Have a startup company or know someone that does? Or maybe you’re thinking about starting up an entrepreneurial venture? Well, you may want to think twice before you plan on whipping out your platinum cards to cover startup expenses. That is, if you can’t pay your bill off in full at the end of the month.
According to a 2009 study done by the Kauffman Foundation, they say that taking on credit card debt is a significant contributor to reasons of why a company may fail. According to their findings, for every one thousand in debt the company or founders take on to fund it, the odds of failure increase by 2.2%. The majority of the startups in the study had no employees, it was the founder(s) that ran everything.
However with VC and angel capital in short supply due to the economy, it’s understandable why people are using their charge cards to finance their dreams. The founders of Google are rumored to have funded their venture in the early days with credit cards, but remember, there were a thousand dot-bomb failures for every Google-like success story.
Written August 2009