Erica Sandberg is a prominent personal finance authority and author of “Expecting Money: The Essential Financial Plan for New and Growing Families.” She writes “Small Business Credit Profiles,” a weekly column featuring small business owners’ journey with credit and credit cards for CreditCards.com.
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Billy Thompson needed a solution to a vexing problem.
“Since puberty, I suffered from excessive underarm sweat – otherwise known as Axillary Hyperhidrosis,” says Thompson. “I remember thinking ‘If only there was an undershirt that blocked the sweat from passing through.’” After looking for what he wanted and not finding it, Thompson decided to develop his own. As the old axiom goes, necessity is the mother of invention.
To transform the idea into a shirt and then a business, Thompson hooked up with Randy Choi, who suffered from a similar condition. Choi not only understood the goal of the product and believed in its merit, he had a domestic garment supply chain background and strong entrepreneurial chops. Thompson had a history in sales. A partnership was born, and the duo launched his sweat-proof t-shirt company, Thompson Tee, in 2012. Their online store soon opened and sales have doubled every year.
Thompson’s mission to save people from the embarrassment of sweat didn’t start out on a lucrative note. However, he believed the product would be a success, so he brought credit cards into the fold. With them, he made it through the tough times. By the end of 2017, the company pulled in $9 million in revenue, and the duo still own 100 percent of the company, split right down the middle.
How much card debt did it take before you saw results?
I have always had a good credit rating because I’ve been responsible with my credit cards. The same goes for Randy. When you’re an entrepreneur, making sure you have good credit is a necessity because when you’re in startup mode, that is usually all you’ve got.
Given my credit history, I was able to run up over $100,000 in credit card debt. I was all-in, and going for boom or bust! In the beginning, we used credit cards for seed capital and the line of credit helped with cash flow.
I’ve since paid that debt off, which took three years.
I guess you could say running up $100,000 in credit card debt is never a good thing and wouldn’t necessarily recommend it, but it worked out for me in the end.
Today, how do you use credit cards to help your business?
We now use the Chase Ink Business Preferred Credit Card. We went with this card because early on they gave us the highest credit line. Originally, we banked with Wells Fargo, but they wouldn’t give us anything when compared to Chase so we eventually switched it all over.
Also, the rewards on the Chase Ink card we use are high. It currently offers 80,000 points after spending $5,000 on purchases in the first three months. After that, you can earn 3 points for every dollar you charge on the first $150,000, as long as you spend it on travel and certain business categories, such as internet advertising.
As an ecommerce company where most vendors take credit cards, we’re maxing out our credit cards, so we have to make payments every two weeks or so. I don’t keep track of how many points we earn in a month or year by doing this, but whatever they are, I reinvest them into the business.
The Chase card has been good for us as employers. Some members of our staff have access to the account, and we manage their accounts online. It simplifies bookkeeping, and we’re able to place lower spending limits on them.
And because we’re an online retailer, of course, nearly all our customers use credit cards to pay us!
See related:5 business expense card options for employers
What lessons about borrowing money have you gleaned along the way?
Well never say never, but I plan to never run up $100,000 in credit card debt again! But if that’s all I got, you bet, I’m doing it again.
My advice for other small business owners is to monitor your credit reports and make sure your credit scores are in good shape. Pay all your cards off each billing cycle so you’re not paying interest. Don’t max out your credit availability, either. When you’re starting your business you may need to open new credit cards to take advantage of the 0 percent APR for 12 to 18 months offers. Once you have them, enjoy the points you earn!