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Can you recommend a credit card for short-term financing in an early stage company?

There are all kinds of cards out there, first of all is this something you recommend against and why?

Second of all, if you think a business line of credit is acceptable, what are some cards you think align well with the typical costs for a software SaaS/PaaS business in the data mining space?

16 Replies

Edward Robertshaw
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Started TinyCall
Running a company on credit card debt is very risky and stressful. I would suggest strongly looking at other options first. Spread your risk and take outside investors if possible.

Mike Whitfield
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Mike Whitfield Entrepreneur
Sr. Software Engineer, EPAM, Google
Can you explain said risk? Can you explain said stress and how does it differ from a different financial stakeholder? Options are crowdfunding, accredited investor pools, and angel investment.
Edward Robertshaw
0
0
Started TinyCall
Credit card debt will get tied to you personally. So the company fails, you still have the debt to pay off (likely at a high interest rate).

Banks wont give you a credit card for you business thats not tied to either real company assets or real people.

Investors/crowdfunders/angel/etcon the other hand by stock and take the risk that if you fail they lose the investment. They will also share in the relative success, so the risk is worth while.

The stress comes if the company is failing(and for start ups that is usually a high risk)as the credit card backers will be under high pressure to find cash to repay the debt.
Mike Whitfield
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Mike Whitfield Entrepreneur
Sr. Software Engineer, EPAM, Google
Seems sensible.

The competition for funders is incredibly high at the seed level. I could laugh and try to tell you some of the crappy products friends of friends have had succeed on KickStarter because they're willing to go all out to turn their friends into cash. I don't have that. I'm not good at whatever game that is.

On the other hand, is it an Ok bet to make that if I got into a bad debt situation a tech job could bail me out? 6 figure income is not very unrealistic for my skillset. I need to stock some cash to de-risk my early non-technical hires right now. Not even sure how much money I want to spend, I just want cash available if I need it.

What is a good interest rate for a business line of credit?
Edward Robertshaw
0
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Started TinyCall
If you have other assets (like a house), you might get a better deal lending against that for cash. Go to your local bank and ask these questions (then shop round for the kind of loan the makes most sense for you). Nobody here (including me) can or should advise you on the specifics of debt. I personally recommend you stay clear or it for doing a tech startup. You have plenty of risk already with the start up and the loss of opportunity cost.

I've been through 500startups twice and through VTF. I've seen a lot of start ups including my own. If you can't get outside investment, there is likely something wrong with your business.

Look for advisors who can help you, then get them to help you fund raise. It's not hard to sell GOOD ideas.

Looking at your websitehttp://www.spiritway.co/ and as a tech person and start up founder: I have no idea what you guys do (not asking you to tell me, just saying what investors will see). I think you have a marketing problem at the very least.
Mike Whitfield
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Mike Whitfield Entrepreneur
Sr. Software Engineer, EPAM, Google
Yea; marketing problem has been ringing in my ears for 6months :)

For instance, here's a question you might have asked, "even if I get what the business does, why is it called 'Spiritway'?"

This might prompt me to ask a different question, start a different thread. :)
Mike Whitfield
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Mike Whitfield Entrepreneur
Sr. Software Engineer, EPAM, Google
Nonetheless, let's get back on topic. There is the status quo and then there's solid logic. I'm hearing status quo (e.g. statistically this is what *other* companies do). The jist of how banks differ from private investors is clear, except I'm still not convinced that I can solicit a private investor right now without selling them hard on the business (and this doth not maketh a good relationship). I'd like some users first, and I'd like a more solid group of supporters/a team in place before seeking capital. I'm seeing a lot of risk with no promise of return for capital seeking activities and I'm seeing high risk and little time cost for a credit card.

Still seeking a more complete dataset of debt capital (what is a good interest rate, how is a competitive rate established).
Edward Robertshaw
1
0
Started TinyCall
You typical borrow money if you have a cashflow issue. Example: you need to order the parts to make up an order and ship it but don't have the cash for parts. You can then lend against the invoice and hopefully all goes well and you pay the lender back once the order has been paid by the client.

