Tag Archives: credit cards


Here are the best ways for funding a startup

Researching how to fund a startup can be an arduous task. Many start the process by “bootstrapping”, which is the exact opposite of funding. It essentially means the entrepreneur uses their own savings to fund the business. There are many companies that have successfully launched using this strategy before taking on investors. For example, MailChimp and AirBnB founders both used bootstrapping to launch their ideas. Although as funding options go, bootstrapping tends to be a less-popular choice, as it generally involves more risk.

If access to cash reserves or savings is limited, we recommend these five alternatives to consider for funding a startup:


This is one of the newer ways to secure funding and it has recently taken the entrepreneurial world by storm. Popular platforms like kickstarter or Indiegogo are great examples of websites that allow users to create crowdfunding campaigns.

Here’s how it works: an entrepreneur will post a detailed description of his/her business on the platform of choice along with the goals of the business, future financial strategies for turning a profit, the target audience, how much funding they require and the reasons. Anyone can contribute money toward helping a business that they believe in. Generally, those giving money will make online pledges with the promise of pre-buying the product or service. While there are many advantages to this tactic, competition is widespread, so startups need to make an idea stand out from the crowd in order to attract the crowd.

Venture Capitalist Funding

Venture capitalists specifically look for startups to fund. For many businesses this option is ideal, as venture capitalists have a lot of money at their disposal and plenty of resources readily available to help companies succeed. On the flipside, the business owner can end up giving away a considerable percentage of the company, and the underwriting and funding process can take longer than anticipated.

Angel Investor Funding

Angel investors work similarly to venture capitalists except their operations are much smaller, sometimes only one person. Like venture capitalists, angel investors will often want a large portion of your company, e.g. owning 49 percent of your company is not unheard of with an angel investor.

Credit Cards

If you have excellent credit history you may be able to use it to establish a line of credit to help fund your startup. There are specific credit cards designed for entrepreneurs, so visit your bank to learn about the options that may be available. While a line of credit is a way to access funds quickly, it can have a negative impact on your personal credit, especially if you find yourself unable to make timely payments.


Factoring is one of the oldest forms of financing. Factors offer lines of credit like a bank, except a factor will underwrite the credit quality of the company’s customers, not the company. Everything comes at a price when it involves financing a startup, and factors will need to see a return on their investment. They charge a fee instead of an interest rate, and you can expect it to be comparable to a cash discount. One of the major benefits of factoring is funds can be available within five to 10 business days of receiving your application. Factors are lenders who don’t require equity and they can grow your credit limit as your business grows.

While any one of these options will traditionally lead to secured funding, we encourage you to continue working on your idea, even if you don’t initially succeed in getting the monies needed. If you’ve exhausted all of these avenues, it may be worth pitching your idea to friends and family, but remember nothing kills a relationship like money so give it serious consideration first.

Entrepreneurs are typically thick-skinned individuals who are accustomed to having the door shut in their faces many times before getting a positive response. If an idea is a good one, and it’s marketable, through hard work and perseverance, funding will be attainable, and the business should come to fruition.


Study: Young Credit Card Users Are MORE Responsible

If you think young people don’t know how to manage money and pay down their credit cards, then you should think again. A new study from the W. P. Carey School of Business at Arizona State University and the Federal Reserve Bank of Richmond shows young borrowers – 18 to 25 years old — are among the least likely credit card users to have a serious default on their cards. Not only that, they’re also more likely to be good credit risks later in life.

“Young credit card users actually default less than middle-age borrowers,” says Assistant Professor Andra Ghent of the W. P. Carey School of Business. “Also, those who choose to get credit cards early in life are more likely to learn from any minor defaults and move on, avoiding major credit card problems in the future. Plus, they’re more likely to be able to get a mortgage and become a homeowner at a young age.”

The new research by Ghent, as well as Peter Debbaut and Marianna Kudlyak of the Federal Reserve Bank of Richmond, is now a Federal Reserve working paper. In it, the researchers analyzed consumer data from the New York Federal Reserve Bank Consumer Credit Panel/Equifax to determine whether young borrowers are worse credit risks than others and to estimate the effect of individuals choosing to get a credit card at a young age.

The results demonstrate that part of the Credit Card Act of 2009 may not have been necessary. The act made it illegal to issue a credit card to individuals under 21 unless the person has a cosigner or submits financial information indicating an independent means of repaying the debt. It also includes a provision banning companies from recruiting credit card users within 1,000 feet of any college campus or at college events.

“Letting students apply for credit cards may actually make sense,” says Ghent. “These students are the people who want credit, need to build up a good credit history, and have a steeply sloped income profile. If they don’t have a student loan, then a credit card may be the only way they can establish a decent credit history.”

The researchers found that while people in their early 20s are more likely to experience minor delinquencies (30 or 60 days past due), they are much less likely to experience serious delinquency (90 days or more past due). In fact, someone age 40 to 44 is 12 percentage points more likely to have a serious delinquency than a 19 year old.

However, the Credit Card Act of 2009 has clearly had an impact on how many young people are getting credit cards. Individuals under 21 are 18-percent less likely to get a credit card following passage of the act, and that’s not necessarily a good thing.

“You can’t learn by just watching credit card use,” adds Ghent. “You have to get a card, pay it down every 30 days, and experience, in order to learn. It’s also hard to get a mortgage if you can’t get a credit card to build up your credit history.”

