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lawnperfections
02-05-2002, 11:04 AM
Recently, I got hammered for a blunt comment I made " If you can't buy it for cash don't buy it". Below are some of my philosophies on money both Personal and Business. I would like to see if there are more weirdos like me. What are yours thoughts on money?

I can see that my "pay cash" comment was a little too blunt for the more "sensitive" members of the site(my bad), so I will expound on my comment. I would hope that part of your business plan would include setting aside money for emergencies and future equipment purchases, if its not, it should be. The crap advise that you are receiving from bigjames and others are the reason there are so many bankruptcies now. Bigjames's plan is obviously working for him, i.e. "I got some real bad stuff on my credit". You wouldn't take lawn care advise from someone with a dump for a yard so DON'T TAKE FINANCIAL ADVISE FROM BROKE PEOPLE. It was Dave Ramsey that said "A child does what feels good. An adult however, delays pleasure, formulates a plan and sticks to it. Using credit is a childish way to fix an adult situation." Buy used equipment if necessary, sell some stuff you don't use, have a garage sale, whatever. Formulate a plan (that doesn't include credit) and stick to it. If you fail to plan then plan to fail.

And

Your right credit is normal. The average American has over $8000 on a number of card and that doesn't include the other money pit "cars". Yes, that's normal. Who wants to be normal, I would rather be weird.

Weird is:

Being debt free

Having 3 to 6 months of expenses in an emergency fund

Investing in retirement accounts - 5% of income in company match 403b and 10% or 3k a year in a Roth IRA for me and the same for my wife

Planning for your childs future - Educational IRA's, UTTMA's or a Mutual fund so if they don't want to go to college they have money to pursue their passion - like maybe a Lawn Business

Paying of the house in 5 to 7 years and not 15 or 30

Making over 95k but living on 50k to 60.

Most of all weird is "Living on LESS than you make" so that you can do all of the above.

Your intelligent comments are welcomed.

Chuck Sinclair
02-05-2002, 11:12 AM
I'm with you if i can't pay cash i DON'T need it I am preety much debt free just one truck payment and i like it like that.

1MajorTom
02-05-2002, 11:13 AM
This is a good thread, but I am going to move it over to the elements of business forum.

I do believe credit cards can be very evil. When I grew up, my parents never bought anything with the exception of their car on credit. They always paid cash for everything.

We are very close to being debt free. I imagine we will be debt free by the end of this season, besides the house. It will be a good feeling.

LAWNS AND MOWER
02-05-2002, 11:14 AM
What's the over/under on this thread getting moved to Elements of Business????

LAWNS AND MOWER

bruces
02-05-2002, 11:15 AM
I don't agree with the "cash only" philosophy. If I followed that I wouldn't have been able to get started in the business.

Prudent use of credit is a good business tool. I will strive to be debt free from a business standpoint when I get to a certain level.

I also will strive to set back funds for equipment replacement so that I will be able to pay cash for replacements.

If I can do that I will get closer to being debt free. If I have the opportunity to take on more work that might pay me 1,000 per month, but I need a 10,000 mower to do it that I can't afford, I'll borrow the money and pay 300 per month for 3 years so that I can take on that work and make more money. I won't say, oh, I can't afford that, I'll pass on that job.

It is all about what people feel comfortable with. Credit cards, especially, have gotten a lot of people in financial difficulty.

On the other hand, proper use of credit can be very beneficial.

You have to do what you can live with.

Scraper
02-05-2002, 11:20 AM
What the HELL? I spend 10 minutes typing a response while in the meantime it gets relocated...now my post is lost?


To sum up my response...I disagree...in a perfect world a business can survive on income generated. If you want to grow...that 21" is going to get quite a workout until you can afford to buy a 52" so you can take on bigger accounts. Where do you think all your 401(k) or mutual fund $$$$ is going? To big businesses so they can afford what they need.

P.S. I'll pat your back for you, because that's all your post represents.

Bruces has said primarily what I said. Lawnperfections...from your profile I see you are part time...so I guess your Full time job paid for the equipment in cash? Not all have that option.

1MajorTom
02-05-2002, 11:42 AM
Quote: What the HELL? I spend 10 minutes typing a response while in the meantime it gets relocated...now my post is lost?

The thread was relocated because if I didn't try to relocate at least some of the misplaced threads, the whole forum would end up being a debacle. I try my best to keep some assemblance of order, so it easier to check out each forum for all the members.

Relocating this thread wasn't done to inconvenience you.

Randy Scott
02-05-2002, 11:43 AM
This is just like the Ford vs. Chevy debate. It's personal opinion and what works for each individual and what they're comfortable with is going to vary. To say one way or the other is the correct method is an ignorant statement. It all depends on what you want in life, where you want to go, and how you are going to get there. What works for one may not be good enough for the next. I know what side I lean towards but that is what works for me and what I'm happy with. It is taking me the direction I have in my vision. If you are happy with something that works for you, then stick with it. :)

lawnperfections
02-05-2002, 11:46 AM
Chuck - It's nice to see there are other weird people like me. BTW nice site.

Jodi - Sorry about the mis-post. I'll bet your parents are enjoying retirment because of it. I'm happy to see that one of the people on this site whose advice I respect is on the right path.

bruces - what are you going to do when Murphy's Law comes to town and for whatever reason after a few months your contact is cancelled. Then you have more mower than you need and 2 1/2 more years of payments.


Scraper - actually, I started my business with my home equipment and a rider that my mother in law let me use as long as I did her yard every Saturday. Call me a scrub, whatever. That stuff lasted my first season, then at the start of my next I bought all new Sthil equipment, with cash and continued to use the Snapper until the middle of the summer when I decided to upgrade to a new 36, with cash.

beck
02-05-2002, 11:58 AM
I don't mind buying on credit. Last year was my first full time year I had my trailer and a 36". I went from 15 customers to around 50. I decided it would be more beneficial if I had a ZTR so I checked over all of my numbers then went and bought one. I financed it over 3 yrs with no pre-payment penalties. After four months I paid it off. Yes I did pay $225 in interest but if I waited until I saved enough money it probably would of taken me closer to 8 months. The reason why is because I had 5-6 days worth of mowing solo cut to 3 days with a helper leaving two other days to do side jobs. So the extra time available to do side jobs produced income greater than the expense of financing the equipment.


They key is to not get carried away with credit. know your limits. Lawnperfections made some very good points.
I do put money into a Roth IRA, and will probably start a SEP this year.
The emergency fund is crucial. or possibly insurance on yourself if you cant work.

Scraper
02-05-2002, 12:05 PM
Jodi,

That doesn't explain why my response didn't follow the thread to this forum. Why would it get lost? Stop being so defensive all the time!

LawnLad
02-05-2002, 12:27 PM
Your own personal comfort with money is what will determine how you view debt and whether you choose to use it. For some it might help, others it will get them in trouble.

I approach debt differently for personal use than for business. Except for buying a house, income/investment property or business property - then I'll finance.

For business, I choose to use debt as sparingly as possible. But I accept it and use it when I need it. We use vendor house accounts where we have net 30 or 15 day terms. This is strictly for convenience. I know we can write a check for those items when the bill comes in, as most of these are direct costs.

Any other debt we take on or obligate ourselves to has to be based on making money. If I can get the return on investment and factor the financing into the cost of the job - or recover it, than I will. I'm making money on some one else's money then.

Consumer debt is different. This is where as a business or personally you can get in trouble. Sure we use credit cards - it's more convenient to buy some things on a credit card. I simply pay my bill in full each month. I don't buy beyond what my budget dictates.

If you believe in delayed gratification, and not using consumer debt to live beyond your means, I think using credit can be useful. Heck, I'll make a big purchase right after my closing date on my credit card statement. I therefore have about 50 days before the money for that purchase is due. Where else do you get money for 50 days for free at no cost? I mostly use credit cards for personal purchases so I can track my expenses; grocery store, entertainment, dry cleaning, etc. I just won't live off the credit cards or let living expenses carry over from billing cycle to billing cycle racking up interest expense. Don't buy it if you don't have the money to pay for it.

