Excessive fees, debt traps, and poor credit scores are common when businesses leverage credit cards for funding.
They hook business owners with low introductory rates and promises of instant funding, and it’s very difficult to get out from under the debt once you’re in.”
— Armando ArmendarizEL PASO, TEXAS, USA, December 14, 2023 /EINPresswire.com/ — Leading invoice funding company Viva Capital says businesses are putting themselves at risk by engaging in a common practice – leveraging credit cards. Additional coverage of the topic is available in “Why Relying on Business Credit Cards is Dangerous,” which is now live on VivaCF.net.
The report shows that more than eight million small businesses across the country are actively leveraging credit cards, with more applying and receiving new cards every year. While most view it as an easy way to obtain cash on demand, the funding often comes with unforeseen consequences.
“It’s similar to the consumer market,” explains Armando Armendariz, Director of Business Development and Partner of Viva Capital. “They hook business owners with low introductory rates and promises of instant funding, and it’s very difficult to get out from under the debt once you’re in.”
He notes that although annual percentage rates (APRs) of around 17 percent are typical for those with good credit, many pay 30 percent or more. Around half don’t pay their credit card debt in full each month, and many pay little more than the interest fees, effectively trapping their businesses in debt for years, if not decades.
Credit scores usually drop as the level of debt and difficulty in making payments climbs, which means that options to reduce debt, such as refinancing, also vanish. Moreover, many business credit cards require a personal guarantee, which puts the business owner’s personal assets, such as their home, at risk.
“In addition to the risk, credit cards generally aren’t a good fit for business funding anyway,” Armendariz notes. “With lower, inflexible limits, they generally don’t work well for the things business owners need the most help with, such as covering payroll and purchasing supplies or inventory.”
He contends that invoice factoring is better fit in many cases because provides debt-free funding. Advances also scale with the company, so it’s more flexible and can help with both small and large business expenses.
Those interested in learning more about invoice factoring are encouraged to contact Viva Capital at VivaCF.net.
ABOUT VIVA
Founded in 1999, Viva helps B2B businesses of all types accelerate cash flow through specialized funding solutions like factoring, accounts receivable financing, and asset-based lending. Their simple qualification process makes it easy for small and mid-sized companies to get vital funding despite lack of credit or time in business. Additional information is available at VivaCF.net.
