To propel your startup into the marketplace, you need working capital. It is hard to ask friends and family to get onboard on a speculative venture, even if you are sure that it is a winner. Without a track record, banks are often not keen on lending to new businesses. Investors are hard to find, and it is challenging to get noticed on crowdfunding sites.

That leaves you with credit cards. According to the National Small Business Association, credit cards are the number one method for funding a new business in the U.S.

If you have no other way to bring your dream to life, it can be a viable way to give your vision traction. However, it requires research, number crunching, and a good, hard look at the benefits and drawbacks. Here are a few things to consider before you pull out the cards for your new business venture.

Pros and Cons of Using a Personal Credit Card for Business

Using credit cards to finance a business has both advantages and disadvantages. You'll need to weigh the benefits against the risks, for you and your startup.

Benefits of Using a Personal Credit Card for Business

• You have instant access to working capital.
• Credit card financing may be your only option.
• You don’t have to share equity with investors. Control stays in your hands.
• You can make use of 0% credit card offers. That is a great rate for funding your startup, and the rates usually last a year.
• You don’t have to worry about collateral. This is a requirement for banks and most investors.

Downsides of Using a Personal Credit Card for Business

• You mix your personal and business funds right from the start. This is a big no-no according to accounting experts.
• Your personal credit score could take a hit. If your business goes under, you still need to pay the balance on your cards. This can be next to impossible if you are carrying a heavy load.
• Lawsuits are a possibility. Debt collectors can come after the assets of your business and you.
• In the future, you may have trouble getting credit cards for your business with a decent rate, based on problems you had paying off your personal cards.
• Your credit cards have a debt limit, usually around $50,000, and it may not be enough to fund your startup.
• If you overextend yourself, you may end up without funds to keep going.

Alternatives to Credit Card Financing

Besides credit card financing, there are other ways, potentially less risky, to fund your new business.

1. Unsecured SBA loan. For example, SAM’s Club has partnered with Superior Financial Group to provide these loans, which require a personal guarantee. Most are in the $10,000 to $20,000 range. Check with the SBA to see what options are open to you.
2. Crowdfunding. Kickstarter has provided funds to a broad range of people who have a great idea but little financing. Two others are Indiegogo and RockthePost. Crowdfunding requires a strong online presence, persuasive copy, and perseverance to sell your idea.
3. Factoring. For a startup, this may not offer much help if you don't have any receivables yet. However, if you do, you can often get immediate cash for your invoices at a discounted rate.
4. Use your retirement funds. This is a big risk too, and it isn't advisable to jeopardize your retirement. However, for many people their 401(k) offers a vast amount of money. You might have the option to borrow money against your 401(k) instead of withdrawing it.

You need money to start a business. Using credit cards is simple and doesn’t involve others in the risk of launching a new business. Be sure to look at the pros and cons from every angle before deciding if it is the right option for you.