Careful When Building on a House of Cards

Robbie Vorhaus writes that using a credit card to build your business may not be the best idea. Three years into building his business, Vorhaus Communications, Inc., he found himself $125,000 in debt, $65,000 of which was credit card debt. This is the story of how after he eventually paid off his debts, his opinion of credit card borrowing changed:

I was learning what it meant to be an entrepreneur. It didn’t mean hating one’s boss, or not liking to be subject to authority, but rather high risk. Make that high risk, not of success, but of failure. If nothing else, I learned that I needed to be standing, essentially, in business, when the tide turned.

That is why I now view the assumption of credit card debt differently. I am no longer naïve about building a business. I know now that it takes forging relationships that involve figuring out what I can do to meet clients’ needs. No longer do I focus on the image-enhancing tactics of maintaining the appearance of being a business. Likewise, I have a different view of the financing that makes it possible.

These days, I consider plastic a tactical tool for laying the groundwork for business that I am reasonably certain I will secure. In other words, if I have a good reputation, a good management team, if my calls are getting returned, and I can see revenue five months hence, but I need that computer server today, I would be inclined to put the purchase on a credit card.

If, on the other hand, I am using the card merely to cover expenses, I don’t see credit card debt as a good idea. If you’re floundering and using the card, you’ll find yourself floundering and in debt.

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