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  #181  
Old 03-06-2013, 12:13 PM
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LindblomRJ LindblomRJ is offline
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A revolving line is handy. If you can finance at slow rate for something large, a truck, large equipment, or trucks.
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  #182  
Old 03-06-2013, 01:16 PM
precisionlawnandlandscape precisionlawnandlandscape is offline
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Guess i will chime in with my $.02 worth. 1st off, anyone who says "all debt is dumb", is well, for lack of better words, "DUMB". Yes, if your growing a "lawn care" business, you shouldn't have a problem growing somewhat debt free. however, and i don't mean to piss anyone off here, if you try to grow a "real" business, and by this i mean, manufacturing company, retail store, excavating company, all of which require MAJOR investments of cash, to both start and to maintain. This simply is not going to happen strictly on cash only. If you try to do any of the above on cash alone, you will never grow to any size in your lifetime. Now there are probably a FEW exceptions to this, but very few.

Next thing, i will use an example that i witnessed first hand. My grandparents are very wealthy (in the millions). They bought a motorhome about 5 years ago. Price tag, a cool $495,000. They paid $395,000 in cash and financed the other $100,000. I immediately asked her, why would you do that, you have the other $100,000 in the bank. She said that's how i got all my money, by being smart and knowing when to pay cash and when to finance. I said, please explain then!!! She said we financed the other $100,000 at 0% interest for 12 months. That is a payment of $8,333.34, we then pay that with our credit card each month (which has a $50,000 limit). When we get the bill we pay it off right away, so no interest there. I said why, what have you gained by doing this. She said our card pays 5% cash back, so we receive a little over $416 each month from the credit card company. She said "easiest $416 a month i ever made" Now who looks like the dummy?
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  #183  
Old 03-06-2013, 01:32 PM
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Patriot Services Patriot Services is online now
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Quote:
Originally Posted by precisionlawnandlandscape View Post
Guess i will chime in with my $.02 worth. 1st off, anyone who says "all debt is dumb", is well, for lack of better words, "DUMB". Yes, if your growing a "lawn care" business, you shouldn't have a problem growing somewhat debt free. however, and i don't mean to piss anyone off here, if you try to grow a "real" business, and by this i mean, manufacturing company, retail store, excavating company, all of which require MAJOR investments of cash, to both start and to maintain. This simply is not going to happen strictly on cash only. If you try to do any of the above on cash alone, you will never grow to any size in your lifetime. Now there are probably a FEW exceptions to this, but very few.

Next thing, i will use an example that i witnessed first hand. My grandparents are very wealthy (in the millions). They bought a motorhome about 5 years ago. Price tag, a cool $495,000. They paid $395,000 in cash and financed the other $100,000. I immediately asked her, why would you do that, you have the other $100,000 in the bank. She said that's how i got all my money, by being smart and knowing when to pay cash and when to finance. I said, please explain then!!! She said we financed the other $100,000 at 0% interest for 12 months. That is a payment of $8,333.34, we then pay that with our credit card each month (which has a $50,000 limit). When we get the bill we pay it off right away, so no interest there. I said why, what have you gained by doing this. She said our card pays 5% cash back, so we receive a little over $416 each month from the credit card company. She said "easiest $416 a month i ever made" Now who looks like the dummy?
A full blown gem of advice. BOA is currently one of a handful of companies offering great cc incentives. Paying off full at end of month eliminates the interest. The incentives are cash back on fuel and other purchases. Just don't forget to make that payment on time. This helps with your cash on hand throughout the month. It can be a real juggling game at times.
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  #184  
Old 03-06-2013, 04:28 PM
32vld 32vld is offline
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Originally Posted by precisionlawnandlandscape View Post
Next thing, i will use an example that i witnessed first hand. My grandparents are very wealthy (in the millions). They bought a motorhome about 5 years ago. Price tag, a cool $495,000. They paid $395,000 in cash and financed the other $100,000. I immediately asked her, why would you do that, you have the other $100,000 in the bank. She said that's how i got all my money, by being smart and knowing when to pay cash and when to finance. I said, please explain then!!! She said we financed the other $100,000 at 0% interest for 12 months. That is a payment of $8,333.34, we then pay that with our credit card each month (which has a $50,000 limit). When we get the bill we pay it off right away, so no interest there. I said why, what have you gained by doing this. She said our card pays 5% cash back, so we receive a little over $416 each month from the credit card company. She said "easiest $416 a month i ever made" Now who looks like the dummy?

The dummy is the person that reads this and forgets grandma has the wealth to pay off this loan in cash tomorrow. So grandma can work the system.

Most business owners are borrowing money and counting there never will be a drop off in profits bad enough that they will be out of business if their income drops off too much which will cause them to default on their loans.

I have seen businesses grow and reach millions of dollars in sales and buy million dollar machines without using credit.

Rate of growth and the costs to get there vs rate of growth in net profit.

