Since the first installment of "How to Start and (more importantly) Finance Your Cosmetics Line" I've received numerous emails asking about the details of 0% APR financing for your cosmetics line.
When talking about the 0% APR period, I asked rhetorically "Need I say more?"
Gauging from my inbox, I would say yes, I suppose I do need to say more.
To clear up a few misconceptions:
- We, Genie Supply do not offer financing options.
- Paypal Credit offers 6 months at 0% APR - if you are approved - for every purchase of $100 or more, up to your credit limit. After 6 months, the remaining balance is subject to 19.99% (or more) APR.
- There are plenty of credit cards on the market that offer 0% APR for 6-24 months. This is, again, subject to approval. This still means that the amount on your card/account at the end of that period must be zeroed out, or you will be subject to their new APR, which is typically 19.99%-29.99% or whatever the maximum allowable APR is in your state.
So that all sounds really scary, but it's not.
Credit is a tool. You must learn how to use it.
No matter who you are, at some point in your brand's lifetime, you must leverage credit. This doesn't make you fiscally irresponsible, it's literally just a part of doing business, and definitely a part of scaling.
Do you think hotel owners can pay for the entire thing at once? No way.
Even if you have investors or boat loads of cash, leveraging credit can be really smart.
Credit begets credit.
Not only that, but at 0% APR, it's unwise to remove all of that cash from your cash flows. All companies--and especially start-ups--live and die by their cash flow.
Additionally, if the inflation rate is 3% per year, you're actually paying less money by waiting until the 6th or 12th or 24th month of your interest-free period to pay, because money today is worth more than money tomorrow. That's a fact.
How to Start Your Cosmetics Line on 0% APR Credit Cards
Okay, so now that we've worked through that logic, let's work through a situation where I "show my work" for what starting a cosmetics line on 0% APR credit cards would look like.
Tools Needed: Decent Credit (~650+ score), $35k annual income, US address
You will open the card on your personal account and reimburse this all as expenses or a loan to your company. Opening a business credit card is much harder and you will typically only get a starting credit line of $2000 after 2 years in business. Yes, it sucks.. hard.
Credit Limited Needed: $3000
Sometimes the credit limit is a judgment on you: on your creditworthiness (credit score) and/or ability to pay back debt (income), but sometimes it's not (source). Credit history (did you pay on time? Is this your first card?), credit lines open and number of applications also comes into play when deciding whether or not to extend you credit, so make sure to do your homework before applying.
Use a free tool like CreditKarma to track your credit score, all the variables that feed into that score, and to see your approximate chances of getting approved on any given card. Yes, they offer all of that, for free.
Products Purchasing: 600 custom lip glosses / liquid lipsticks; 3 colors, 200 units each. Custom printed tube, custom boxes, assembly and international air shipping.
Cost: $2880 + $270 shipping
Card: 0% APR for 12 months
Monthly Payment: $262.50
Just make the payment on the first of every month, and in 12 months it will all be paid off. No debt, no interest and better credit because of it.
The way to calculate the monthly payment is to take the total cost (here $2880 + $270 = $3150) and divide by the interest-free period (here 12), to give you the exact monthly payment ($262.50).
In this scenario, if you were instead to get an 18-month interest-free period, the monthly payment would be $175. Of course, you can pay it off earlier, and if you have your lip glosses within 2-3 months of the initial payment, I would hope you can make that money back sooner!
The Best 0% APR Credit Cards
These are subject to change at any time, as credit card companies often do, but as of today, here are the best 0% APR credit cards, rated by interest-free period.
- Discover It Cashback Match (0% APR for 14 months)
- BankAmericard Credit Card (0% APR for 15 months)
- Citi Diamond Preferred Card (0% for 21 months)
- Wells Fargo Platinum Visa Card (0% for 18 months)
- Citi Simplicity Card (0% for 21 months)
- Chase Freedom Unlimited Card (0% for 15 months)
- BankAmericard Cash Rewards Credit Card (0% for 12 months)
- Wells Fargo Cash Wise Visa Card (0% for 12 months)
- Blue Cash Everyday Card from America Express (0% for 12 months)
- Barclaycard Ring Mastercard (0% for 15 months)
These are seriously good deals.
I had Chase Slate before with the same option as the Chase Freedom above (15 months interest-free). The card doesn't come with all the frills of a higher-end card, but it does get the job done.
So don't just sit at home and twiddle your thumbs, daydreaming of what could be. Get out there, figure out your financing options, and make your cosmetic line a reality!
And if you need help manufacturing or figuring out the details, we're always here.