business finances- what to do

Discussion in 'Business Operations' started by Smitty58, Jul 9, 2005.

  1. Smitty58

    Smitty58 LawnSite Senior Member
    Posts: 531

    I know there are those on here who only pay cash for everything they own. That would be great ,however that is not always possible. So if you are starting out and you need equipment normally you can by it on your personal credit. The problem with that is 2 fold, 1 your "business" doesn't get credit for it and it takes away from your personal credit. Does that make sense? That is where I'm at right now. I would like to have everything in the company name and have the company get credit for it. Anyone have any suggestions. How long did it take your "Company" before it could buy big ticket items on credit?
     
  2. topsites

    topsites LawnSite Fanatic
    Posts: 21,653

    It takes a LOT of time and WORK and if you fail to heed the advice of those who have been around the block, you may end up as a business failure (or you never get off the ground, you 'run a business' but have a secure job and draw a regular paycheck). Over HALF of all entrepreneurs fail and a portion keeps trying and trying, and trying... One day I got tired of trying.

    So I decided to listen ...
    I worked my tail off washing dishes at a restaurant for 2-3 years while I saved 5 thousand dollars and paid off my credit card, my car, and every other bill I had. I never went out, I bought clothes at the thrift store and lived in a rented room for many, many years. That is how I got to where I could pay my car insurance in one lump sum (it's cheaper that way) and all that before I even considered starting my own lawncare business for real.

    I recommend you do this because you HAVE to know how to SAVE your money or you will not make it: There are times business is slow month after month, after month, after month, and then some: If you do not know how to save your money, a slow year or two will bust you.

    You see, this isn't the first time around for me and I've been through bankruptcy so now I DO things the hard way because the secret is there is no secret. 5 thousand dollars wasn't quite enough but the problems were MUCH alleviated as I charged nothing on my personal credit card, that is a big no-no... and, I kept it paid off paying the FULL amount due every month (finance charges - no-no).

    Later in my first year I took 1000 dollars to the bank and set up a Small Business Checking account: The account is free checking but:
    - Minimum balance 1000 Dollars: *IF* balance falls below this amount any time during the month, you will be charged 10-dollar fee which = -12% apr interest on your 1000 so, NEVER let the account fall below 1000.
    - Limited to 100 transactions per month (you gotta do like 5 thousand dollars worth of work before you exceed this), extra transactions are 10 cents each.

    Then I kept my credit card paid off, and worked to keep the balance up. Things were not perfect, I paid about 60 dollars my first year and 120 the next in stupid fees but in my 4th year (this year) I think the fees are up to 15 dollars (zero would've been right, but I am not perfect).
    But it did work...
    One day the bank that issued my personal credit card offered me a Business VISA - No annual fee but like 19.8% apr, a sweet deal which I applied for and got my first business credit card, 500-dollar limit.

    Today, ALL business expenses go on the Business VISA, then I pay it online via my business checking account - clicky-clicky, online banking - no stamps, no hoping the check gets there on time, no nonsense. Paid on time, kept it up, no mistakes: Today my credit limit is 2000 dollars.

    Now let me explains something to you: Your business means and guarantees NOTHING to a bank because your business does not have CREDIT - You do! See the bank ain't stupid, they're not going for this crap of 'oh the business is responsible' because they know what that means: If they don't get their money, WHO is going to pay the bill? A 'business' is nobody, and they need SOMEBODY to pay. Thus, *MY* signature went on the application to guarantee the VISA gets paid for and if it doesn't, they not only come after me but they ruin my personal credit.

    Not to blow anyone's bubble, but hopefully it clears things up for those who think businesses have it made - They don't, it's the owner's arse that guarantees things get done and paid, not the business. So yes, you need to build credit - Keep your personal card paid off, use it but don't f*x it up. That and SAVE some MONEY: 20 dollars a week for starters is good, then later see if you can do 40, maybe 50... As your savings accrue, do *NOT* spend that money - If you can do that, then you know how to save.
    No it is not easy, but if you can do it then maybe you have what it takes.
    Set your mind to it, then DO it - Discipline... You'll need that, too.

    That is how it worked for me.
     
  3. Equipguy

    Equipguy LawnSite Senior Member
    Posts: 370

    It takes about 3 years or so for your company to stand alone in the credit dept. One suggestion is to buy in your name and the companies name. Good Luck!
     
  4. LawnScapers of Dayton

    LawnScapers of Dayton LawnSite Silver Member
    Male, from Dayton, OH
    Posts: 2,574

    I got a $5000.00 credit card in my company's name right off the bat. I am not sure how. But I have never, ever carried a balance on a card......And my personal credit rating is excellent......

    Derek
     
  5. Scapegoat

    Scapegoat LawnSite Member
    Posts: 249

    I would recommend you work another job and save up so that you could at least outright buy the majority of your equipment (except maybe you're main mower). Sure takes alot of stress away when you don't have payments to worry about, especially when starting out.
     
  6. Smitty58

    Smitty58 LawnSite Senior Member
    Posts: 531

    I'm a part timer and have a good paying full time job. The question was about the "company" establishing credit. I have a company credit card with me as a backer ,but I'm thinking about a larger scale. I guess it really doesn't matter since the company is me just curious how others do it.
     
  7. Scapegoat

    Scapegoat LawnSite Member
    Posts: 249

    Ok, I thought from your statement above you didn't have enough money to purchase what you needed.
     
  8. Smitty58

    Smitty58 LawnSite Senior Member
    Posts: 531

    Yea, I wanted to clear that up since the replies were kind of all on that same line. I have all the equip purchased already ,but the z and the enclosed trailer are financed under "me". I was asking about changing the financing to the "company". Hope that clears it up.
     
  9. AlleganyLawnCare

    AlleganyLawnCare LawnSite Member
    Posts: 180

    I have a business credit card for a line of credit > $5000. It is through Chase Bank. What is special about it, is that you apply in your business name as you as the backer and every time you use it, your company builds the credit. When a personal credit report is done, it does not show up on your personal credit (unless you are late paying on it). When you do a business credit report, it will show up as a positive or negative (depending upon if you are paying on it timely or not). It has a low APR 7%. I have had it for over 5 years. I love it. One thing though, I don't know if this matters alot or not, but when I did apply, I was incorporated. I am not sure if they will do it for sole prop., or partners. LLCs I would think so.
     
  10. Team Gopher

    Team Gopher LawnSite Platinum Member
    from -
    Posts: 4,041

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    Hi Smitty58,

    I think part of your question also rests on whether you are a (d.b.a./sole proprietor) or incorporated.

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