But again... it all depends on someone's comfort level with debt and how you choose to apply it.

lawnperfections
02-05-2002, 12:50 PM
LawnLad - Finance Mag. did a study and found that even those who pay off the card every month spend 18% more than they would if they used cash.

There is an emotional attachment to Cash. Pay for your food one week with cash and one week with the card. I'll bet you when start laying down those 20's it will make you think "Do I really need everything that's in this cart." It is so much harder to give up that cash, that's what keeps you honest.

LawnLad
02-05-2002, 01:30 PM
You make a good point. I can see where one does not want to let go of their cash. Emotional? Maybe.

However, if you pay yourself first, and learn to live on less than your earnings - as long as you meet your savings goals, than I think you're okay. As soon as you pinch into your savings (either your contribution towards or actual savings), your screwed.

Could you save more by paying cash for things since you're looking at the dollars? Perhaps. I'm not disciplined enough to though to keep track of ALL my cash receipts, so I choose to use credit cards as a crutch in this regard.

I use cash as silly money. I set aside a certain amount for non budgeted items. Your point is made in so far as I usually have cash left over in any particular budget period in my 'silly money' account because I like to see how much of it I can save.

If you really want to go pure cash - go to an envelope system. Pay for everything in cash, and pay according to the amount of money you stick in each envelope/account for that period (month/week, etc). I'm sure you'll save a lot more because you're constantly counting it and thinking about it. I simply choose not to think about it that much or be constantly reminded since I know I'm meeting my savings goals.

You can focus on your offense (making money) and your defense (saving money). It takes both to win the game. As long as you win your game by meeting the goals you set for yourself - than your game plan worked.

Again... a matter of preference. But I'm certain you're right that if cash were used, I'd spend less.

lawnperfections
02-05-2002, 01:40 PM
We do use an computer version of the envelope system. We also use a zero based budget for each month before the month begins we spend every cent on paper. It includes a line item for every thing including "Blow money", spend it on whatever you want. If you don't tell your money where to go, you'll be wondering where it went.

It sounds like we are sorta close on our ideas, except for that credit card thing.

tlcservices
02-05-2002, 02:36 PM
when i was in accounting they said buy now and pay with cheaper dollars later. It worked for ENRON why cant it work for us?

scott's turf
02-05-2002, 02:39 PM
My girlfriend and I just bought our first house last week for $268,000. It is our dream house and we can afford it. We put 10% down and still have extra in the bank. All our friend that we graduated with can't believe that we can afford a house. The main reason why we can is that we didn't piss our money away on 30k cars like so many of my young co-workers. We both drive 10 year old toyotas that have run great for years. The extra money from the lawn care biz halped as well. No debt there at all. I buy all used equipment and fix it up. I don't think I could ever justify a 10k mower after I purchased 2 54" mowers for $3000 total. If that mower is 3X faster or would last 3X longer mayber. Profit is my main goal with my biz. Although this is just a second income for me, I still believe I would follow the same system if I were full time.

lbmd1
02-05-2002, 06:29 PM
Lawnperfections, why do you feel you with having 30 accounts, a full time other job, and a wife that works, gives you the expertise to criticize full time LCO's on this site for their financial choices. Do you have a CPA or Corporate lawyer like many of us? How about liability insurance? 4-10 employees to pay each week? I'm sure many of us could easily afford to pay cash for a 36" walk behind. Ridiculing Big James and others on their past credit problems shows what a big man you are. How about you, born with a silver spoon? You don't think any of us lawn dawgs have what you have?, think again. I'm sure their are many!!!! whom have more. Who cares? Many of us have grown because of borrowing credit, but have also gained ASSETS!!!!!! What's your 30 account business worth? I just hit the 1/4 million mark in sales in my lawn biz, with only a small fraction going to installs. What do you think mine is worth? It gets fun when the accountant tells you to go out and buy 2 new riders before the end of the year. What does your CPA tell you? When you get off that porch and want to run with us big dawgs, then maybe we'll listen. You're comment on "using credit is a childish way to fix an adult situation is laughable. Do you know who John Allin is? Do you think he paid cash for his snow removal equipment for the Winter Olympics? What about Toro, Exmark, John Deere, IBM, Ford etc... They all got that big by paying cash? Your assumption to Bruces about losing a contract shows your inexperience again. Not many here go out and use credit on a 10k machine for one account. We may not be an Sr Analyst like you, but some of us know our numbers and trust our professionals that we surround ourselves with. Many of us have had our ups and downs with our past. Wait till you get divorced, have to move out and pay not only the mortgage there, but an apartment for yourself child support, lose your job (don't think it can't happen) You'll have that credit card maxed out within a month trying to pay for all of that with those 30 accounts. By the way, most of us here have at least 4-5 months of income put aside, it's called winter!

lsylvain
02-05-2002, 07:55 PM
Debt works well for some and bad for others. Using debt to finance your business is fine if you can handle the pressure and paying the intrest. The benifiet is you are not using your money your are using someone elses. One of my clients is a building contractor he is worth over $12,000,000 he has never delt out one penny of his own money.

I'm more of a 50/50 guy. If I have 5,000 to spend on equipment I'll pay 5000 and borrow 5000.

fshrdan
02-05-2002, 08:39 PM
Why use a credit card??? Skymiles!!!

Why would you want to pay cash for everything when you can get SkyMiles for every dollar you spend, and not pay one cent in interest? I choose vendors based on whether they accept AMEX or not. And I get several free trips per year.

This is a nice brown trout from the Green River in Utah. A fish I wouldn't have caught without my free SkyMiles.

heygrassman
02-05-2002, 08:46 PM
Great point... nice trout.. fish fry?

fshrdan
02-05-2002, 09:12 PM
No sir. Catch and release all the way. I'd rather catch 'em than eat 'em.

RYAN
02-05-2002, 09:14 PM
I think Lbmd1 hit the nail on the head for me. I am trying to expand my business and will need to do some more financing in order to do so. You need to spend and sometimes borrow money to make money. As long as you have everything in check and don't get in too far over your head you are fine. As long as you are making a good profit from the equipment which is financed than it is fine. Not everyone feels like driving some junker toyota all the time.

mike payne
02-05-2002, 10:28 PM
I am only a small time lco., I only have 42 accounts but I have been succeful in many business operations. Credit is a tool than is an important as any the tool in your operation. During the early seventies I borrowed over a million to purschase rental property. I am now dept free and loving doing lawns. I can pay cash for about any thing in life, but that is due to taking a gamble and borrowing when I was younger. Like any other tool you purchase, get the best deal that you can. Good luck.

HOMER
02-05-2002, 11:26 PM
No comment..............this time if it gets lost it won't matter!

SCL
02-05-2002, 11:30 PM
Now there is a guy who knows how to use debt! my hats off fshrdan.

site
02-05-2002, 11:51 PM
Being debt free would be cool, and I could do it today and still have a bunch of equipment to use, but I would have to cut way back on the workload. Having a reasonable amount of debt is o.k. too as long as you have the cash flow to keep the payments up. Credit cards are a great way to help cash flow, while dangerous in the wrong hands I admit. Financing equipment makes perfect sense if it done as a part of a solid realistic business plan. Banks will overloan if you overpromise- They don't really care, they almost always get what's theirs in the end.
Here's a scenario for you debt free guys to consider- An extremely rich and reliable client wants you to do a job which you know you have the capability to do (if you had some more equipment). This job would be a huge moneymaker and would double or triple your income this year. Do you borrow money and buy what you need? I would.

