevin-smith-shares-clerks-budget-to-inspire-young-filmmakers&q; target=&q;_blank&q;&g;raised&l;/a&g;&a;nbsp;over $27,500 and produced his first successful movie. Based on the success of &l;em&g;Clerks&l;/em&g;, Kevin would go on to direct movies starring Matt Damon and Ben Affleck.
So, the question becomes this: Can you launch your business with the right business credit cards like Kevin did? What if you don&s;t want to make movies but instead want to open the next best restaurant in town or the hottest line of dry cleaners in your city? Are credit cards a viable option, or is this just a myth? What are the risks of using credit cards to launch the business of your dreams?
Here are the benefits of using credit cards to fund your business:
&l;strong&g;1. Speed Of Funding:&l;/strong&g; Credit cards are one of the fastest ways to get capital to substitute for a startup business loan. (Spoiler&a;nbsp;alert: Actual &q;startup business loans&q; don&a;rsquo;t exist.) If you are looking for money right away, credit cards are one of the best ways to get it.
A traditional small business loan can take many months, assuming you are ever able to actually get one. Alternatively, with credit cards, if you apply for the correct ones, you can apply for a few different credit cards at major banks, and within seven to 14 days, the credit cards will arrive at your door. This will give you very quick access to the money you are looking for to start your business.
&l;strong&g;2. Low Interest Rates:&l;/strong&g; 0% interest credit cards are no joke, as they are one of the most useful tools that exists when it comes to funding a business. Imagine you get three credit cards, each with a $10,000 limit, and all have a 0% interest rate for 12 months. As long as you pay off the cards within one year, you are literally not paying &l;em&g;any&l;/em&g; interest.
This particular benefit&a;nbsp;is only right for people who have very good credit, however. This is generally defined as credit that falls within the 680+ range. If you have fair credit (below 680) or worse, it can be very difficult to get low-interest credit cards with the balance you need to fund your business.
&l;strong&g;3. Flexible Payments:&l;/strong&g; When you start your business with credit cards, you have some of the most flexible payment terms that exist in any type of lending.
For any new business, cash flow can be very tight. The fact that a balance never becomes fully due at any time makes credit cards a completely unique method of funding a business. Compare this with an installment loan, where you are required to pay the entire loan off in a predetermined period of time. Each month, these large payments must be made in full and typically have no redraw capabilities.
&l;strong&g;4. Unsecured Line Of Credit:&l;/strong&g;&a;nbsp;To add a cherry on top, this money comes in the form of unsecured lines of credit.
The difference between secured and unsecured money is worth talking about. With unsecured credit, you don&s;t have to put your house on the line to get the money. You also don&s;t have to give anyone a lien on your equipment. You can simply take the credit cards and use them any way that you see fit — and, as long as you are paying them back responsibly, there is absolutely no downside to doing this.
While credit cards can be a great option, it is very important that you are aware of the potential risks before signing up. Here are three things to keep in mind:
&l;strong&g;1. Make sure you are getting enough money to make your business &s;revenue-ready.&s;&l;/strong&g;
One of the most important lessons to take away from what Kevin Smith did with credit cards to fund &l;em&g;Clerks&l;/em&g; is that he finished the project he was working on and was ready to take it to market. So, the first thing to be especially focused on is generating revenue. Of course, there is no guarantee that you will actually generate revenue; however, you need to make sure that you don&a;rsquo;t run out of money before you are &a;ldquo;revenue-ready.&a;rdquo;
&l;strong&g;2. Make sure you can make at least the minimum payments.&l;/strong&g;
If you don&s;t make at least the minimum payments, using credit cards to fund your business is not a real option for you. If you miss a payment, your credit score could be destroyed. In addition, the interest rate on the credit cards will go from 0% APR to 29% or more.
&l;strong&g;3. Understand how high balances can impact your FICO score.&l;/strong&g;
One of the major factors considered in a FICO score is your debt-to-credit ratio. So, if you get $30,000 in credit card lines and use all $30,000 of the credit, it could negatively impact your credit score, even if you make the minimum payments. The lesson here is that if you use this option to fund your business, you must make sure to only use the amount of money that you actually need. In other words, you have to be extra careful and responsible not to overspend just because you have credit available.
In the end, you must always be very careful with credit cards. Credit card debt can be one of the worst things you ever have to deal with in your life. However, if you are diligent and have a business plan, using credit cards might be the best chance you have to actually get your business off of the ground.
&l;/p&g;&l;div style=&q;padding: 20px 0pt;margin: 20px 0pt;border-bottom: 1px solid #DDDDDD;border-top: 1px solid #DDDDDD&q;&g;&l;a href=&q;http://www.forbesfinancecouncil.com/qualify/?source=forbes-text&q; target=&q;_blank&q;&g;Forbes Finance Council&l;/a&g; is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. &l;em&g;&l;a href=&q;http://www.forbesfinancecouncil.com/qualify/?source=forbes-text&q; target=&q;_blank&q;&g;Do I qualify?&l;/a&g;&l;/em&g;&l;/div&g;