Business Line of Credit or Business Credit Card?

[Zoebird]

Any entrepreneurs who have experience/thoughts on these would be most helpful.

Right now, our main business is doing great, and we have an expansion opportunity right at our door. We're going to take it, as we have the capital right now to set it up for the next year no problems.

After that, though, it's questionable. I know that within that first year that we fund, I can create much of what I need in terms of client base to both grow and continue, so I'm not terribly concerned about it. But, I like to have a buffer since it is a big step in my business.

So. I'm looking at Other People's Money. At least as a back up, rather than dipping into any savings and also to allow the first business maintain itself and not have to support the second business so much. It's already providing the seed money, and I think that with the proper effort, we can get it on it's own legs in a year. But, having it's own "back up" system is . . . prudent. . .I think.

I'm interested in your thoughts on this. :)

[catherine]

I don't know how stuff works in New Zealand in terms of interest, etc. And finances is definitely not my strong suit. But my first reaction is to weigh the benefits in terms of a) interest rate vs b) collateral. In other words, if you get a business line of credit, the interest rate will probably be lower than an unsecured credit card, but you will probably have to put up personal assets, unless you own your yoga studio and can put that building up as collateral. My advice would be to avoid putting your home at risk by securing a business loan with it, but that's me. My DH had a business loan and we had to secure it with our house and it just made me really uncomfortable, especially when his business tanked. I just refinanced my home, and while I did NOT want to fold in the debt because I had less time on the note than the new 15-year mortgage--the bank made me include it, so my mortgage wound up a lot more than I was hoping it would be. And it psychologically made it disappear in my DH eyes which I also didn't want, but that's another story.

I would also borrow as LITTLE as possible and pay it off as fast as possible. Debt is debt and even if you're using it to grow your business it still has that nasty feeling that suddenly someone else is holding your strings.

[Float On]

Since you don't own your house and your business rents its physical location you may have a harder time getting a business line of credit. We had one and honestly I wish I'd just stayed with the credit card for what we used it for (new equipment). I could of bounced the card around at the time keeping ZERO interest by transfering to various cards. The line of credit through our local hometown bank had a time-limit with a balloon payment due. It was such a hassle to rewrite the loan at the end of its term that it ended up on a credit card anyway.

[Zoebird]

Thanks. I have an appt with my accountant and another with my bank in the next few weeks. I'll get all of the details then. And it's true, I figured that without real estate, there wasn't any collateral to be had. :D Also, I don't technically quality for any of the government loans yet.