MOW ED
02-06-2002, 07:19 AM
Just curious

Why did you take your last name out of your signature?
I know it was up there earlier in the day.:eek:

lawnperfections
02-06-2002, 08:50 AM
Gentleman, I love a spirted discussion. That is what is great about the country we live in, I'm entitled to my opinion and am free to speak it. I knew I would not get much support with my way of thinking because unfortunately debit is a way of life for most people and anyone who goes against that grain will get criticized. So I am going to leave this alone and we will just agree to disagree.

But before I go I would like to dispel some assumptions:

lbmd1 - I have now capped out at 40(my self imposed cap) accounts, all within my own neighborhood of 225 homes. Because of planning and living a debt free life my wife was able to quit work as planned and stay home when our first child was born 6 weeks ago. My brother is a CPA. Big James started the pissing contest but you right I made some assumptions that I shouldn't have, for that I apologize. Silver Spoon - hardly. When my family moved here from New York in 75 we were on welfare for 6 months. Our family of 7 lived in a cottage on my grandparents property for 8 months until we found a house, even then I shared a room with my 2 older brothers. My parents had there own ideas on work and education. My fathers " Find a good place to work, stay there and bust your a$$ and good things will happen" that has worked very well for him. My mother worked at Hardees until she was able to go to nursing school where she graduated with honors and went to work for Memorial Hospital. She worked at Memorial for 17 years in many nursing capacities until she decided to go back to school to become a pharmacist. For two years she drove back and forth to University of Florida (1 Ĺ hours each way) every weekday and worked 12 hour shifts on the weekend to get her Pharm.D, and somehow never missed a one of our activities. I decided to do a combination of the 2. I had a full time service while I went to school then went to part-time after I got married and got this job that I busted my a$$ to get. This year my 40 accounts will be worth about 50k and that only working 3 days. I don't know about IBM, Ford or Toro... but I do know that Microsoft and GE and debit free companies. Your comment about bruces - that was his example not mine. I'm happy married to my high school sweetheart, but thanks for your concern.

Big James - I think that if you were to ask any of my customers, co-workers and numerous friends they would tell you that I am one of the nicest guys they have ever met and that I would bend over backwards to help them in any way.

Mow Ed - I took my last name off because some child from the site decided to crank call my house and scream "F/U debit free boy". With my city and state on my profile and my full name its easy to go to whitepages.com and get someone's phone number.

Stonehenge
02-06-2002, 08:56 AM
LP - You sound like someone who hasn't tried to build a large company from scratch. If you are the type that can't be trusted with credit and plan to grow your business very slowly over the next 10-20 years, you're on the right track.

However, if you are good with money, know your business and your market and want to build a large company in a short time, you will have to look at using debt in some form as a vehicle for that growth.

Scraper
02-06-2002, 09:00 AM
Originally posted by lawnperfections
Mow Ed - I took my last name off because some child from the site decided to crank call my house and scream "F/U debit free boy". With my city and state on my profile and my full name its easy to go to whitepages.com and get someone's phone number.

Now that is very lame! Whoever would do that should be banned for life!!! :angry:

Just another reason why I do not reveal too much information.

GroundKprs
02-06-2002, 09:41 AM
This is obviously another trolling thread. Someone asks a question, then bashes all the replies that do not agree with his ideas. Lawrence Stone wannabe?

Don't waste any more time on small minds, guys.

Stonehenge
02-06-2002, 10:02 AM
Jim,

You're probably right....

Randy Scott
02-06-2002, 10:43 AM
Ditto here, I thought I gave a decent unbiased opinion on the matter. It IS going to be different for everyone.

People must be getting cabin fever because 80% of the threads turn into an arrogant, testosterone, pissing match. Value others opinions and then shutup about. That's all it is, an opinion. Don't read into it, or take it any further. :rolleyes:

Nebraska
02-06-2002, 12:08 PM
Unless your goals are minimal growth, or in your case growth to a certain point, you are not going to do it without incurring debt.
The simple fact is that debt is a necessary tool that any business with agressive growth goals will have to utilize. It then comes down to your comfort and risk tolerance level.

fshrdan,

nice trout! Spent 9 months after college working in Yellowstone National Park! Ever been to Slough Creek? Where the cutthroat are 6lbs plus? Sure you have.

lawnMaster5000
02-07-2002, 05:42 PM
when considering if something should be bought on credit (i am not talking about the card) all of your finances need to be considered, not just how much you have in cash.

If i have $5,000 i can purchase a nice WB and make about $40,000 - $5,000 (mower) in the first year. That leaves me with about a $35,000 profit.

If i leave that $5,000 in the bank and take out a $15,000 loan then i can purchase a really nice rider. With that ZTR i will be able to bring in about $70,000. After subtracting the initial $15,000 + 12% interest you have $53,000. Add that starting $5,000 and interest on that you have almost $59,000.

Your profit w/o loan is 35K, with loan is $59k.

I'll let you decide what to do. Even if the numbers arent exactly right the decision still needs to be made on the basis of profit margin with or without the loan.

thelandscaper27
02-09-2002, 08:24 PM
If your making good money, and need to get credit established,
How do you do so?

I applied for every credit card, and banks I deal with. Noone will give me any credit. I have no co-signer.

I'm a part-timer. Hoping to get into Davey-Tree Co. Keeping 5-10 lawns weekly. Pulling in a good 2000.00 monthly.

Nebraska
02-09-2002, 10:41 PM
This months issue of Worth has an interesting article on how businesses use debt. I think it would give some insight to anyone who is anti-debt and at the same time growth oriented.

Nebraska
02-09-2002, 10:45 PM
thelandscaper,

are you pretty young? I guess so...your profile says 19, I would have to guess that is a big factor in their decision..

If I were you I would go to a small bank and start with small amount to proove that you are worth the risk. Start with something like $500 and repay in 3 to 6 months. Go back and go at $1000 and repay....it will be the only way. Start with a small bank, set a meeting with the President, and present them with a plan. Tell them that you want the opportunity to proove yourself. If that banks doesn't go for it keep going till you find one that will.. Go for the relationship. While your at it sell them your services

that's my $.02 worth...hope it helps.

thelandscaper27
02-09-2002, 10:51 PM
Nebraska,
Thanks for the input. I'll try to no, I will put it to good use.


Thankyou :)

Sean Adams
02-10-2002, 02:12 PM
I read this forum every single day. I do not post as often as many others on the site, but for good reason. Everyone has their opinion, and with so many different kinds of people, in so many different situations posting, I have found that selective posting is my best bet. I read every single post in regard to this topic about the use of credit. I agree with almost every point made.

Being debt free in life, not just in business is a great feeling. But being debt free personally is also very possible, with your business in "debt". Being in debt does not necessarily mean "being broke". That is what needs to be understood. If you are operating as a sole proprietor, then yes, you are your business and the business debt is your debt. But not every business is a sole proprietorship.

I must at least add this, even if it has been said already. You will be hardpressed to find large, growing, profitable companies in any industry that did not utilize "OPM". Other People's Money is what makes so many amazing things possible in business. It comes down to profit. Are you worth more than you owe? Can you do the things in life you want to do?

Houses, cars, educations, investments - all wonderful things. How you went about purchasing those things are choices of preference, and nothing more.

Getting a "credit education" is something that all entrepreneurs need to go through. It will only make them stronger, wiser, and more prepared for possibilities in the future. I have heard many times over that "bankruptcy is like a badge of honor for an entrepreneur." Learn from it, deal with it, and never make the same mistakes twice.

If Luke wants to live off of his own money, and it works for Luke, that is good for Luke. If he is living and operating the way he wants to operate, that is what works for him. If John Smith, 5 states away, wants to build his business on credit, and it works for him, again, good for John Smith.

I think what started as an explanation of choices and preferences quickly turned into an argument. I think if everyone not only were to express their preference of growing their business (cash or credit), but also shared why and how it worked or didn't work for them personally, it would make this topic even stronger and more valuable for everyone reading it.

To each his own. Best of Luck.

