I negotiate and represent clients on corporate finance lending transactions. This company clearly can't access the capital markets or loan markets (on a secured or unsecured basis), but you think you've correctly priced and underwritten (i) unsecured lines of credit, (ii) without appropriate contractual documentation on terms, including remedies, covenants, enforcement, maturity and (iii) which in any event probably materially violates the terms of the applicable credit card agreements, applicable merchant contracts and law? What you describe is not due diligence. It's sticking your head in the sand.
Why is everyone always saying that if company needs to use credit cards it means they can't get loans or money elsewhere? For some companies, swiping credit cards is a free 30-45 day loan. Their vendor/supplier charges the same amount whether they pay by cash or credit, so why not use a credit card?
I'm obviously not talking about the companies that that are using them to swipe to themselves. That is 100% unsustainable and should raise lots of red flags. But to pay vendors direct? Why shouldn't the company get the extra time to pay for the goods and help with cash flow?
I'm NOT saying it should be done, but it's very different to companies swiping to themselves.