How to Get Instant Cash for Your Business

by Kalinda Rose Stevenson

Published on this site: December 23rd, 2005 - See more articles from this month

What is the biggest problem facing business owners? It's simple. Not enough money. Money is the lifeblood of business. The goal of creating a business is to make money, but before you actually make money, you need to spend money.

You need to spend money to get started. Depending on your business, your start-up costs can range from minimal to enormous. An internet business doesn't take much to get started. A brick and mortar business requires substantial capital investment. Buying a franchise can cost tens of thousands of dollars. Whatever your business, you need money to get started. Most businesses start out undercapitalized and never catch up.

You also need money to run the business. "The cost of doing business" is more than a phrase. It is a harsh reality. You have to pay for facilities, personnel, sales, marketing, advertising, supplies, licenses, taxes, fees, and myriad of other expenses. Most businesses start out anemic and end up bleeding to death. There is simply not enough money to create a profitable business.

So what do you do? You can apply for bank loans and venture capital. You can borrow money from friends and relatives. You can use your own money. Each of these methods has advantages and disadvantages.

One of the easiest and most effective ways to get money is to use cash advances on credit cards. Yes, the interest rates and fees are high. But it all becomes a matter of economics. If a cash advance keeps you in business, it buys you time to create a profitable business.

How do you get lines of credit on credit cards? One of the most important business decisions you can make is to set up a business structure that will allow you to build business credit.

One option is to do business as a sole proprietor. This is a truly risky proposition, since you are mixing your personal and business finances. Under a DBA business structure, you cannot build corporate credit apart from your own personal credit. A failure in the business means a failure in your personal financial life.

A second option is to set up your business as an LLC, with income and expenses offsetting your personal taxes. One great disadvantage of the LLC structure is that you cannot build corporate credit to an LLC because the LLC is simply an extension of your own personal credit.

A third option is to do business under a C corporation. The huge benefit to having a C corporation is that you can use the federal tax ID of your C corporation to build corporate credit apart from your personal credit.

One of the reasons people are scared off by C corporations is that they think they will be liable to double taxation. In reality, a C corporation pays taxes only when it is profitable, and even the IRS acknowledges that double taxation rarely occurs.

With lines of credit on corporate credit cards, which are completely separate from your own personal credit, you have immediate access to money when you need it. The borrowed money buys you time to create a profitable business.

Another great advantage of using lines of credit to finance your business is that borrowed money is not taxable. You can build your business, with borrowed money, and write off the interest and fees as expenses. This is yet another tax benefit available to corporations. Although you cannot deduct interest on consumer credit cards on the personal tax return, you can deduct the cost of business credit card interest and fees on the corporate tax return. With corporate credit, borrowing money becomes a deductible cost of doing business.

Will the borrowed money cost you money? Sure, cash advances on credit cards cost money. But the real question is not how much does the money cost, but how much does the borrowed money allow you to make?

Kalinda Rose Stevenson, Ph.D. free"No Money Limits Consumer Guide to Real Estate Investor Training." http://www.nomoneylimits.com [email protected]