Credit cards are a good source for small business funding

Credit cards are only useful to manage cash flow and for certain small business funding needs, but not to supplement income. Small business funding should ideally come from other sources such as investors or better yet, profit. Invstor.com has created a small list below of some good, and some really bad, uses of credit cards for small business funding.

Some good uses

Manage cash flow-- Poor cash flow management is the single largest reason that small businesses are forced to shut down. If used properly, credit cards can be a great tool to help with cash flow management. Most credit cards don't require you to pay the bill until thirty days after you made the charge on your card. This can be a great way to postpone payment of expenses until you receive expected payments from customers. Be careful not to carry a balance though. Credit card interest can destroy your cash flow and you'll quickly find yourself behind the eight ball if your balance starts to grow.

Office equipment expenses--Credit cards actually are a good way to fund your company, but only for certain types of expenses, and even then in moderation. Credit cards can be a great way to purchase office critical equipment items. And, as stated above, you can delay paying for this (30 days) until you have received customer payments to help foot the bill.

Some really bad uses

Salaries-- Cash advances to pay yourself or employees are a really bad use of credit cards. You should be the very last person to be paid after the company is finally profitable. And, if you can help it, you should set up a plan to compensate employees in some other fashion (other than cash) to start with. This may mean that you have to give up a small stake of equity in your business. But, it's a great way to reduce your financial risk and to ensure that you'll have adequate cash flow.

"Because you can"--Many people charge business expenses on their card just "because they can". This is a really bad idea because these little expenses will quickly add up. It also encourages impulse buying of smaller ticket items. You will quickly lose track of all of the items that you purchased and this will make it much more difficult to create a budget and manage expenses.