Sean Adams

David Haggerty
02-11-2002, 08:16 AM
My situation is just the opposite. I can't keep cash around.
The reason is teenagers!

If I hand one of the kids my credit card, I can literally watch the transaction happen on line. Plus I get a receipt! The cash just seems to disappear, never any change and just some mumbled excuses.

I never plan to be debt free, but I have been financially solvent for quite a while.


Lawnlad;

What an excellent post! I'm going to print that and hang it on the wall. Very well said.

Dave

Paradise Landscapes
06-04-2003, 08:08 AM
I basically think that is in which ever situation that you are in that you need credit.

I barrowd 4k and it turned into a nightmare. If anyone wants to hear my story, Should I put it here, or the new place:

What you started with and where they are now?

Let me know.

AztlanLC
06-04-2003, 11:54 AM
I was in the process of buying a house and buying the company at the same time, I put 20% for my house and 2% down for my business, to this date my business are almost debt free, and still own for my house (25 years) I refinaced my house at a rate of 6%, my business own one truck and 2 mowers, the truck is .9% and the mowers are 2.9%, I don't think I can get a better interest rate, and also helps me maintain cash in my business account.

My idea was to pay off my house as fast as posible, but then realize that I can put that money in differnt places and make more than 10%, also I think if you don't pay your house in the first 5-10 years you better off keep the loan.

Borrow money is a risk which not everyone is willing to take, for me it worked pretty good at the end, but I know of some people who would tell you the opposite.

and also I agree with Sean 100%

bruces
06-04-2003, 03:56 PM
Also, keep in mind that if you are going to have debt, it is probably better to have business debt than personal debt.

Interest on business debt is deductible, interest on personal debt, except home mortgage and student loans, is not deductible.

Business debt interest will also save self employment tax.

If given a choice, I will pay off personal debt (credit cards, vehicles, etc.) first, then business debt.

cos
06-04-2003, 04:35 PM
If I can't pay for something by the time the credit card bill comes in, I don't even bother buying it. I am not going to pay outragous interest charges to anyone. Credit cards can be a good tool if used right. I was never a credit card person and never had one for a long time. I now realize, you can't live without them.

Just my .02

Darwin
06-04-2003, 11:28 PM
You're never a true american until you are in DEBT.


A couple of the postson this thread were regarding building up your credit with taking out a loan. I would like to add a little to that.

If you would like to build up your credit rating then it's easily done in a few steps.

Go to a local bank in your area and get a $500-$1000 loan.

Go to another local bank in your area and do the same.......then repay the first.

Continue this a couple more times and your credit rating should show that you re-payed small loans in an extremely timely fashion, never late.

That only leaves you with paying back the last.

Which, if you plan for this, you should have the cash already available to make this payment as well.

leadarrows
06-04-2003, 11:58 PM
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Have you ever actually tried this^^? I don't think this would be over looked by lending institutions. Do you know it hurts your credit to have multiple credit checks in a short period of time. I have been told this by several bankers and accountants. It raises red flags for them for reasons I don't completely understand. But I have had this problem in the past. You can explain them away most times but it does raise the issue of seeming desperate for the money,something you don't want to do. Banks only want to loan money to those who can afford to pay it back and if you appear desperate you appear to be a risk.

I am in dept a little bit my self I had to get a high interest loan because of my credit rating being pretty much non existent. For years I always paid cash for every thing. Then my wife and I applied for a home loan. HA. No credit history no loan.
So we got a high interest loan bought a dump truck. Used the dump truck to make side money while keeping our day jobs. Then after two years of saving and paying on that loan we were able to secure a regular small business line of credit at a more reasonable rate and payed off the high interest loan. With out these loans I would not be self employed and loving it. Oh and the house we finally got an FHA loan for the five acres we have now. I am currently seeking the funds to buy my grand mothers 102 acre farm. I have to buy out my dad and aunt. :( If I had an aversion to bowering money I would have no chance at obtaining my dreams.

Darwin
06-05-2003, 12:23 AM
Every time you or someone else requests a credit report from any source your rating does drop.

I've spoke with several bankers who will attest to that.

I supplied my above information for folks who do want to gain an advantage on the credit rating issue.

Mix it up a little ...... such as the prices of your loans....... list different reasons for your need to recieve such loans.

It all boils down to building credit.

This method should achieve just that.


I do agree with you though, that if it is scrutinized extremely closely, then there may be questions. If that is the case then there are the above-mentioned reasons for acquiring these loans.

The bottom line is, it does build your credit, and gives you financial credibility.

grassyfras
06-05-2003, 01:03 AM
"Buy low sell high" First thing my dad ever taught me

mtdman
06-08-2003, 12:00 PM
Credit is a tool, and just like any tool, it can be used to your advantage or to hurt you. I don't mind owing on a house, especially with interest rates as low as they are now. Credit cards and high interest rate loans are not so attractive. It's a matter of what you can do with the money now vs how much it will hurt paying back later.

Green in Idaho
06-08-2003, 08:50 PM
Borrow $10,ooo to buy equipment at 10% for one year payable in full at the end of the year= $11,000 due.

In the mean time the equipment allows you to produce an income for your lifestyle AND an extra $1,500 for 8 months that goes to a savings pool= $12,000, right? End of the year the $11,000 is paid and there is $1,000 left over. Who wouldn't borrow to do that? Not to mention you now own the equipment to produce the income in the following year and to build a pool of your own money. Even with such a pool, any time you can borrow for less than the cost it is a good business move.

Business debt is okay if the cost is less than the benefit.

Problem is many borrow for a set cost but the equipment does not bring in the return necessary to pay for itself. i.e. a mower that is only used 30 hours in a season but cost $3,000.

*****
Personal debt is what many are basing their opinions on and it is much more risky. Personal debt doesn't produce an income or a return so the cost is usually more than the benefit.

If your house did not increase in value more than the cost of borrowing for it, even it would be a bad move to buy on a mortgage.

Once again it is a matter of math, NOT opinions.
:dizzy:

dave80
06-09-2003, 02:55 AM
I am 22 years old right now. Sure, I have had some credit problems in the past. Does this mean that I am stupid? No. It just means that I made some mistakes. One of my greatest problems to overcome is that I am very impatient and spend money impulsively, but with time I am improving on that. Up until last year, I only used a 21" Lawn-Boy and Stihl trimmer, and yes I made some extra money. However, I had a few accounts that were larger and I knew that I had the opportunity to gain some new ones if I had some bigger equipment. I borrowed $3500 to buy a 48" walk-behind w/sulky. Now my business has expanded to the point that next year I will be going full time. I began the summer with $14,000 in debt, between credit cards, car loans, and mower payments. At the end of summer my debt will be paid for. Was it a mistake to borrow this money? I would argue no. However it might have been a mistake to go out and buy a $10-12 k ZTR. Without the WB, I would never be in the position that I am in now. Oh, I also forgot to mention that I still go to college full time and support my girlfriend and my 9 month old daughter with my income alone.
Those who said that credit is a tool are exactly right. I used it wrong and it burnt me. But with a little common sense it has helped me a great deal.

The business principle here is simple. It's called leveraging. Look at any business that has employees, including LCO's. The rate charged for an employee might be $35/man-hour, but after expenses for that employee including wages, insurance, etc, the owner is going to have a cut left over for himself, and he did no work. Another example involves real estate. Say you look at an apartment complex that cost $2 million. Most investors will put down anywhere from 10-30% and finance the rest. Once again, we have leveraging. Sure they might pay $50,000 a year in interest, but what if after all expenses are paid, including the mortgage, the property has an annual income of $100,000. Borrowing money isn't the most evil thing in the world, you just have to know how to use it.

