Small Business Credit Profile: Torqued
Founder Tim Trampedach uses 0 percent APR deals to rev up his motorsports business
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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Like many entrepreneurs, Tim Trampedach was involved in an entirely different career before breaking out on his own.
The Bay Area resident previously worked in the tech industry, where he served as director at LendUp, an online financing company. By the end of a decade in product management, however, he was feeling unfulfilled. In response, Trampedach decided to turn his five-year side hustle importing carbon fiber car racing seats to start Torqued, an e-commerce site selling a full array of motorsports and auto racing parts.
“I ran the business mostly for fun and bit of money to spend on my car hobby, dealing with it at night and evenings.” says Trampedach. “But as of August 2018 I decided to do this full time. I’m making it a much bigger business, importing other foreign auto racing brands into the U.S. and also making the products available as a distributor. Being in motorsports – one of my passions – is of course also a major part of this decision. I’m loving every minute of it.”
The company is not backed by venture capital, nor has Trampedach taken out loans. Instead, credit cards are fueling its race toward success.
How did your credit history affect the way you launched your venture?
I have excellent personal credit, so until my company qualifies for reasonable interest rate loans, I’m bridging the financing gap with some credit cards that have 0 percent interest for up to 15 months. I’ve also invested some savings into the company and will look to traditional small business financing next year, once I have some credit history for my company. I’m building that up through corporate cards as well as my personal cards.
Which cards do you have and use and why did you choose them?
I have a few. For my personal accounts, I have a Capital One Venture Rewards Credit Card, because it has a high credit line, doesn’t charge any foreign transaction fees and it gives cash back on purchases. It’s been my main card for the side hustle for a few years. I also recently started to use my Citi Platinum Mastercard again, which I’ve had for 19 years. It also gives cash back and offers 0 percent interest for 6 months.
For my business cards, I’m using them mainly to build my credit history. I have a SimplyCash Plus Business Credit Card from American Express and the Costco Anywhere Visa Card by Citi. Then there’s my Bank of America Cash Rewards credit card that is tied to my bank and offers [a low introductory APR.]
Tip: Should you fund your startup business with a credit card? Credit card financing is easily obtainable if you already have good credit and cards in your name. But if your business fails, you'll be personally responsible for any debt you incur, regardless of whether you've taken out personal or business credit cards.
How are credit cards helping you and your business become successful?
As with most e-commerce sites, cash flow to purchase inventory is one of the hardest aspects. Especially when starting out with a new company, you’re not eligible for a Small Business Administration loan and banks won’t lend to you for your business. But you can open some business credit cards. I try to use cash back cards because they’re easiest. Points can be hard to manage or transfer to somewhere useful.
In my case, I’m regularly sent very compelling offers with terms like $15,000 credit lines, 1 percent cash back and no interest financing for 12 or more months as long as you make the (very small) minimum payments. I was able to choose from a variety of different credit cards – and turning a number of them down – to get essentially free 12-month revolving lines of credit. So far, the impact has been an increase in my already good credit scores, and that is starting to help give me access to further credit.
I keep meticulous records of what is due when and the dates that any 0 percent offers expire, and I always make the minimum payments. You have to be mindful of when the rate goes up and be ready to pay the card off at that point, which is my plan.
See related: How can I improve cash flow for my startup?
What lessons have you learned about borrowing money along the way?
To get traditional financing for your business or to qualify for an SBA loan, you more or less need a corporate credit history of at least a year. That means you either have to start the business early or be creative about bridging the financing gap, which is what I’m doing with my credit cards. Charging can be a creative way to fund your inventory needs. You can’t refuse no-cost loans that also give you cash back!
That said, you need a very good credit rating to be able to get the better cards and it takes diligent management to make sure you pay the balance off so you aren’t hit with absurd finance charges. Be extremely careful to pay on time and at least the minimum because late payments may cause the introductory zero percent interest to go away and have the balance come due in full. If you’re going to use this strategy, keep a spreadsheet of when the card offers expire and set up autopay for the minimum payments.