It's so tempting to max out the credit cards — and even apply for new ones — to provide the funding you need. And, yes, credit cards can be extremely helpful when you're starting or operating your business. But there's a cost to all of this easy credit, and it's called interest.
Interest rates range from about 8 to 21 percent, so if you're not paying off your monthly balance due, you're paying a lot for the use of that money. High-interest loans like these can eat away profit margin in a big hurry, and if your business is in a delicate cash flow stage, those credit card payments can mean the difference between success and failure.
Given that caveat, it's not a bad idea to have credit cards available in case you need them for occasional cash flow management or for emergency purchases such as computers that stop working in the middle of a key project.
If you need to borrow a small amount of money (say, $1,000) for a short time (less than thirty days), in order to squeak by until a client pays his bill, credit cards can certainly help, either through purchases or cash advances. Pay the credit card off as soon as the client pays his bill, to limit interest charges.
Credit cards can also help to establish a better credit rating for your home-based business. Obtaining a credit card in the name of your business, using it regularly, and paying it off as soon as the bills become due, shows good financial management. Ultimately, however, you must be wary about credit cards. They can be helpful tools, but it's very easy to get in over your head with credit card debt.