Bootstrapping with plastic

Filed in archive Bootstrapper Resources on July 25, 2007

Though some might urge staying away from credit card debt, Eric Rosenfeld, president of Adaptive Consulting Partners LLC, insists they may be the best tool for bootstrap entrepreneurs.

Here are Eric's suggestions for keeping that debt manageable and putting plastic to its best use in starting your company:

• Think Installment Debt. In using credit cards, I treated the debt as an installment loan with fixed payback terms, rather than as an open-ended loan from family or friends. I made it my business to repay card debt in a lump sum pegged to cash flow. Specifically, I wouldn't borrow any more than what I knew could be repaid within a ninety days, based on projected receipts. Credit-card companies usually bill after a thirty-day grace period, allowing two weeks for payment to arrive. Since I was on top of the amount of cash coming into ACP over the forthcoming sixty days, I always knew that, at most, I'd be out sixty days.

• Shop Around. Not one to look a gift horse in the mouth, I took advantage of the lenders' penchant for offering some of the best gift horses around: credit cards with permanent rates as low as 9 percent and introductory offers that sometimes dipped below 4 percent. Throughout my first year and a half, I moved my balance from card to card three times, each time securing a lower rate.

• Be Frugal. Frugality also enabled me to use credit cards as my business financing tool. With payments for equipment, rent, advertising, attorney's services, and the like going directly onto the plastic and appearing on the following month's statement, I had an incentive for weighing every purchase.

For more of Eric's experiences starting his own consulting firms back in 1997 read "Credit Cards: A Small Business Financing Tool" here...