People in personal life as well in business forget the difference between need and want.

Doubling sales is a want, not a need.

Trading in a truck every 4 years is a want, not a need.

That is the problem with credit use creating problems. People use credit when it is not a need.

Truck died, 10 years old, 275,000 miles, everything is worn out and the expense is so high the truck is not worth fixing.

With no truck, no cash to buy a truck, the LCO has to get a loan. This is a need not a want.
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  #185  
Old 03-06-2013, 05:58 PM
precisionlawnandlandscape precisionlawnandlandscape is offline
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[QUOTE=32vld;4697709]The dummy is the person that reads this and forgets grandma has the wealth to pay off this loan in cash tomorrow. So grandma can work the system.


You are correct, grandma has the money "NOW" to pay off said loan, but "NOT ALWAYS". Grandma and Grandpa got to be this wealthy by being smart with the money they made through the years, which required both paying cash and borrowing money, when it made sense. My grandparents told me once, "It's not how much you make, but what you do with what you make". My grandparents never owned a business and never inherited one dime from anyone, yet were able to amass a small fortune. All of which came by being smart with what they made. The point i was trying to make is, if you go back to the beginning of this thead people were saying "Cash is King", "I only use cash, never credit", "I never use credit for anything" etc.... All i was trying to point out is, credit has advantages, "IF USED CORRECTLY"



I have seen businesses grow and reach millions of dollars in sales and buy million dollar machines without using credit.




I agree with this statement also, but as i said earlier, these are far and few between. Not saying it is never possible, but not very likely in most high capital type businesses. My best friend owns a very successful pallet company. Started out with $20,000 in cash and $30,000 on credit cards. This was when he was 19 years old. No help from anyone, no knowledge of the business, no connections, no experience in the industry. 18 years later, 2 locations, 32 employees, 4 semi trucks, over 100 trailers, 2 mulching operations complete with tub grinders, coloring machines, walking floor trailers, around 1.5 million in equipment etc.... 2 years ago bought a piece of real estate to move locations, 1.2 million, payed cash. Guess what though, started with that $30,000 in credit and continued to use credit till about 7 or 8 years ago. Without it, he would not be anywhere near the level he is today. This is part of being an "entreupenuer", you take chances. Sometimes you win, sometimes you loose. Sometimes credit is needed to take advantage of that big contract or that big opportunity. If you wait till you have "cash in hand", it may be too late. As stated earlier, it just depends on the person. Want to get a good in depth look at how some very smart people made it big, watch the Discovery channel documetary "The Men Who Built America". Very interesting piece on the Vanderbilts, Rockefellers, Carnegie, J.P. Morgan and Henry Ford, lot of credit used by those guys starting out, didn't turn out too bad wouldn't you say.
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  #186  
Old 03-06-2013, 06:11 PM
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Patriot Services Patriot Services is online now
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It can be scaled down. Nobody said it was only for expensive purchases. Cash back perks apply to every purchase. It just gets a lot more noticeable the larger the purchase. Additionally it stresses the need to maintain good credit.
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  #187  
Old 03-06-2013, 06:31 PM
newguy123 newguy123 is offline
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Quote:
Originally Posted by precisionlawnandlandscape View Post
Guess i will chime in with my $.02 worth. 1st off, anyone who says "all debt is dumb", is well, for lack of better words, "DUMB". Yes, if your growing a "lawn care" business, you shouldn't have a problem growing somewhat debt free. however, and i don't mean to piss anyone off here, if you try to grow a "real" business, and by this i mean, manufacturing company, retail store, excavating company, all of which require MAJOR investments of cash, to both start and to maintain. This simply is not going to happen strictly on cash only. If you try to do any of the above on cash alone, you will never grow to any size in your lifetime. Now there are probably a FEW exceptions to this, but very few.

Next thing, i will use an example that i witnessed first hand. My grandparents are very wealthy (in the millions). They bought a motorhome about 5 years ago. Price tag, a cool $495,000. They paid $395,000 in cash and financed the other $100,000. I immediately asked her, why would you do that, you have the other $100,000 in the bank. She said that's how i got all my money, by being smart and knowing when to pay cash and when to finance. I said, please explain then!!! She said we financed the other $100,000 at 0% interest for 12 months. That is a payment of $8,333.34, we then pay that with our credit card each month (which has a $50,000 limit). When we get the bill we pay it off right away, so no interest there. I said why, what have you gained by doing this. She said our card pays 5% cash back, so we receive a little over $416 each month from the credit card company. She said "easiest $416 a month i ever made" Now who looks like the dummy?
Although your Grandma's story is pretty awesome...most businesses do not allow someone to pay debt with another form of debt (i.e., pay motor home debt with credit card.)

