(posted 6/14/98)

You're looking for startup money or expansion capital. And you've just been put through the ropes by loan officers or venture capitalists. But you've got three pieces of plastic sitting in your wallet that will give you access to $30,000. Why shouldn't you tap into this ready source of cash?

The reason, say financial experts, is that the high interest fees and the danger of overextending yourself could end up crippling your business in the long run.

If you've exhausted all the other avenues, though, and there doesn't seem to be any route to the cash you need, don't discount the credit card option totally. It can be an effective source if you know the pitfalls and stay disciplined about tapping into this ready supply of capital. If you decide to join the 23 percent of U.S. entrepreneurs who whip out their plastic to grow their businesses, follow these guidelines to keep the debt under control:

Do lots of research about finding the lowest rates. There are cards out there with interest as low as 5.9 percent. Read the fine print to be sure the offer is for an unlimited time and that it doesn't go up in three or five months. Look for cards that charge low annual fees.

• If you're using plastic for startup capital, consider keeping your present job so you have a guaranteed cash flow to pay back the loan. Missing a few payments or making payments late will create a snowball effect that will soon bury you in debt.
• Don't use the cards for personal expenses. Stay focused on the reason you used them in the first place and don't be lured into the trap of depending on them for all your business and personal spending needs.
• Although you don't have to produce a business plan to get the money from credit card companies, create one anyway. It doesn't have to be fancy or even something that anyone other than you will see. But it will serve as your reality check. One good thing that comes out of the paperwork involved in traditional financing is it makes you face facts.
• Conjure up an imaginary loan officer who will be practical about the amount of money you should be borrowing. The problem with credit card financing is there are no realistic limits, so be strong about setting your own.

Susan Kushnick is a business writer, editor, and researcher based in New York. She has contributed material to If You're Clueless About Starting Your Own Business, The America Online Insider's Guide to Finding Information Online, and the upcoming Kinko's SOHO Sourcebook.