Why You Shouldn’t Start a Business with Credit Card Debt

May 3, 2018, Written By John H. Oldshue

According to a new small business survey from LendingTree, 27% of small businesses rely on debt to launch their companies. Of those entrepreneurs, 44% used a small business loan and 25% used credit cards to fund their start-up costs.

Carrying debt early on in a business is a common practice, but that does not make it ideal. Credit card debt can be particularly stressful for new entrepreneurs because income is unpredictable. Paying more than the minimum each month may be impossible at times, which lengthens the lifespan of the debt and racks up extra interest to pay.

Beyond the initial start-up costs, LendingTree found 46% of small business owners carried business-related credit card debt. Nearly half (48%) said they have personal credit card debt for their businesses, while 27% had all the debt on business credit cards. Twenty-five percent had operational debt on personal and business credit cards.

The Right Way to Start a Business with Debt

In an ideal world, start a business with money already saved. That may not be an option for many entrepreneurs. If you are going to start or fund a business through debt, make sure it is the right kind of debt. Here are some options:

  • Get a low-interest small business loan. If you have a longstanding history with a local bank or credit union, reach out to them first. They will typically have the best rates, and your existing history will increase your chance of approval.
  • Get a business credit card with a low interest rate and high rewards. The best small business credit cards typically offer 1-5% cash back. If you cannot qualify for a low-interest loan, a credit card may provide quick funding for your business.
  • Explore programs like PayPal Working Capital and Square Capital. These lines of credit provide funding for your business, but payments are proportional to your income. If you have a slow month, you only pay a minimal amount. In a highly profitable month, you will pay off a large portion of the loan. This scalable payment structure is ideal for new businesses.


The information contained within this article was accurate as of May 3, 2018. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.


About John H. Oldshue

John Oldshue is the creator of LowCards.com. He worked for over 15 years in television and won an Emmy award for his reporting. He covers credit card rate issues for LowCards.com.
View all posts by John H. Oldshue