You typical take investment, when you have a cool idea and you need cash to set up the operation and you sell a stake in the company to someone with cash to make it happen.

Specifics on lending will come only from lenders. They will review you based on what you have and how risky you are (and you sound high risk).

Just to restate. IMO, fixing your messaging so investors/advisors understand you better, thats likely your best bet. If you make ugly UI. Consider a service likehttp://www.sketchdeck.com/ .

I found this on your sitehttp://www.spiritway.co/hostwise . It looks like it does some cool stuff potentially investable stuff. I had to hunt for it though and its UX and cosmetics don't do you justice. Also, when I type your naked URL in I get a blank page. These are red flags to investors, that you make just make tech and are not building a company.

If you can earn good money, earn the money and pay out of pocket from not debt. Do consulting on the side (that's what I do with aperations while I am ramping up Tinycall).

I know of companies (on a personal level) that have used credit card debt as you describe and I give you my warning, its a very dangerous game to play. From what I see from you, you shouldn't be at that stage yet. where its logical.

Using money from investors to grow your business, should be your goal. Investors make money by investing in companies and selling the stock after the value goes up or from dividends, aka they win if you win.

Banks/lenders, have cash (often other peoples cash) and make money lending it (not 'investing'), they don't like to take on risk so they want assurances that if you fail they still get paid back, they then make money through interest (which is not tied to your success). These are very different models.

To be fair, if you did a credit card/bank loans route and it paid off, you could do well out of it. So long as the company succeeds and you can pay back the debt. It's cheaper than giving up % of your company to investors and may get you funds faster. Just know you have to live with the downside if it fails. Consult your accountants and legal people so you understand the risks fully though!

I've seen VC's tell founders to max out credit cards before "if they believe in the business". It's crazy IMO to not share the failure risk. If you need to use a credit card to fund the business, you can't afford to that level of risk. On the other hand, if you have $1M in the bank, it might not sound risky at all.....

Do the easy fixes first! Then ask for feedback on your pitch from people you consider friends and take it from there. Forget the credit cards.
Mike Whitfield
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Mike Whitfield Entrepreneur
Sr. Software Engineer, EPAM, Google
Thanks for the thoughtful response. A group of peers is always welcome.

My last employee and I went through a copy revision, and he wanted the "R&R" section removed, for instance. I've replaced it with what will be a spiritway.co/tv link because I think media is awesome (and it showcases the technology I've built).

For instance, here's the first two paragraphs from the product description. It's amazing how much stuff is ready to go but release engineering is a real challenge for any business:

Product

Our business provides a solution for the hyper segmentation of information in the digital age. We do this by crawling the internet and selling our customers on both our crawl data and a dashboarding service they can use to interact with what's interesting to them. We offer a more personalized and curated approach to data and we espouse style and individual values over accuracy and data completeness.

Technology

To accomplish this, we leverage the latest technologies and are innovating in the browser space. We are most closely aligned with the achievements made by Google and Apple with their Webkit technology but also have an interest in pursuing partnerships with Mozilla based on their Firefox mobile operating system. We contribute to our surrounding technology community with open-source JavaScript technologies we use every day to give our customers a reliable and unique experience at a drastically reduced cost.


Edward Robertshaw
1
0
Started TinyCall
Founder dating forums are not for reviewing specific products or websites. It's the wrong place for it as it only helps you (I dont make the rules).

That said, your website sucks (as do the above descriptions you just listed). It looks tired. There is no call to action and its confusing for normal people (they wont read paragraphs of text ever).Sorry, I know how that sounds.None of this is uncommon at the stage your company is at. Try getting some feedback on reddit (if brave), or ask friends.

You need them to be able to tell you back and no prompting just them and 5 second look at your site:
- what problem is the business solving?
- whats the value ad?
- whats the call to action for the visitor? Sign up?

I am also limiting you to 10 words. Then I want to know it in 3 words.

Maybe you need a business founder who can help (and give them founder level equity, no more posts about 2%).

Tough love here but I am being honest and real with you.


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