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Debt is not bad. Unmanageable debt is bad. Does your cashflow cover the interest payment? Is your cashflow showing an upwards trend so that you'll be able to

by ankeshk 17y ago

Debt is not bad. Unmanageable debt is bad. Does your cashflow cover the interest payment? Is your cashflow showing an upwards trend so that you'll be able to pay up your debts? If yes - credit card debt or any other kind of debt is not bad. It'll help you grow faster. Without losing a lot of control.

jacquesm 17y ago
That's not true. If your cashflow is showing an upwards trend so that you'll be paying up your debts you are still doing worse the moment any of your predictions about your future income stream do not work out. Now you have two problems, on the one hand you have a problem in your business that needs your attention, on the other you have the credit card companies that are after your skin. Debt is fine as long as the going is good, when the going gets tough it becomes a real headache quite fast.
- ankeshk 17y ago
  Smart money management tip: keep a buffer in place. Stay one month ahead of the interest payments. So even if something goes wrong with your business - you have at least 30 days (and usually 45-50 days) before having payment issues.
joubert 17y ago
Your ROI is highly unlikely to exceed the interest rate on the card.
- ankeshk 17y ago
  If you run a venture that has exponential growth potential - then your ROI is usually likely to exceed the interest rate with ease. My entire family is into diamonds. So I know a bit about how the diamond trade works. Every trader takes loans and usually the interest rate is 1 to 1.5% per month. Very similar to credit card rates. Everyone pays them without a lot of issues - because the ROI is there. I know its the same with a lot of small to mid textile firms too.
  - joubert 17y ago
    Sure, if you trade goods (and keep inventories low), then you can use short-term loans (incl. credit cards) to finance purchase of inventory until re-sale. However, if you're building a business predicated on service delivery, the cycle is quite different and lead time is likely to exceed the "free month" with a credit card. Business loans make more sense.

by ankeshk 17y ago

jacquesm 17y ago

That's not true. If your cashflow is showing an upwards trend so that you'll be paying up your debts you are still doing worse the moment any of your predictions about your future income stream do not work out. Now you have two problems, on the one hand you have a problem in your business that needs your attention, on the other you have the credit card companies that are after your skin. Debt is fine as long as the going is good, when the going gets tough it becomes a real headache quite fast.

ankeshk 17y ago
Smart money management tip: keep a buffer in place. Stay one month ahead of the interest payments. So even if something goes wrong with your business - you have at least 30 days (and usually 45-50 days) before having payment issues.

joubert 17y ago

Your ROI is highly unlikely to exceed the interest rate on the card.

ankeshk 17y ago
If you run a venture that has exponential growth potential - then your ROI is usually likely to exceed the interest rate with ease. My entire family is into diamonds. So I know a bit about how the diamond trade works. Every trader takes loans and usually the interest rate is 1 to 1.5% per month. Very similar to credit card rates. Everyone pays them without a lot of issues - because the ROI is there. I know its the same with a lot of small to mid textile firms too.
- joubert 17y ago
  Sure, if you trade goods (and keep inventories low), then you can use short-term loans (incl. credit cards) to finance purchase of inventory until re-sale. However, if you're building a business predicated on service delivery, the cycle is quite different and lead time is likely to exceed the "free month" with a credit card. Business loans make more sense.