What is Credit Card Stacking?
Credit card stacking is a practice among small business owners who can qualify for business loans. They apply for multiple credit cards in a particular order and use them to bear expenses. It is to access an unsecured line of credit and works as an alternative solution for startups. This method is also used when the credit card’s limit is insufficient to cover all business expenses. This strategy might be a challenge for most businesses, but if used correctly, it can be very beneficial for funding your business.
How Does it Work?
Credit card stacking enables you to have an unsecured line of credit to use for your business. You can use multiple credit cards in these regularly and pay off your debt from time to time. You can get your stack on your own, or you can also use a credit stacking company to help you get the credit cards. This is an excellent strategy for businesses that are unable to get loans or don’t have a mortgage for a loan. However, this is also risky as it involves an unsecured line of credit. Following are some things that you need to remember about how credit stacking works.
- You can only use the money you have available on your credit card. Every credit card has a limit, and you are allowed to use it until you reach that limit. You will need to pay off your debt every month, and once you do that, your limit will be renewed. This means that your credit card limit keeps revolving if you continue to pay your bills on time.
- You need to provide the lender with a personal guarantee. No one wants to lend money without any guarantee, so you also need to give the right to your lender to pursue your personal assets in case your business fails to pay off the debt. Some lenders don’t require this personal guarantee, but you will have to do thorough research to find them.
- If you want to be able to apply for a business loan in the future, you need to regularly pay off your debt. If your credit card bills are paid on time, your chances of getting a business loan will increase. However, if you fail to pay your bills, it will reflect badly on your credit score and affect your chances of getting a loan.
- You don’t need to put your business or personal assets as collateral in credit stacking.
Who Needs Credit Card Stacking?
Following are some situations where businesses might need credit card stacking for funding.
Immediate Funding Needs
If your business needs immediate funds, getting a loan might take a longer time than credit stacking. You can typically receive the cards in seven to ten days, which is perfect if you need quick help with your finances. This might be a little riskier than business loans, but credit stacking is your best option when it comes to speed.
Can’t Get Business Loan
If, for any reason, you are unable to get your business financed, credit card stacking can help you fund your business. There are many cases when businesses can’t get business loans approved. For example, you might have low revenue, which decreases your chances of getting a loan. You would still need someone to provide you with the funds, and that’s when credit stacking helps you.
Startups
This is also an ideal option for startups because, at the start of your business, you might need funds, and at that stage, loans are issued based on your personal credit score. In most cases, startups face difficulty in getting business loans, but credit card stacking enables them to have the financial support they need to establish their business. Once you manage your credit score, you can apply for a loan as well, but in the beginning, credit stacking is your best option.
No Collateral
Unlike business loans, credit stacking doesn’t require any collateral from the business owner, which makes it a practical option for small businesses. They usually don’t have anything to put as collateral; hence choosing credit card stacking works best for them.
Conclusion
Credit card stacking is a good option if you want an alternative for business loans. Most new businesses need financial support to establish themselves in the industry, but it is difficult for small businesses to get their loans approved easily. In this case, they need something that can quickly fund their business without demanding a lot from them. Credit stacking can be very effective if businesses use it efficiently. Once you get the fund, try to pay your credit card bills on time to maintain your credit score. 0Percent can help you get the funding for your business, so reach out to them and get the financial support you need.