For another explanation, follow the link and read the post by brucec32:

http://www.lawnsite.com/showthread.php?s=&threadid=46897

Green in Idaho
06-09-2003, 04:42 AM
Originally posted by dave80
However it might have been a mistake to go out and buy a $10-12 k ZTR. With{}the WB, ... I still go to college full -time times=&threadid=46897[/url]
Dave80:
Bingo! You win the prize!

A ZTR AND a w/b without enough working time to make them both financially efficient for you. You might consider getting a helper to run one of those to maximize your time on the curb and get more accounts to support the extra equipment.

Remember to help your girfriend with the baby even MORE than you 'think' you can. It sounds like you are balancing a whale on a high-wire. I was there 12 years ago, yo. Best wishes for a cash cow summer! Maybe you'll find a ring somewhere along the way. ;)

lawnperfections
10-01-2004, 01:02 PM
I have been away for a while and since Iím a glutton for punishment I thought I would bring this post to the top.

Update:
Iím still living the debt free life, built the dream house.
$325k, 3644 sqf and its sweet

Still putting 15% in to retirement,
Still on track with the kids college fund
Still paying cash for cars

Started advising other at work on the values of living debt free
Still cutting part-time after 6 years, really considering going full time.


How is everyone

HOOLIE
10-01-2004, 11:36 PM
I agree that credit is a tool, to be used wisely. Being debt-free is nice and admirable, but there are situations where credit is the wiser choice. If you're a cash only type of guy, your FICO scores are not going to be as high as they could be, that could mean higher interest rates on mortgages and car loans. Its good to make some purchases regularly on credit and then pay them off in full each month. Banks love that.

A story my old boss' dad once told me- now this guy was a millionaire, owned 6 or 7 rental properties, real set-for-life kind of guy. He was telling me how he took out a student loan for one of his granddaughters. I asked him why he didn't just pay-in-full for her tuition. Because, he said, my money is in places where its earning 10,15, 20 percent a year, and the loan is only 3%. So he'd be LOSING money by taking cash out to pay the tuition.

Something to think about.

lawnperfections
10-03-2006, 09:35 AM
I'm back for another update......and still a glutton for punishment. Still living debt free.......paid for house worth $430k....almost $100k in Traditional and Roth IRA's......$100k in savings account(don't know why I haven't put them in Mutal funds yet)....College savings for the kids going extreamly well. Paying cash for everything even cars.....buying an 04 G35 Coupe this week (let someone else take the butt kicking on the Depreciation).

Check my credit score for those who think that cash kills your FICO......not that I care because I will never borrow money again for any reason.....it was 826.

Get on the Dave Ramsey bandwagon....go to www.daveramsey.com and listen

Do the 7 Baby Steps
1. $1,000 to start an Emergency Fund
2. Pay off all debt using the Debt Snowball
3. Three to six months of expenses in savings
4. Invest 15% of household income into Roth IRAs & pre-tax retirement
5. College funding for children
6. Pay off home early
7. Build wealth and give! Invest in mutual funds and real estate

Myth: Debt is a tool and should be used to help create prosperity.
Truth: Debt is not a tool; it is a method to make banks wealthy, not you.

Debt is dumb. Most normal people are just plain broke because they are in debt up to their eyeballs with no hope of help. If you're in debt then you're a slave, in the sense that you do not have the freedom to use your money to help change your family tree. According to a recent USA Today article about debt, 78 percent of baby boomers have mortgage debt, 59 percent have credit card debt, 56 percent have car payments.

It takes a lot of will, discipline, courage and help to slay the debt monster. But it can be done. Imagine how much you could put toward retirement if you just didn't have a stinking car payment? This is how the wealthy build their wealth. Debt is really dumb. Welcome to the real world!

HOOLIE - If you plan for College when they are young then you don't have to take money from anywhere.

rutwad
10-03-2006, 12:52 PM
Recently, I got hammered for a blunt comment I made " If you can't buy it for cash don't buy it". Below are some of my philosophies on money both Personal and Business. I would like to see if there are more weirdos like me. What are yours thoughts on money?

I can see that my "pay cash" comment was a little too blunt for the more "sensitive" members of the site(my bad), so I will expound on my comment. I would hope that part of your business plan would include setting aside money for emergencies and future equipment purchases, if its not, it should be. The crap advise that you are receiving from bigjames and others are the reason there are so many bankruptcies now. Bigjames's plan is obviously working for him, i.e. "I got some real bad stuff on my credit". You wouldn't take lawn care advise from someone with a dump for a yard so DON'T TAKE FINANCIAL ADVISE FROM BROKE PEOPLE. It was Dave Ramsey that said "A child does what feels good. An adult however, delays pleasure, formulates a plan and sticks to it. Using credit is a childish way to fix an adult situation." Buy used equipment if necessary, sell some stuff you don't use, have a garage sale, whatever. Formulate a plan (that doesn't include credit) and stick to it. If you fail to plan then plan to fail.

And

Your right credit is normal. The average American has over $8000 on a number of card and that doesn't include the other money pit "cars". Yes, that's normal. Who wants to be normal, I would rather be weird.

Weird is:

Being debt free

Having 3 to 6 months of expenses in an emergency fund

Investing in retirement accounts - 5% of income in company match 403b and 10% or 3k a year in a Roth IRA for me and the same for my wife

Planning for your childs future - Educational IRA's, UTTMA's or a Mutual fund so if they don't want to go to college they have money to pursue their passion - like maybe a Lawn Business

Paying of the house in 5 to 7 years and not 15 or 30

Making over 95k but living on 50k to 60.

Most of all weird is "Living on LESS than you make" so that you can do all of the above.

Your intelligent comments are welcomed.



Sorry I have not read your post until now, but Dave Ramsey, welcome to the board.

Thirdpete
10-03-2006, 05:30 PM
see the problem is, looking at it like debt. eff that.

i opened an account at shemin nurseries and had to pay cash. so, customers had to pay for materials before work started and then they were installed, paying the remainder later. usually a 50/50 payment plan worked with this. one day, they said anyone could get instant credit. ten minutes later i had a 2000 dollar credit line with them. excellent. buy things that i have cash for, like materials being installed, and pay them off the next day. that shows that youre using the account and paying it off. that worked for one year.

next year, got a credit card from my business account. again, buying things i would normally buy like dump fees, oil filters, etc. paying for things i would normally pay cash for. but now, i get points. then, because i had spotless credit, financed a mower, six months no payments then interest kicks in. well, five months after buying the mower, i mailed in a check for payment in full. again, spotless credit.

now i'm preapproved for a 25k business loan from the bank, and i'm 20 years old. the point is, use credit to buy things you would normally buy anyway, and that's how you build credit. let other people's money pay for your things that you normally pay for, then pay them at the end of the month. no different than paying the phone company at the end of every month. then when the time comes, take that leap for expansion.

Az Gardener
10-04-2006, 12:07 AM
see the problem is, looking at it like debt. eff that.

i opened an account at shemin nurseries and had to pay cash. so, customers had to pay for materials before work started and then they were installed, paying the remainder later. usually a 50/50 payment plan worked with this. one day, they said anyone could get instant credit. ten minutes later i had a 2000 dollar credit line with them. excellent. buy things that i have cash for, like materials being installed, and pay them off the next day. that shows that youre using the account and paying it off. that worked for one year.

next year, got a credit card from my business account. again, buying things i would normally buy like dump fees, oil filters, etc. paying for things i would normally pay cash for. but now, i get points. then, because i had spotless credit, financed a mower, six months no payments then interest kicks in. well, five months after buying the mower, i mailed in a check for payment in full. again, spotless credit.

now i'm preapproved for a 25k business loan from the bank, and i'm 20 years old. the point is, use credit to buy things you would normally buy anyway, and that's how you build credit. let other people's money pay for your things that you normally pay for, then pay them at the end of the month. no different than paying the phone company at the end of every month. then when the time comes, take that leap for expansion.


The problem from taking advice financial or otherwise from such a young person is that you have not faced much adversity.

