Loans?

Discussion in 'Starting a Lawn Care Business' started by GravelyWalker, Oct 10, 2012.

  1. MR-G

    MR-G LawnSite Senior Member
    Posts: 479

    Its all good...we do the same thing with all our hand held equipment..(trimmers/blowers/edgers) we flip them every 12-18 mos.:usflag:
     
  2. MDLawn

    MDLawn LawnSite Bronze Member
    Posts: 1,284


    That is some great thinking. I think some people become way too attached to their equipment and wear it as a badge of honor or something because they paid it off. I really like this thinking, wow. Especially mowers that are getting used EVERY day. Again I'm not anywhere near doing this but interesting.

    I remember reading in one of my landscape publications an article about debt and different business structures.

    Business "A" leased all of their equipment (non truck) and replaced every couple of years. I think they were a mowing franchise.

    Business "B" Did pretty much the exact thing MR-G is doing.

    Business "C" kept all their old equipment and had a fulltime mechanic to fix everything.

    The results at the end...........each business was very successful. And this was the point of the article. Showing how each of these strategies worked plus I think listing the pro's and con's. But again each business model worked. Business "A" and "B" put their money into new equipment. Business "C" put their money into a full time mechanic. Probably a wash between the three to see if one was better. I think the loans/debt vs. cash debate is just that, a debate. At the end of the debate you can walk away with many answers to use to make your own decisions. Sometimes it's the right one and sometimes it's the wrong one, although user dependent.

    My thoughts? Financing a $50k pickup pulling around beat up mowers is a joke. Buy a decent but newer used truck and have new equipment. Your mowers are doing the work, yes your truck needs to run but each used truck I have purchased only needed minor things like brakes. Heck the one new truck I had was at the Ford dealership a ton of times luckily under warranty. Now in Grandview's case with snowplowing his truck is also used as equipment to push snow. So he needs it to be reliable too. In the end whatever way you choose needs to be right for you. And if someone else makes money (not someone starting out) and chooses to purchase that $50K truck, who cares they made the decision and it has ZERO impact on your business.

    Great info on both sides.
     
  3. larryinalabama

    larryinalabama LawnSite Fanatic
    Posts: 16,458

    I must be missing something, because everytime I went to the toro or exmark or car dealer they were moore than happy to take 100% down and usually give me a nice discount. As far as I know equiptment bought in cash has the same warranty has financed equiptment. If you can profit 8k per month per machine you could pay cash for 1 machine every month and still clear 40k per month.

    It sounds like a nightmare of paper work just to float 25 to 30 thousand dollars.
     
  4. grandview (2006)

    grandview (2006) LawnSite Gold Member
    Posts: 3,466

    A little off here but, guys with all this cash just sitting here ,I don't know. At the end of the year when my books are done and any money listed will be taxed ,So either I pay tax on it or keep buying stuff I don't need. So again,you have a boat load of money just sitting there,I don't know how your getting around it. I do ,but what say it.
     
  5. CL&T

    CL&T LawnSite Senior Member
    Posts: 493

    That was another point I was going to bring up but I figured it would be better if I didn't because it would open another can of worms with some of the financial geniuses here.

    You can give it to the government or you can spend it on equipment and it works whether you pay cash or finance. It's either a 179 deduction the year you acquire it or you depreciate it over a number of years. But from what I see I doubt some here even have competant accountants or pay taxes on the cash they pocket.
     
  6. larryinalabama

    larryinalabama LawnSite Fanatic
    Posts: 16,458

  7. MDLawn

    MDLawn LawnSite Bronze Member
    Posts: 1,284

    I've read that thread and it shows a lot of what can go wrong. Also i think i remember he talks about how he had everything through one bank which allowed them to easily empty his accounts both business and personal when they came calling for his $$$. But that's a tiny part of it. I mean he was borrowing to cover payroll not just finance equipment, again from what I remember. And I think he even admitted it was common practices for businesses to do that. Then the economy tanked and they came calling on all his notes.