The full study is available at http://www.public.asu.edu/~aghent/research/DebbautGhentKudlyak_July2013.pdf.


Credit Unions Face The Future & Ride Out The Current Economic Storm

Beginning in November, credit unions across the nation will launch a celebration marking 100 years of their not-for-profit, cooperatively owned financial institutions operating in the United States.

Arizona Business Magazine, September 2008What may be surprising for some about that 100-year mark is a realization that credit unions have just lately — maybe within the past 20 years or so — become more visible within their communities. That’s largely because of the growth they have experienced, with more and more consumers becoming convinced that credit unions offer a superior, straight deal for themselves and their families.

With more than 90-million members nationwide, and about $825 billion in assets, credit unions have become much more prevalent within the working population of the nation as a source of loans, a safe harbor for their savings, and an innovative financial institution that meets the needs of their member/owners.

But, make no mistake — much has changed in 100 years, particularly in terms of how products and services are delivered, as well as expectations by consumers of services from their credit unions. ATMs, debit cards, online banking, credit cards — all are items credit union members of 100 years ago could scarcely have imagined.

Today, nearly all credit unions offer at least some of these services to better assist their members and to meet their high expectations.

What hasn’t changed at credit unions, however, is their philosophy and structure — a key difference between credit unions and other types of financial institutions, particularly banks.

For one thing, banks are owned by investors, either privately or as stock-held organizations. Credit unions are entirely owned by their members, cooperatively.

Secondly, banks exist to maximize profits for their investor/owners. Credit unions exist solely to maximize financial services to their members.

To put that difference into context, consider the subprime mortgage crisis that has ravaged our economy, locally and nationwide. By their very nature, credit unions largely avoided the crisis. Credit unions, which largely hold on to their mortgage loans rather than sell them off (70 percent of credit unions nationwide do exactly that), made loans to members that they could pay back — especially taking into consideration a member’s ability to pay back the loan.

It is no secret that in the current economic downturn, many individuals have found themselves backed into a corner from the subprime mortgage crisis and a wide variety of other unfriendly designer loan products. Fortunately, credit unions have honestly established their presence for serving their members. Remaining removed from other lending institutions has only worked for the best interest of their members.

This isn’t to say that credit unions across the country have not faced some “collateral damage” from the subprime crisis. Members are having trouble making payments on credit union loans because of an expensive subprime mortgage obtained from other lenders, or because some members are losing their jobs in today’s weak economy. But credit unions went into this with very strong balance sheets, and will still be in very strong shape when it’s all over.

Further, consumers can be assured that their money is safe when it is saved in a credit union. Just as the Federal Deposit Insurance Corp. (FDIC) does for banks, the National Credit Union Administration (NCUA), an agency of the federal government) insures a person’s savings to at least $100,000, with higher total insurance coverage available if the member has a combination of individual, joint, trust, payable-on-death and other types of accounts. In addition, there is separate insurance coverage of up to $250,000 for individual retirement accounts.

Today, credit unions offer a wide range of financial services, either because their members expressed an interest in having those services or because the credit union identified services that would best serve their memberships.

Yet, there are limits on what a credit union can do. In fact, credit unions are among the most highly regulated of all financial institutions.

But the changing realities of their members’ lives require credit unions to be as flexible as possible in the services they offer. Credit unions don’t yet have the complete flexibility they need, but are working with the Congress and state legislatures to allow them to be more limber in providing services to members.

One area in particular is business lending. Even though a number of credit unions came into being in the early 20th century, specifically to provide business loans to their members (fishermen, farmers, cab drivers and others), credit unions today are tightly regulated in this area.

Nevertheless, business lending is becoming for some credit unions an important part of their lending portfolio.

Much of the business lending at credit unions is driven by the members themselves. They know and appreciate the solid programs credit unions have offered on auto and home loans. Further, before the present economic slowdown, small businesses were already having trouble finding credit from traditional sources.

A 2004 research study by the Small Business Administration found that credit access for small business had been significantly reduced from traditional sources, and that non-bank sources of funding are becoming increasingly important, especially in areas dominated by banking institutions that have “consolidated,” that is, large banks merging with or buying up smaller banks.

What further attracts members interested in business lending and consumer financial services is that credit unions have a mission of serving “people from all walks of life.” In fact, today just about anybody is eligible to join a credit union somewhere (but not everyone can join just any credit union — you must fall within its “field of membership”). That’s important for credit unions, because, as cooperatives, they need members from all income segments: Those who have funds to save in order to bring deposits into the credit union, and those with a need to borrow funds to finance their needs in life.

It is this cooperative structure, and our mission to maximize financial services, that compels credit unions to offer a better deal on savings and loans. In fact, the Credit Union National Association’s Web site reports each day just how much of a better deal credit unions offer at www.creditunion.coop

For their first century in America, credit unions have seen a great deal of change, particularly in how consumers expect to obtain and receive their financial services.Arizona Business Magazine, September 2008

But what has not changed in the last 100 years is the cooperative structure, spirit and philosophy of credit unions — “people helping people.” We hope to keep celebrating that spirit for the next 100 years.

Steve Earl is president and CEO, and Joy Audet is political communications coordinator for the Arizona Credit Union League, which represents credit unions operating in the state. For more information, visit www.azcreditunions.org.