No disrespect, you have done well, congratulations. Anyone can make a plan and follow the plan as long as nothing unexpected occurs everything works out fine.

What happens if your rig was stolen and you could not work.
What if you were injured and could not work.
What happens when (not if by the way) you don't get paid for a job.

It gets even worse when you are bigger and have employees and 1/2 of your company decides to go to South America and open a brothel. Sound silly I know but this is a situation I was recently faced with. Don't give me any crap about hiring Mexicans either these are all American, US citizens. The fact is the longer you are in business the more weird situations you will be faced with. They rarely go along with the plan

Point is if things are paid for no worries. When you are in debt you are are walking around with a noose around you neck, fine if you don't slip. Especially with the new bankruptcy laws.

Just be careful and realize the universe doesn't give a crap about your plan.

Thirdpete
10-04-2006, 08:45 AM
The problem from taking advice financial or otherwise from such a young person is that you have not faced much adversity.

No disrespect, you have done well, congratulations. Anyone can make a plan and follow the plan as long as nothing unexpected occurs everything works out fine.

What happens if your rig was stolen and you could not work.
What if you were injured and could not work.
What happens when (not if by the way) you don't get paid for a job.

It gets even worse when you are bigger and have employees and 1/2 of your company decides to go to South America and open a brothel. Sound silly I know but this is a situation I was recently faced with. Don't give me any crap about hiring Mexicans either these are all American, US citizens. The fact is the longer you are in business the more weird situations you will be faced with. They rarely go along with the plan

Point is if things are paid for no worries. When you are in debt you are are walking around with a noose around you neck, fine if you don't slip. Especially with the new bankruptcy laws.

Just be careful and realize the universe doesn't give a crap about your plan.

I have insurance on the rig against theft and the credit line to buy everything if need be, right away. said rig consists of a 01 F150 with 95k miles, a 48 wb, a 32 wb, a stihl trimmer, stihl backpack, 6x12 open trailer, and a bunch of other random stuff like wrenches and trimmer line.

if i was injured and couldnt work, i'd be up the proverbial creek without sufficient means of locomotion. thats the risk of flying solo, but its the only way i can do it with being in school full time.

to be honest, i havent done any jobs that are greater than a month's reciepts of lawn maintenance. again, because i'm in school, i usually miss the time to bid on all the decent sized projects earlier in the year (up until the end of may i'm busy with school) so i just focus on lawns. in the summer, most of my work comes from the 22-25 lawn customers i have. if i don't get paid, that would be bad, but again... i think the biggest job i did this year was just under 1,000 dollars. that's not sending me to the poorhouse.

if half my employees left to start a brothel... wow i haven't heard that one before. i too agree that you can't just snap your fingers and some mexicans appear ready to work, so i know that wouldnt be feasible. i would imagine i would look for legit day labor, work myself, maybe ask a brother of mine to work with me in the time being. that would just be until i find more work. not sure if half your employees means 20 employees or 3 employees but either way, that sucks and i'm sorry to hear that. \

Randy J
10-04-2006, 09:09 AM
...

next year, got a credit card from my business account. again, buying things i would normally buy like dump fees, oil filters, etc. paying for things i would normally pay cash for. but now, i get points. then, because i had spotless credit, financed a mower, six months no payments then interest kicks in. well, five months after buying the mower, i mailed in a check for payment in full. again, spotless credit.

now i'm preapproved for a 25k business loan from the bank, and i'm 20 years old. the point is, use credit to buy things you would normally buy anyway, and that's how you build credit. let other people's money pay for your things that you normally pay for, then pay them at the end of the month. no different than paying the phone company at the end of every month. then when the time comes, take that leap for expansion.

The thing is, if you pay cash you don't need to build credit. When you let "other people's money" pay for things, you have to pay them a fee. That means less money for you. While debt free may not always be possible, it sure simplifies things. In your last post you admit that if some customers don't pay you'll be in trouble. That alone creates stress in your life. It would be much easier to treat non-payments as an inconvenience more than an emergency. I think debt free is a goal everyone should shoot for, and the sooner the better you're life will be!

Thirdpete
10-04-2006, 09:15 AM
The thing is, if you pay cash you don't need to build credit. When you let "other people's money" pay for things, you have to pay them a fee. That means less money for you. While debt free may not always be possible, it sure simplifies things. In your last post you admit that if some customers don't pay you'll be in trouble. That alone creates stress in your life. It would be much easier to treat non-payments as an inconvenience more than an emergency. I think debt free is a goal everyone should shoot for, and the sooner the better you're life will be!

it wouldnt kill me if a customer didn't pay me, not now, because my jobs are small. iit would be an immense source of stress.

the only debt i have right now is school loans. no business debt. but i have a lot of credit (bank, credit card, two suppliers, two dealers) that if i need, i can use. the only way to have that small safety net was to use the credit once i had the opportunity.

i'm working on building a cash safety net too, but it would seem smarter to me to have your bases covered in more ways than one.

Randy J
10-04-2006, 09:38 AM
...

i'm working on building a cash safety net too, but it would seem smarter to me to have your bases covered in more ways than one.

Cash will always be king.

Thirdpete
10-04-2006, 08:53 PM
cash is king but if you have credit and cash, is that bad? is it bad to have a line of credit open if need be?

Randy J
10-05-2006, 07:25 AM
cash is king but if you have credit and cash, is that bad? is it bad to have a line of credit open if need be?

Not bad to have a line of credit - only bad to use it!

Think about it - if you have cash your money works for you. If you borrow someone elses money works for them. Bankers don't get rich for nothing!

Thirdpete
10-08-2006, 12:07 AM
if you have money in a savings account the bank is making money, thats a moot point. if you carry credit card balances with 20 percent interest, you're losing money. but its better to have your cash in an interest earning account and pay off your credit cards at the end of every month, right? that way you get interest and the credit card companies don't. plus you earn points, rewards, etc.

just pay the damn bill at the end of the month. same as cash.

topsites
10-08-2006, 12:17 AM
Well... There's a fine line to be drawn here, everything apparently has to be studied so as to determine the least expensive way.

Granted, paying interest is the worst way but if you have money in a 5% APR account (mind you, $9000 is enough to pay you $35 / month in interest!)... So say I have that much and I want to buy a Ztr and it costs $8,500 and I can get a 3 yr. 0% interest 6-month no payment loan, would it not be smarter to take the payments route while the money continues to accrue interest? I think so...

But then there are invisible ways in which we get charged interest, such as paying for your car insurance in payments instead of paying it all in one lump sum. This is tricky because the agents assure us there are NO interest fees (yes but they do have a $10 / month administrative fee or some other such crap!)... So, pay this in one lump sum.

Then I watch folks taking that very thing I just said and running out and buying a brand-new car on the same principles... But here's where failure sets in: On a car loan, you have to have FULL coverage insurance.

So, pay for the car cash and get minimum liability insurance and pay that in one lump sum.

But that's not just weird, that's crazy I am told.
What if you wreck, they ask me?

I tell them: Drive slow, real slow. Don't tailgate and stay OUT of traffic.
This way it's also cheaper in the long run due to no moving violations, but you are right, we're too weird.
Btw, having your electric / phone / cable come direct out of your bank account RULES (no checks, no stamps, no time wasted, never a late fee).

I've barely scratched the surface, should I go on they'd put me away.

Randy J
10-08-2006, 07:14 AM
...[/QUOTE]

Really this can't be argued based on math. I think it's the human factor that might make the difference. How many people would really leave that $9000 in the bank while paying off the zero interest loan? Many - if not most, would instead use the $9000 on something else. Or they may use that $9000 for collateral on another loan. If your disciplined enough to pay off the credit card at the end of the month, then no it doesn't cost you anything. However, how many times have any of us bought something with the intent of paying it off at the end of the month - but then something else comes up.
For that reason I intend to go debt free from this point on, but I know some obviously can and do make debt work for them - especially if they can stick you the principles you've described.

rutwad
10-08-2006, 07:49 AM
...

