Questions on credit card financing (or any other ideas)

speigespeige subscriber Posts: 4 Member
edited December 2007 in Startup Funding
I`m a software engineer and I have an idea for a product I want to build and sell. I`ve done a lot of budeting and planning and need ~$50,000 startup capital to survive until the product is completed and starts to sell. I`m wonderring about how to finance something like this. I have a 750 credit score and no debt. I`ve asked for a personal line of credit for that amount and I was approved for $10,000, I also have a credit card with maximum at $15,000 with 9% interest (permanent, not a promotion, but I know this is uncommon) --- This is through wells fargo, a credit union or other bank may offer more...My idea is to ask for several more credit cards through other lenders until my overall max is 50,000 and then use the personal line for all expenses until it`s maxed and then "balance transfer" the entire balance to a credit card and then keep using the personal line/balance transfer until I`ve used up the entire 50,000 capital and hopefully at that point my projections are right and I start getting some revenue...Obviously I need to be really careful and look for good deals that have low interest rates/fees on balance transfers.My question is if this is really possible??  I plan on quitting my job when I`m ready to make the plunge (obviously after I have the credit accounts I need), but I`ve heard that lenders can lower your credit limit as soon as they get nervous that you won`t be able to pay things back --- As long as I`m making the minimum payments am I safe, or could that really happen?With wells fargo my minimum payment is 1% of balance + interest and their balance transfer interest is only 1% per month, so if i used $50,000/12 months (a little at a time, not all at once) with these type of rates, I should be able to make the minimum payment for a full year for under $10,000, but at the end I`ll have $50,000 debt and a $2,000/month minimum payment so at that point I have to be getting some revenue or I`ll go bankrupt...I understand that a lot of rates are for only a few months and then they change, etc, I know I have to be really careful how I do this, but is the idea ok or not possible? I`m not trying to avoid the interest by passing money around, It`s just that I can`t get a personal line for $50,000 and so I need several lines,     cash advances are obviously way too expensive, but 10%-15% interest is fair and reasonably and I can afford it, as long as this idea is possible with credit cards...Can anyone give me some ideas/clarification on this and if this is possible? My other option is to go through the business loan process, but I`d rather due personal because it`s less headache..I realize that anyone looking at this has many questions about what my budget/plans are because it sounds like I`m way too optimistic or I`m forgetting things, but I really do have things written out well as far as the business goes, i`m just to the point of figuring out the best way to finance the thing --- I`d like the easiest way with the least loss of control (personal loans), but I know it may not be possible and may need to look to business financing/angels... If any more information is needed feel free to email me, I just don`t want to get into all the details and make this really long. Thanks,  Devin Garner  [email protected]

Comments

  • robertjrobertj Tampa Bay, Floridasubscriber Posts: 0 Member
    Devin,
    Is this $50K for your personal survival or is it for the business (or a combination)?
    Using Credit Card debt as a way to cover your personal needs while starting a business is a commonly used approach.
       Having a $2000 per month payment next year could put a real strain on your budget slow the company growth.
        A business loan with typical terms would require a payment of about $800 - which would be more "comfortable".
    Having some "emergency" credit available via credit cards, can be a great backup but I would not recommend it as a primary funding source.
    I`d review my other options first.
  • CookieMonsterCookieMonster subscriber Posts: 0
    Great advice from Robert!
  • speigespeige subscriber Posts: 4 Member
    The $50K is for both personal and business purposes. The actual business plan I have is going to sound really crazy, but I plan on moving to mexico for a few years to get the business rolling and then move back to the US. I`ve lived with hispanic people for several years and understand the culture and speak the language. The cool thing about it is that I see it as an exciting adventure to move there, fulfilling personal goals, but it also helps me fulfill my business goals, because it`s so much cheaper to do what I want to do. Were I to do a budget for the exact same business plans in the US it`d cost me more like $200K - I`ve already done a lot of research with my hispanic friends, so I`m not necessarily asking for advice in that aspect, but of course it`s welcome...The basic idea is that I can sell the product in the US over the internet charging normal price, but my living expenses/rent/office space/employee costs are *much* lower so even if in the beginning the revenue is really low, I`ll be able to survive. The product I plan on building has a *HUGE* market, so $2,000 payment isn`t a lot, but obviously it depends on how I market/advertise the product (which I at this point know nothing about). My competition is average, there are a few companies that make similar products, but I don`t feel like they`re very high quality and none of them have really penetrated their customer base fully, so I think I should be able to get a decent percentage of the market.Financing wise it just *sounds* from what I read that it`s hard to get a business loan, however I`m sure the overall terms are much better..I need to write a business plan for personal planning anyways, but if I can finance the entire $50K through credit cards at 15% interest rather than through a business loan at 10% I think i`d rather take the higher interest rate just to have less hassleI`d like advice on the business plan itself as well, but what is the best way to discuss something like this? I`m nervous about giving out all the details but I don`t know why, because I really don`t think anyone has the ability to steal it -- It`s not a new idea, other companies already do it, I just think I can do it better... Thanks.  Devin Garner  [email protected]
  • robertjrobertj Tampa Bay, Floridasubscriber Posts: 0 Member
    Devin,
    Your intent to reside outside of the US might give some capital providers (lenders/investors) an uneasy feeling - even though it is economically advantageous.
    Other things to consider include:

