Credit Card Debt an Indicator of Business Failure

A new study out by the Kauffman Foundation finds that the use of credit card debt by start-up companies reduces the likelyhood the company will survive the first three years.

The study, The Use of Credit Card Debt by New Firms, indicates that while credit card debt can provide needed short-term financing, over-reliance on credit cards drain liquidity from the business and negatively impact its financial stability.  The study suggests that every $1,000 in credit card debt will increase a firm's chance of closing by 2.2%.  This means that a firm with $10,000 in credit card debt will be 22% more likely to fail!

The full study is available on Kauffman's website at: http://www.kauffman.org/uploadedFiles/kfs_credit_card_debt_report.pdf. 

If you are an entrepreneur, what has been your experience with credit card debt and your business?

Comments

[Bad Credit Daddy]

Greetings! Very helpful advice within this post! It's the little changes which will make the largest changes. Many thanks for sharing!

[Robin Smith]

Fantastic information about credit card. We all know how much important is this for debt factor. Nice blogging really..here is a similar link.

http://letterdash.com/saver/How-to-Avoid-Debt-Know-the-Tricks

[Annie Masias]

Excessive credit card debt can be one of the most stressful problems any can go through.

[Lis of Ace Cash Express]

Yes, because most businesses tend to consider credit cards as one of their last resort. But it still depends on how a particular business use the credit. Let say for example, in a small, mom-and-pop business. It is wise to use your credit card in buying your supplies if the interest rate for a month will be just around 3-3.5% and use the cash to fund for a scheduled expansion(for example) that can profit ten folds, eating the burden of the credit card's interest rate.

-------
Ace Cash Express
http://www.acecashexpress.com