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An ode to credit cards for entrepreneur's business startup cash

By Penelope Trunk

Being in debt is not cool. The problem is that if you want to start a company, and you want to work at it full time, what can you do besides go into debt? Yes, there are some alternatives, but for the most part, entrepreneurs over the past 10 years have been funding their companies with their credit cards.

Penelope Trunk on startups and credit cards
Penelope Trunk
Penelope Trunk is the founder of three startups -- most recently, Brazen Careerist, a social network to help young people manage their careers. Her career advice appears in more than 200 newspapers. She wrote this column for CreditCards.com.

There are some good reasons to not go into debt. It's limiting when you are trying to get out of debt, and of course, some people can never get out. On the other hand, if your manage debt carefully, you can create more opportunities for yourself.

I did this when I started my current company, Brazen Careerist. This is my third company. My first company was funded by a software firm, and it owned 90 percent of the company. My second company was funded with $3 million from a venture capital firm. But my current company was not fundable at the beginning. I didn't have a big enough idea. (To get outside funding, you need to have a company that could, conceivably, generate about $100 million in revenue in five years. Few ideas can claim to lead to that, even in a best-case scenario.)

So what's left? Funding the company with credit cards. Here are the decision points I used before I went into debt:

1. I wanted to work from home while I had young kids. The only way to do that is to either have a way to when the kids come or create one. To create a way, you start from scratch: No money. I decided this was worth the risk. I would go into debt to be with my kids when they were young and needed me, and I'd pay it back when they were older, when I could be more flexible about the kind of work I did.

2. I wanted to turn my freelance writing into a larger business. If you are just a freelance writer, you will probably never make enough money to both support a family and pay back debt. But I had a vision that my writing would turn into a company that I could get funded. If I did this, I would have enough money to pay back the debt. If I did not go into debt, I would not be able to give myself the chance to try something big.

3. I needed a jolt of self-confidence. It's hard to start over in a career. It's hard to start something from scratch. And it's hard to be a new mom. I was all those things. I was lost and scared. But you need insane self-confidence to start a company. Insane optimism. In order to muster that, something needed to give. And it was the credit cards. In order to take a leap to start a business, I also took a leap that I have earning power to pay back the money.

And you know what? It paid off. I took on a lot of debt -- some at absolutely terrible interest rates with insane penalties that will probably be against the law shortly. But I got to stay home with both my kids, I got to write whatever I wanted, and I did start a new company. And I do make a very good salary now, and I do not worry about paying off the debt.

I'm not saying it wasn't scary. It was. But most of the things in life worth doing are also a little scary.

See related: Compare small business credit cards, Glossary of common credit card terms

Published: March 18, 2010


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