    The cost of marketing your product will be the same regardless of your physical location.
    How quickly you want/need to capture market share will dictate how much you need to invest in marketing & promotion.
    An internally funded marketing effort (slow penetration) could leave you vulnerable to your competition - especially if they have greater financial resources.
    Finally, if you want to discuss your business plan - send me a private message with your contact info or contact me directly, so we can execute a NDA.
  • RoblueRoblue subscriber Posts: 0
    I`m a software engineer and I have an idea for a product I want to build and sell. I`ve done a lot of budeting and planning and need ~$50,000 startup capital to survive until the product is completed and starts to sell. I`m wonderring about how to finance something like this. I have a 750 credit score and no debt. I`ve asked for a personal line of credit for that amount and I was approved for $10,000, I also have a credit card with maximum at $15,000 with 9% interest (permanent, not a promotion, but I know this is uncommon) --- This is through wells fargo, a credit union or other bank may offer more...
    My idea is to ask for several more credit cards through other lenders until my overall max is 50,000 and then use the personal line for all expenses until it`s maxed and then "balance transfer" the entire balance to a credit card and then keep using the personal line/balance transfer until I`ve used up the entire 50,000 capital and hopefully at that point my projections are right and I start getting some revenue...Obviously I need to be really careful and look for good deals that have low interest rates/fees on balance transfers.My question is if this is really possible??  I plan on quitting my job when I`m ready to make the plunge (obviously after I have the credit accounts I need), but I`ve heard that lenders can lower your credit limit as soon as they get nervous that you won`t be able to pay things back --- As long as I`m making the minimum payments am I safe, or could that really happen?With wells fargo my minimum payment is 1% of balance + interest and their balance transfer interest is only 1% per month, so if i used $50,000/12 months (a little at a time, not all at once) with these type of rates, I should be able to make the minimum payment for a full year for under $10,000, but at the end I`ll have $50,000 debt and a $2,000/month minimum payment so at that point I have to be getting some revenue or I`ll go bankrupt...I understand that a lot of rates are for only a few months and then they change, etc, I know I have to be really careful how I do this, but is the idea ok or not possible? I`m not trying to avoid the interest by passing money around, It`s just that I can`t get a personal line for $50,000 and so I need several lines,     cash advances are obviously way too expensive, but 10%-15% interest is fair and reasonably and I can afford it, as long as this idea is possible with credit cards...Can anyone give me some ideas/clarification on this and if this is possible? My other option is to go through the business loan process, but I`d rather due personal because it`s less headache..I realize that anyone looking at this has many questions about what my budget/plans are because it sounds like I`m way too optimistic or I`m forgetting things, but I really do have things written out well as far as the business goes, i`m just to the point of figuring out the best way to finance the thing --- I`d like the easiest way with the least loss of control (personal loans), but I know it may not be possible and may need to look to business financing/angels... If any more information is needed feel free to email me, I just don`t want to get into all the details and make this really long. Thanks,  Devin Garner  [email protected]

    I have the perfect resource for you.  I used it and my credit score is almost a 100 points less than your credit score.
    I found success at www.thesnaploan.com.  With the conditions and circumstances you described in your post, I have a strong feeling you may find success with them as well.
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