The 6 Benefits of Borrowing the Right Way
What you should actually want from business capital.
An estimated 4 out of 5 small business owners use credit cards to start, build, or grow their business — and it's estimated that fewer than 15% of them use credit the right way. The rest damage their credit profiles, miss tax deductions, limit their future borrowing capacity, and pay more in interest than they need to. This guide walks through what “the right way” actually looks like.
Adapted from the whitepaper by Tom Gazaway, President & CEO of LenCred— Fund My Franchise's lending partner for unsecured business credit.
The Situation, the Problem, and the Fix
The Situation
According to the National Federation of Independent Business, 79% of small business owners use credit cards. The Meredith Whitney Advisory Group puts it at 82%. Either way, 4 out of 5 owners rely on credit cards as a vital part of their overall funding strategy.
The Problem
Fewer than 15% use credit cards the right way. They pick the wrong cards, damage their FICO scores, fail to separate personal and business credit, and limit their ability to acquire additional financing when they need it.
The Fix
Learn the 6 benefits of borrowing the right way and apply them deliberately. Capital access becomes an asset rather than a slow-motion liability — and your profile stays strong enough to support the next growth phase.
The 6 Goals of Borrowing
Money for Your Business
When you're looking for unsecured capital, ideally you want to accomplish as many of these goals as possible. Each one independently is worth paying attention to. Combined, they're the difference between funding your business and funding your stress.
01
Access to Capital
The obvious one. You need money to start, build, grow, or maintain your business — so you need access to capital.
This is often treated as the ONLY goal, which is the mistake. Access to capital is table stakes. The other five benefits are where borrowing the right way separates from borrowing the wrong way.
02
Separate, Preserve & Improve Your Personal and Business Credit
The right way is to structure borrowing so that most or all business debt doesn't show up on your personal credit report.
There are specific circumstances where you benefit from some credit lines appearing on your personal report — but it depends on variables that differ for every buyer. There is no one-size-fits-all answer. The wrong way is to treat your personal credit as an infinite resource for the business, which quietly destroys your long-term borrowing capacity.
03
Achieve (or Maintain) an Excellent Personal Credit Profile
Keep your FICO scores high, your debt-to-income ratios low, your utilization minimal, and your inquiries under control.
Utilization is 30% of your FICO score alone. The target: low balances relative to your limits, minimal recent inquiries, high average age of accounts. These aren't marginal improvements — the difference between a 780 and a 700 FICO is often tens of thousands of dollars over the life of your funding.
04
Cash-Flow Friendly
For entrepreneurs, cash flow is king. Structure your borrowing so monthly payments fit your budget without starving operations.
Example: borrowing $50,000 that requires $10,000/month in payments doesn't work for most franchise buyers. You'll pay it back — but you need the most favorable monthly payments your lending options allow. Cash-flow-friendly structures preserve the operating capital you need to run the business while you're paying the debt down.
05
Minimize Interest Expenses
Would you rather pay more or less interest? Seems obvious — and it is, once you actually understand what you qualify for.
This only gets confusing when you don't understand your real options. Just because John qualified for 7% doesn't mean you will — and just because the first lender you ask offers 12% doesn't mean that's your market rate. Learning the full set of options you qualify for is the difference between optimizing interest cost and overpaying by thousands per year.
06
Maximize Tax Benefits
The one most owners miss. If you borrow the wrong way, you probably don't qualify to deduct the fees and interest.
If you fund your business with a personal loan, personal credit card, or personal line of credit, you probably don't qualify to write off all the associated fees and interest. The wealthy don't miss this deduction — they structure their borrowing specifically to capture it. Consult your tax professional for your specific situation, but don't miss this one.
“Do you think the wealthy write off all the money they borrow for their businesses? Why don't you?”
When the 6 Benefits
Apply Most
Almost every business owner needs capital at some point — often throughout every stage. Applying the 6 benefits at each stage keeps the door open for the next one.
Embryonic
Pre-launch through first few months
Typical capital needs: Franchise fees, build-out, initial equipment, working capital buffer
Emerging
Months 6–24 — establishing operations
Typical capital needs: Growth capital, equipment expansion, hiring, marketing spend, inventory
Established
Year 2+ — proven cash flow
Typical capital needs: Second location, refinance to better terms, acquisitions, expansion
The Bottom Line
Why This Matters
There's no way to accomplish a goal you haven't identified. Most business owners never identify “borrow the right way” as a goal — so they never take the steps to achieve it. The 6 benefits aren't optional nice-to-haves. They're the outcome of a deliberate approach versus a default one.
When business owners apply these benefits, they get a clear understanding of their borrowing options, they select the lowest-cost option for their situation, they maintain or improve their credit as they grow, and — most importantly — they keep the door open for additional capital in the future. That last one is what separates businesses that scale from businesses that stall.
Ready to Borrow
the Right Way?
A call with Al — review your situation, understand your real options, and structure your capital stack to capture all 6 benefits instead of just the first one.