Really this can't be argued based on math. I think it's the human factor that might make the difference. How many people would really leave that $9000 in the bank while paying off the zero interest loan? Many - if not most, would instead use the $9000 on something else. Or they may use that $9000 for collateral on another loan. If your disciplined enough to pay off the credit card at the end of the month, then no it doesn't cost you anything. However, how many times have any of us bought something with the intent of paying it off at the end of the month - but then something else comes up.
For that reason I intend to go debt free from this point on, but I know some obviously can and do make debt work for them - especially if they can stick you the principles you've described.[/QUOTE]

I for one charge as much as I can to my credit card. I may have the cash in one pocket and the cc in the other, and I will pull out the ole plastic. They have a 30 day grace period with no interest so monthly charges paid each month are charged no interest. But I only charge what I can pay for. If I don't have the cash, then I don't buy it (even though I use the CC). Now each and every month I have more money in my accout earnin g interest for my while I am paying no interest on my cc. And my CC pays back 1% cash on all purchases, so there's more interest! These are just some of the benefits of using a CC versus paying cash

Randy J
10-08-2006, 08:49 AM
I for one charge as much as I can to my credit card. I may have the cash in one pocket and the cc in the other, and I will pull out the ole plastic. They have a 30 day grace period with no interest so monthly charges paid each month are charged no interest. But I only charge what I can pay for. If I don't have the cash, then I don't buy it (even though I use the CC). Now each and every month I have more money in my accout earnin g interest for my while I am paying no interest on my cc. And my CC pays back 1% cash on all purchases, so there's more interest! These are just some of the benefits of using a CC versus paying cash

Well, like I said, I can't really argue with that. Not many are that disciplined though, myself included. For that reason I still chose to use only my cash from here on out.

TJLANDS
10-08-2006, 12:53 PM
The thing is, if you pay cash you don't need to build credit. When you let "other people's money" pay for things, you have to pay them a fee. That means less money for you. While debt free may not always be possible, it sure simplifies things. In your last post you admit that if some customers don't pay you'll be in trouble. That alone creates stress in your life. It would be much easier to treat non-payments as an inconvenience more than an emergency. I think debt free is a goal everyone should shoot for, and the sooner the better you're life will be!
Randy, nothing personal but I think you are giving bad advice . If you want to have a small, very,very small operation maybe just maybe you could survive on a cash basis. But I still think it is a bad way to do business. If you want to grow and be a business Owner you need to establish good business credit to grow and expand when necessary.

meets1
10-08-2006, 11:33 PM
I just purchased a new New Holland Boomer. Cab, snow blower, loader, tiller, mower. Financed for 4 years. No down, no payments until 4 year, no interest - WHY NOT DO IT.

I need the tractor, awesome time to buy it. I have 4 years to lay out a payment plan. If you guys have 35-40K laying around to just plop down on the unit- I don't think I would be in the lawncare/landscape biz. I would keep my money.

Also - how many that responded to this thread have A. Inherited money to use to start biz? B. This is the 2nd job to have fun with C. Wife has awesome job and therefore I can live off her even if lawn care is a break even deal? D. Your a young/old guy with daddy's money behind you to bankroll the biz? E. Your other biz subsidies your mowing habits?

I have a biz credit card that gets paid monthly. It also redeems points to use. Is that a bad thing?? I get gas at a station that offers 5% off if paid on now, pay with credit card, get 5% off, then that total earns me a % at the end of the month and I bank those points for use later.


Cash is nice, but in business you need to the ablitiy to go to the bank and ask for a loan to keep things moving.

rutwad
10-09-2006, 12:16 AM
Financed for 4 years. No down, no payments until 4 year, no interest


:confused:

Randy J
10-09-2006, 07:40 AM
Randy, nothing personal but I think you are giving bad advice . If you want to have a small, very,very small operation maybe just maybe you could survive on a cash basis. But I still think it is a bad way to do business. If you want to grow and be a business Owner you need to establish good business credit to grow and expand when necessary.

No offense taken, however, I can provide examples of people who are multi-millonaires, and who did it all with cash - the most notable Dave Ramsey. I think you can build a bigger better business if you do it with cash than you can with credit. Now to be honest, it will take longer. But when you get there you'll have a much better foundation, knowing you owe nothing - and that no one can come take your stuff. I'd rather have a $100,000 year with no payments being made out, than have a $250,000 owing $$$ to creditors. If nothing else, I can sleep better knowing if someone cancels my services, I don't have to sweat it. If I have to worry about making payments, and someone cancels, I will be sweating bullets. Some people can manage debt very effectively, but many can not. Though it works for a lot of people, I would say telling someone they need credit to build a business is actually worse advice.

rutwad
10-09-2006, 08:23 AM
Sorta related, a good friend of mine is a car salesman. A 71 yr. old lady came in to buy a car and she had no credit. Not bad, just none. She owed nor had owed anyone, but now she wanted to finance a car. She could not get approved! Cash is a great option, but it's nice to build credit also.

TJLANDS
10-09-2006, 10:52 AM
No offense taken, however, I can provide examples of people who are multi-millonaires, and who did it all with cash - the most notable Dave Ramsey. I think you can build a bigger better business if you do it with cash than you can with credit. Now to be honest, it will take longer. But when you get there you'll have a much better foundation, knowing you owe nothing - and that no one can come take your stuff. I'd rather have a $100,000 year with no payments being made out, than have a $250,000 owing $$$ to creditors. If nothing else, I can sleep better knowing if someone cancels my services, I don't have to sweat it. If I have to worry about making payments, and someone cancels, I will be sweating bullets. Some people can manage debt very effectively, but many can not. Though it works for a lot of people, I would say telling someone they need credit to build a business is actually worse advice.
Dave Ramsey? you gotta come up with a better example than someone that makes money off of people selling his oppinion on finance.

Thirdpete
10-09-2006, 11:09 AM
plus, single incidents tend not to hold weight when talking about everybody else, just because there's an exception to every rule.

i can't see the reason not to have credit, other than, you dont trust yourself with money enough. personally, i trust my ability to manage money (or a lack there of mostly lol) so its not so much an issue to have credit. i have an 8k credit card in business name but pay it off every month, even if i pay for a mower or new engine with it (have done them both). i can handle that. if other people can't, they shouldnt get credit.

but either way, anyone who refuses to look into it is just a fool.

TJLANDS
10-09-2006, 06:35 PM
Though it works for a lot of people, I would say telling someone they need credit to build a business is actually worse advice.
If you want to be a business owner, with 4-5 crews out seven days a week not just a self employed one truck owner operator, you need to establish good business credit to survive.
You would have a very hard time proving otherwise.

mrusk
10-09-2006, 06:56 PM
There is nothing wrong with using credit to build your business. I pay out about 1600 a month in load payments between my truck and my skid steer. My truck is 0% for 3 years and my skid steer is 3.5 for 5. Paying the skid steer payment saves me so much $$ over renting its not even funny.

If i get hurt and can't work and all my workers leave i will not go bankrupt. Just because you have loans doesn't mean your living month to month!!!! Yea i don't like writing the checks out every month, but its a necessary evil to building a business.

Why pay cash and kill your cash flow when you can finance to protect the money you have in your reserves incase you get hurt or have a low perid of business.

Matt

Grass Kickin
10-09-2006, 08:58 PM
I'm with you if i can't pay cash i DON'T need it.

I haven't used a credit card in 8 years. I recently got one for my business, I own 2 businesses. I haven't used it, got it just in case. Paying cash is good though.

meets1
10-09-2006, 09:54 PM
I realize this industry of lawn care doesn't relate to farming but how can a farmer afford a $300,000 JD combine, maybe a $125k TRACTOR, A wagon or two or a semi, farm 1500 acres of land and pay cash for everything??