    But that's on a scale larger than one single guy looking for a loan for 1 ZTR or a start up, way bigger. But again like I stated about the article I read, all situations can be successful. We get it you are a CASH ONLY guy to buy things. That's great. But why bash the guys who finance and are successful? If your business is the only one destined to survive because you don't borrow then you should want everyone to get loans so then you'll own all of the lawns in your area. But we know that's not going to happen and you'll find success and so will a company that has a loan for a mower.
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  8. Nate'sLawnCare

    Nate'sLawnCare LawnSite Bronze Member
    Posts: 1,001

    Some manufacturers are offering 0% financing and no payment until April 2013, but if you do that, go ahead and make the payments starting now. Also, put some cash down on the purchase if you can. By the time April rolls around and you're actually using the equipment, you'll have some of it paid off which will put you in less of a bind if you were forced to sell it. Just don't go crazy with the borrowing.
     
  9. 32vld

    32vld LawnSite Gold Member
    Posts: 3,984

    For a person that does not like worms you keep opening cans by the truck load.

    You cite examples and make them appear to be appropriate for universal application across the board in every instance.

    Many people in this business when starting out do not make a gross income and or clear enough profit to make it worth while to hire a first class accountant. What that accountant would save them against what they would have to pay that accountant would cancel out the savings.

    Though hopefully they reach that level quickly where they will need an accountant.

    Now to your 179. Any other loop holes an accountant can find.

    I know of a restaurant owner in Westchester County, NY. Highest overall real estate values of the counties surrounding NYC.

    He and his two partners were owned nice 3 br colonials on 1/2 acres. These three men were told buy their accountant to buy new more expensive homes. They said no.

    The accountant said well buy a home or pay more to the government. So they bought 4/5 br colonials, on 1 acres. They deer hunted. So the new houses had walk in fridges to hang their deer.

    These guys were making money hand over fist.

    For them to buy these new homes was not putting their business at risk.

    For a LCO to get a loan based on getting a new customer, to buy a $10,000 mower to get this new customer. Then lose that customer will bankrupt that business.

    A business that needs to buy a $10,000 for a new customer and can still afford to pay that loan if they lose that new customer is a whole different story.

    Then to say better to buy a new expensive piece of equipment then pay taxes. That needs to be qualified as well. The size of a businesses cash reserve needs must be factored in.

    Then do you really need to buy that new piece of equipment that will get you a tax break.

    Some times not. One is in business to amass wealth and retire. Instead of holding onto cash, buying equipment for a tax break you get a $10,000 piece of equipment that will be worth nothing in time.

    Or invest that $10,000 cash for a retirement fund to earn income for one's retirement.

     
    Last edited: Oct 24, 2012
  10. 32vld

    32vld LawnSite Gold Member
    Posts: 3,984



    I reposted this because I could not edit it.


    For a person that does not like worms you keep opening cans by the truck load.

    You cite examples and make them appear to be appropriate for universal application across the board in every instance.

    Many people in this business when starting out do not make a gross income and or clear enough profit to make it worth while to hire a first class accountant. What that accountant would save them against what they would have to pay that accountant would cancel out the savings.

    Though hopefully they reach that level quickly where they will need an accountant.

    Now to your 179. Any other loop holes an accountant can find.

    I know of a restaurant owner in Westchester County, NY. Highest overall real estate values of the counties surrounding NYC.

    He and his two partners were owned nice 3 br colonials on 1/2 acres. These three men were told buy their accountant to buy new more expensive homes. They said no.

    The accountant said well buy a home or pay more to the government. So they bought 4/5 br colonials, on 1 acres. They deer hunted. So the new houses had walk in fridges to hang their deer.

    These guys were making money hand over fist.

    For them to buy these new homes was not putting their business at risk.

    For a LCO to get a loan based on getting a new customer, to buy a $10,000 mower to get this new customer. Then lose that customer will bankrupt that business.

    A business that needs to buy a $10,000 for a new customer and can still afford to pay that loan if they lose that new customer is a whole different story.

    Then to say better to buy a new expensive piece of equipment then pay taxes. That needs to be qualified as well. The size of a businesses cash reserve needs must be factored in.

    Then do you really need to buy that new piece of equipment that will get you a tax break.

    Some times not. One is in business to amass wealth and retire. Instead of holding onto cash, buying equipment for a tax break you get a $10,000 piece of equipment that will be worth nothing in time.

    Or invest that $10,000 cash for a retirement fund to earn income for one's retirement.

    Getting loans or as some like to say using credit as a business tool to be used all the time, is the same as saying that everyone should always use only a certain sized mower all the time.

    Loans should only be used when they will not put the business at risk, and it is to your advantage to do so.

    Our founding fathers were onto something when they said in god we trust, all others pay in cash.

     

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