Using credit cards for as apposed to a small business loan.

gazid

Hi all,

I'm looking at acquiring a franchise in a small business. The cost involved is relatively low, at around 16k. A small business loan would be the obvious way to go but I'm wondering if it might be worth investigating a 0% spending credit card deal, spread over a couple of cards. The business loan would be 9.9% over five years but I'm wondering if some money could be saved with the CC option.

There seem to be some good 29 month good deals, my credit rating is on the plus side of good and my current credit limit on existing cards is around £8000, so the chances are good that I would get a relatively high credit limit.

Obviously, I would need to be on the ball when the 0% expired.

Any thoughts or experiences appreciated.

[Deleted User]

Your credit rating doesn't give you any guide as to how lenders will view you.

Another 16k of limits might be a big ask, depending on your income, especially over a short period..

What is your income and what do your credit files show?

gazid

Hi and thanks for responding!
My plan would be to spread the cost oral least some of it over two cards.
I work as a freelancer and currently turn over around 34'000, my sole trader business would run along side the franchise and my credit is on the plus side of good. I just wanted to explore alternatives to a business loan.

Ebe_Scrooge

My thoughts ...

As ZX81 says, ignore your credit score, it's meaningless, and lenders can't see it.

You say your current business turns over £34k ? What's your profit on that - this, I would suspect, is significantly less than turnover ? If so, then I think credit of £16k is unlikely to happen, using the broad rule of thumb of 50% of income available as credit.

Finally, would the franchise owner accept payment by Credit Card anyway ? Many won't, or at least will pass on the ( typically ) 2 or 3 % fee to you, which may well outweigh any advantages to using a 0% card.

gazid

Hi Ebe,

Thanks for that, I didn't realise that lenders don't access your credit score.
My thinking is that I would spread the cost over two 0% cards, credit the funds into my bank account and pay the franchise fee, or at least part of it that way. It could be that it would in fact be more tax advantageous to go the small business loan route.