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Credit Card Debt an Indicator of Business Failure

Aug 17, 2009

A new study out by the Kauffman Foundation finds that the use of credit card debt by start-up companies reduces the likelyhood the company will survive the first three years.

 

The study, The Use of Credit Card Debt by New Firms, indicates that while credit card debt can provide needed short-term financing, over-reliance on credit cards drain liquidity from the business and negatively impact its financial stability.  The study suggests that every $1,000 in credit card debt will increase a firm's chance of closing by 2.2%.  This means that a firm with $10,000 in credit card debt will be 22% more likely to fail!

 

The full study is available on Kauffman's website at: http://www.kauffman.org/uploadedFiles/kfs_credit_card_debt_report.pdf

 

If you are an entrepreneur, what has been your experience with credit card debt and your business?



Tags:
Category: Business Planning

Mike Lambert

Mike Lambert is the manager of the Wyoming Market Research Center in Laramie, WY.


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