Grass Kickin
10-10-2006, 07:13 AM
That does make sense but I would think one would take out a loan rather thasn get bombarded on a credit card for 125K

Az Gardener
10-10-2006, 08:33 AM
I realize this industry of lawn care doesn't relate to farming but how can a farmer afford a $300,000 JD combine, maybe a $125k TRACTOR, A wagon or two or a semi, farm 1500 acres of land and pay cash for everything??

All these things can be leased and some tax professionals may even say its a better way to go. Most people want to own because they are greedy they want to squeeze every dime out of things instead of being happy with the profit they do make.

I am no different. I have resisted leasing space for my business for years because I wanted to buy. But it just is not in the cards for now so I have finally leased a place and it has already made my life much better and the guys are happy about it too. Bulls make money, Bears make money, pigs get slaughtered.

meets1
10-10-2006, 09:31 AM
That is true. I just still think you need credit - cash is awesome but can't always be done. I guess looking at it - our personal stuff is usually paid with cash. Although I owe a few years yet on my house payment which was set for 15 should be off in 91/2 - 10 years. I have 2 little boys, an awesome wife, and things we do as a family are all paid for. But comes biz - I use credit.

Sunscaper
10-10-2006, 09:32 PM
When I first started I bought alot of things on credit with the anticipation of increased sales and paying things off quickly. After 3 years when that didn't happed I am stuck paying the minimal payments and I am kicking myself for it now. I don't regret the new bobcat and dump truck. but other smaller things like mowers, trailers, etc. could have been purchased more effeciently. I recommend the cash method, it's not as sexy but you'll sleep much better and have more in the end. That is my new philospohy also.

Thirdpete
10-11-2006, 12:08 AM
well small stuff like mowers can definitely be paid for in cash but someone already said it... who has all that money sitting around for a bobcat and a dump?

meets1
10-11-2006, 09:00 AM
That is so true. A mower or handheld equipment I hope can be paid for as you need them or replace items of equipment. But if your looking at a Skid, dump, tractor, who has that $$ just sitting around. That would be stupid if ya did cuz any thing we have sitting gets invested or at least switched to a higher paying interest account.

LawnBrother
10-11-2006, 09:35 AM
Recently, I got hammered for a blunt comment I made " If you can't buy it for cash don't buy it". Below are some of my philosophies on money both Personal and Business. I would like to see if there are more weirdos like me. What are yours thoughts on money?

I can see that my "pay cash" comment was a little too blunt for the more "sensitive" members of the site(my bad), so I will expound on my comment. I would hope that part of your business plan would include setting aside money for emergencies and future equipment purchases, if its not, it should be. The crap advise that you are receiving from bigjames and others are the reason there are so many bankruptcies now. Bigjames's plan is obviously working for him, i.e. "I got some real bad stuff on my credit". You wouldn't take lawn care advise from someone with a dump for a yard so DON'T TAKE FINANCIAL ADVISE FROM BROKE PEOPLE. It was Dave Ramsey that said "A child does what feels good. An adult however, delays pleasure, formulates a plan and sticks to it. Using credit is a childish way to fix an adult situation." Buy used equipment if necessary, sell some stuff you don't use, have a garage sale, whatever. Formulate a plan (that doesn't include credit) and stick to it. If you fail to plan then plan to fail.

And

Your right credit is normal. The average American has over $8000 on a number of card and that doesn't include the other money pit "cars". Yes, that's normal. Who wants to be normal, I would rather be weird.

Weird is:

Being debt free

Having 3 to 6 months of expenses in an emergency fund

Investing in retirement accounts - 5% of income in company match 403b and 10% or 3k a year in a Roth IRA for me and the same for my wife

Planning for your childs future - Educational IRA's, UTTMA's or a Mutual fund so if they don't want to go to college they have money to pursue their passion - like maybe a Lawn Business

Paying of the house in 5 to 7 years and not 15 or 30

Making over 95k but living on 50k to 60.

Most of all weird is "Living on LESS than you make" so that you can do all of the above.

Your intelligent comments are welcomed.
While financing has it's positives, I am with you regarding your business financial philosophy. I have structured my business to always run "in the black", and it seems to be working well. Less worries also, if things slow down there's no truck payments, etc. to make, it's all paid for. I would consider financing a new piece of equipment in an emergency, but I could most likely find a nice used whatever-it-is for the right price, so why finance?
I understand that a cash flow system (financing for start up/new equip., etc.) is faster, it comes with much more risk, and less positive cash flow. I am playing it safer and as a result may see slower growth (but not that much slower), and I have the added benefits of enjoying a higher net and fewer worries.

meets1
10-11-2006, 09:31 PM
I am looking at this and it seems that everyone has a different idea on this subject. I am getting our skid fixed - the bobcat dealer has no interest, no down, etc for 3 yrs. A new S205 machine he will sell for $25K - 1.8 hrs, cab, heat, no busket. He has the exact machine that a city traded in with 500 hrs, 1 yr old - with 5 yrs left of warrenty - asking $22K. New unit has 1000 hr warrrenty or 6 yrs. I guess if you had the money - would you buy the used one or finance the remaining and buy the new??

Thirdpete
10-11-2006, 10:51 PM
new. its worth it to me to know where a piece of equipment has always been, always. cant do that unless its new.

TJLANDS
10-11-2006, 10:56 PM
I am looking at this and it seems that everyone has a different idea on this subject. I am getting our skid fixed - the bobcat dealer has no interest, no down, etc for 3 yrs. A new S205 machine he will sell for $25K - 1.8 hrs, cab, heat, no busket. He has the exact machine that a city traded in with 500 hrs, 1 yr old - with 5 yrs left of warrenty - asking $22K. New unit has 1000 hr warrrenty or 6 yrs. I guess if you had the money - would you buy the used one or finance the remaining and buy the new??
Since I am one of the pro-credit guys I would say buy the new machine and let it pay for itself, but only if it is not going to sit and make no money. Why put out 25k all at once.
Then the cash guys would say put out the 25k and who cares if it makes money, its paid for...just kiddin.
You just have to go with the business decision that makes sense for you.
Also check your tax situation.

Randy J
10-12-2006, 07:37 AM
If you want to be a business owner, with 4-5 crews out seven days a week not just a self employed one truck owner operator, you need to establish good business credit to survive.
You would have a very hard time proving otherwise.

If you want to use credit fine. However, this statement if flat out wrong - and a perfect example of what's driving the "saving" crisis in America today. The "I want it now" syndrome. You can build a fantastic business by using cash, but it will most likely take longer. I am simply arguing that even though it takes longer, someone who builds his business with cash is much more secure than someone who uses credit. My emphasis has shifted from "I want it now", to "I'll take my time building it, and keep it". And if you owe, and get hurt and can't work anymore, than I'm curious on how you'll make payments. If you have a ton of savings, great. But what happens when that savings is used up?
Again, I will not argue that some people get rich using credit. My argument is that getting rich using cash is much, much less risky - and much more enduring.

Thirdpete
10-12-2006, 08:51 AM
nobody's going long term on stuff like mowers and trucks, a few years at most. not like a 30 year house payment. that being said, financing things here and there, if you can pay the monthly payments or pay it off early, isn't all that risky. its worse if you're a solo operator, obviously, but i thought the point of getting credit and financing things was growth and if i was working solo, i wouldn't need to finance a skid steer, two trucks, three mowers, attachments for the skid, etc.

mrusk
10-12-2006, 08:56 AM
Do any of you guys who are against credit running a decent size operation, or are you just part timers?

I belive it is always better to use someone elses money!!! Why would i lay out 35k for a new skid steer when i could finance it at 3.5 and get 4.5% in a money market account?

Some of you people are out of your minds. How is it risky using credit to build your business if you keep a balance that is 2-3 years of payments in your business checking account? How is that risky?

I think paying cash is more risky. It kills your cash flow.