Their situation sounds quite unique due to their income level/wealth. I might be assuming, but most people couldn't do that due to the above statement I made.
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  #188  
Old 03-06-2013, 07:13 PM
precisionlawnandlandscape precisionlawnandlandscape is offline
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[QUOTE=newguy123;4697848]Although your Grandma's story is pretty awesome...most businesses do not allow someone to pay debt with another form of debt (i.e., pay motor home debt with credit card.)

Sure they do. Buy new truck at 0% interest. Let's say $30,000, 60 equal payments at $500 each. Let's say you had the $30,000 already in the bank. Take said money out of bank (probably only drawing about 0.5% or less in interest. Invest this $30,000 in a 5 year CD, right now because of the bad economy only about 2% interest, grandparents used to have CD's that were around 6% or more. CD is the safe way, i honestly would buy a rental house, real estate or some other form of investement with the $30,000. Take whatever credit card you have and pay your $500 truck payment with it online. If your card has cash back for purchases guess what, money in the bank. Key here is, PAY OFF STATEMENT AS SOON AS IT ARRIVES. Now the reason i brought up the safe and secure CD is because if you were to fall on hard times you can cash your CD in with no penalty. You just don't make as much interst on it, but guess what you were already making 5% or so cash back using someone else's money. Don't have to be rich to play the system, just smart enough to know your limitations and don't get carried away. My grandparents use this method for EVERYTHING. She said they average around $5,000 a month or so on the card. Always paid in full each month. Around $60,000 per year with 5% cash back, comes out to about $250 a month. About $670 a month when they were paying the motorhome also. This works for paying your gas bills, utilities, tires, medical expenses, insurance premiums etc.....it can really add up if you own a business. Large company with $30,000 a month in expenses. 5% cash back equals $1,500 a month to the bottom line. If your already operating at razor thin profits as some of you say, why would you leave this money on the table just to brag "I pay cash for everything"?
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  #189  
Old 03-06-2013, 07:30 PM
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PerfectEarth PerfectEarth is offline
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I've had to go back 7 pages to find the word "TAX" or "TAXES" in this thread. This is not as simple as "I want it or need it, so I buy it/finance a low rate!" VS. "NO! Cash is king!"

When you run a growing, legit business on the books, you do NOT want to pay Uncle Sam if you can avoid it. So what we have done is purchase equipment, and most recently a new truck, on good credit. We pay the loan, manage cash, and banks love it. In turn, we can grow, purchase equipment that will help us be profitable, and have tools we NEED to work and grow.

I've diverted ton of money by financing and acquiring a working asset and NOT paying more to the GOV. Would I rather be debt free? HELL YES, but then I would be stuck paying more taxes, struggling with equipment needs, and not growing the business. Debt will come to an end one day (or be much less stressful) but not now. That's part of business and going in a forward direction. That's what financing is there for. A necessary evil that you make work for you.
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  #190  
Old 03-06-2013, 08:01 PM
newguy123 newguy123 is offline
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[QUOTE=precisionlawnandlandscape;4697900]
Quote:
Originally Posted by newguy123 View Post
Although your Grandma's story is pretty awesome...most businesses do not allow someone to pay debt with another form of debt (i.e., pay motor home debt with credit card.)

Sure they do. Buy new truck at 0% interest. Let's say $30,000, 60 equal payments at $500 each. Let's say you had the $30,000 already in the bank. Take said money out of bank (probably only drawing about 0.5% or less in interest. Invest this $30,000 in a 5 year CD, right now because of the bad economy only about 2% interest, grandparents used to have CD's that were around 6% or more. CD is the safe way, i honestly would buy a rental house, real estate or some other form of investement with the $30,000. Take whatever credit card you have and pay your $500 truck payment with it online. If your card has cash back for purchases guess what, money in the bank. Key here is, PAY OFF STATEMENT AS SOON AS IT ARRIVES. Now the reason i brought up the safe and secure CD is because if you were to fall on hard times you can cash your CD in with no penalty. You just don't make as much interst on it, but guess what you were already making 5% or so cash back using someone else's money. Don't have to be rich to play the system, just smart enough to know your limitations and don't get carried away. My grandparents use this method for EVERYTHING. She said they average around $5,000 a month or so on the card. Always paid in full each month. Around $60,000 per year with 5% cash back, comes out to about $250 a month. About $670 a month when they were paying the motorhome also. This works for paying your gas bills, utilities, tires, medical expenses, insurance premiums etc.....it can really add up if you own a business. Large company with $30,000 a month in expenses. 5% cash back equals $1,500 a month to the bottom line. If your already operating at razor thin profits as some of you say, why would you leave this money on the table just to brag "I pay cash for everything"?

I agree with you on the rental, that would be the best bet.

A CD at 2%, inflation is higher than that so you're actually losing money by parking in for only 2%.

Again, paying debt with debit in the form of a credit card, I'm not sure but I don't think a lot of businesses/etc. allow you to do that with high dollar purchases like a car/home.

I think it's a good strategy but a bank will not usually allow someone to pay debt with debt.
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