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The problem with using personal credit cards for small business


It’s a question we hear all the time: Should I use personal credit cards for small business related expenses?

We know very well that this is something Canadian small business owners are doing and while it’s a common and perfectly acceptable strategy for some small business owners, it’s not ideal.

Lendified recently conducted a poll of 350 small businesses in Canada to learn more about their day-to-day worries. Not surprisingly, we learned that cash flow was one of the top things small business owners worry about. Another key finding of the Lendified Index was that personal credit cards were their preferred source of credit, particularly for newer enterprises who have been in business for less than five years.

We also learned that many of these new small businesses had maxed out their personal credit cards – it’s no wonder they’re worried about cash flow.

So, here’s the problem with using your personal credit card for your business:

High Credit Card Interest Rates

Credit card interest rates are much higher than traditional loans – that includes alternative loans and online loans. While credit cards are convenient for day-to-day transactions, if you’re carrying a balance month to month, a small business loan is likely a much better option for you – and could potentially save you thousands.

It Can Get Complicated

When it comes to taxes, business and pleasure simply don’t mix. Come tax-time, you’ll want to write off all of your business expenses, but this can be difficult if you’ve been using a personal credit card for both personal and small business expenses. Even if you keep organized records, mixing your personal and business expenses can raise red flags with the Canada Revenue Agency (CRA) and could potentially lead to an audit.

Your Personal Credit is On the Line:

You believe in your small business – and that’s a beautiful thing. But the reality is, small business can be risky, and you can put your personal credit at risk if your business ever sees hard times. Furthermore your assets could be at risk if your business ever faces legal challenges. You’ve worked too hard to take chances with your lifestyle.

Build Your Business Credit Profile

Building your business credit profile can give you access to more capital in the long run. When it comes to small business financing, smart creditors are looking at the bigger picture when assessing your financial health, looking at additional factors such as business behaviour, and not just personal credit. Taking smart steps towards building a credit profile can help you get tens of thousands more in business financing down the road.

Small Business Loans are Made for Small Businesses

This point may seem obvious, but it’s worth highlighting: Your financial needs as a small business are unique, and there are financial solutions tailored specifically to serve those needs. For instance, we understand you need to spend money to grow, and it might take a little longer for the seeds you plant to bear fruit. Personal credit cards on the other hand are best reserved for day-to-day transactions that can be covered with your next paycheque.

Fast, Easy & Convenient Small Business Loans are Available 

Until recently in Canada, credit cards seemed like the best option for Canadian small business owners needing a fast, convenient source of funding for transactions, emergencies and opportunities alike. But technology has changed that. Today, Canadian small business owners can apply for loans online, get same-day approval and access their funds immediately, without ever having to step into a branch.

Click here to learn more about Lendified and how we stack up against credit cards.

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About the Author



Lendified is Canada's premier online lender for small businesses. The company was founded by former bank executives dedicated to provide businesses with fast, easy, and affordable financing. The Lendified team regularly produces blogs and guides to help small business owners succeed.

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