Fledgling businesses warned against relying on credit cards

Wed, 21 May 2008

While choosing to rely on credit cards to get a business up and running is "perfectly acceptable", one expert has warned that this may not bode well for the future.

John De Groot, chief executive of Startup Co, said that a number of people setting up their own businesses choose to use credit cards to obtain working capital.

Some then "work almost hand-to-mouth until revenue streams improve", Mr De Groot explained.

However, such methods of obtaining capital may not have long-term benefits, he warned.

"Whilst this is perfectly acceptable, it doesn’t necessarily help in establishing a financial track record that can be used by the business for more conventional funding later on," he claimed.

In related news, uSwitch.com recently reported that the last 12 months have seen more than 2.5 million credit card holders told that they will be liable to pay a fee, had their credit limit reduced or their account closed.

The firm attributed this trend to the ongoing credit crunch .
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