Need Funding? Don’t Apply for Anything Yet! Try This First…

So you’ve got a plan – new business, new marketing, new product line. And you know exactly how much funding you need.

You’re ready to apply for a loan or two. But don’t apply yet, because your best funding option could be staring you right in the face!

For many years, I worked at a research and development company that helped fund franchise startups. We dabbled in SBA loans, personal loans, business loans, and (most often) credit card financing.

Over half of our clients experienced unbelievable odds funding their new business, even though they had collateral and great credit.

For those clients, “alternative” funding was their best option. Today, most of them are debt-free (or better, working deep, ongoing relationships with a number of banks) and running profitable businesses.

All this no thanks to traditional business funding or the SBA.

The World of Credit Card Financing

As the banks get stingier with some of the more traditional business loans, more and more entrepreneurs are harnessing credit card financing to grow their business.

Disclaimer: in this article, we are referring to bank-issued credit cards (such as Chase and Bank of America), not merchant cards (such as Walmart and Amazon).

Though it’s not that new of an idea, it is working like a charm. Now even some of the more mainstream small business advisors are recommending credit card financing.

Why is credit card financing such a great solution for business funding?

  1. It is a revolving line of credit (LOC). LOCs are typically the most difficult traditional loans to get approved for. They are flexible, and they never go away unless you close the account or offend the lender. Credit cards are the banks’ loophole to offering prime lending in less traditional ways.

  2. It is a relationship with a lender that can grow into something deeper. Credit cards are more than pieces of plastic that let you spend money. They are relationships with lenders. If you manage that relationship well, many of the more traditional loan options will be available to you for great terms.

Getting New Credit Cards

The intent of my blog here is to help you leverage the current bank relationships you already have. If I have assumed incorrectly that you do not possess any bank-issued credit cards, then it is probably time to get one.

Your bank usually sends you credit card offers in the mail. This is a great place to start.

Mail offers are usually prescreened and usually grants you a stronger chance of approval. Not every mail offer is worth your time.

The best credit card mail offers are from brick-and-mortar banks. Here is a list of banks that frequently send credit card offers that you should take seriously:

  • Wells Fargo

  • Bank of America

  • Chase

  • Capital One

  • Discover

  • Citi

  • American Express

  • 5/3 Bank

  • US Bank

  • Local credit unions (you will need to be a member first)

If you want to target a credit card funding program (frequently called an Unsecured Line of Credit Program), you need to work with a professional. Professional unsecured lending specialists can specially target multiple line of credit offers focusing on 0% introductory interest rates.

If you do not already have a business credit card, visit your bank and let them know that you would like to begin building business credit. Apply for a business credit card. As long as your credit is decent, you’re likely to get it.

Negotiating with Your Credit Card Lenders

Most people already have at least one credit card from a bank (their main bank).

If you have one or more bank-issued credit cards, you can employ these techniques once every 3-6 months.

However, if you have major issues with your credit (collections, recent late payments, bankruptcies under 7 years old, etc.), banks may not be willing to work with you until you get some credit repair.

Credit Line Increase

Did you know that credit card limits go as high as $75,000? It’s true.

Should you ask for a credit line increase that high right out the gate? No.

So start smaller. If you have a credit card for $5,000, ask for an increase to $10,000. If you have $15,000, ask for $25,000. Here are a couple tips to help you get the credit line increase:

  • You need a reason. That reason can be that you travel for work and don’t get reimbursed immediately. If it’s a business credit card, you can let the bank you know that you have inventory to purchase or are about to launch a new marketing campaign.

  • It is best that all your credit card accounts have balances under 50% of their credit limit before you give them a call. If you are unable to do this, ask anyway. The worst that can happen is that they say “no.” Try again in 3-6 months.

  • Make your bank aware that you are looking for more funding. You can let them know that you have a credit card offer in front of you, but you wanted to check with your bank first before starting a new relationship.

  • Don’t be rude. Be polite. You are asking the bank for a favor.

Lower Interest Rate

Asking for a lower interest rate is usually easier than asking for a credit line increase. Basically, let the bank know that you would like to use your credit card more often, but that the interest rate is just a bit high.

Typically, credit card interest rates are somewhere between 9%-15%. But if you work your relationship and negotiate, you can get them as low as 7%.

After negotiating with your credit card lenders, you may find that you get an easy $10,000-$25,000 more in available funds without applying to any banks.

Also, you may have been able to get a lower interest rate or learned of a new 0% offer with your bank.

Credit card relationships are bank relationships. If you take them seriously, then banks will take you more seriously, too. And those lending relationships can go a long way as your build your business.