Credit-Card Financing Comes with Risks

There are "potential risks and rewards for entrepreneurs who lean heavily on credit cards when starting up a business. Plastic can be useful for people who can't get loans from banks or family, or who are sitting on a can't-miss idea and just need some help getting over one big hump. But owners of less explosive businesses can get bogged down quickly in debt, especially if a missed or late payment prompts the card company to ratchet up interest rates. And even though entrepreneurs can open up card accounts in their business's name, they are usually personally liable for bad debt.

'The issue is that almost all credit-card agreements have fine print with very sharp teeth,' says Fred Wainwright, executive director of the Center for Private Equity and Entrepreneurship at Dartmouth's Tuck School of Business. 'If you miss even one payment, the attractive terms can convert to over 20% annual interest rates and outrageously high penalty fees.'"

From this Lodgix.com post.