Loans?

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

  1. MDLawn

    MDLawn LawnSite Bronze Member
    Posts: 1,284

    How about this. Let say you had $12,000 in cash on hand. Post tax so it's your 12k. You've researched and realized you need a larger piece of equipment to either expand your offerings or keep up with productivity at a cost of $10k. If you go take a loan say for 4.9% for 60 months. No 0% promo deals just a straight loan. Take the full term you pay $1295 in interest. Other end is you dump the 10k into the piece taking the chunk of your savings.

    Business takes a slide for whatever reason. With the loan you have a $188 payment but the 10k is there to help relieve that burden and any other expenses or losses. Pay 10k cash for equipment and business takes a hit, little is there to help. No $188 payment but now rent is due but sales are down. Not much extra cash so in order to keep lights on you gotta borrow. Loan guy can keep picking away at his cash. 2 months later business is back up loan guy is still afloat but needs to replenish that savings if he can. Cash guy is 2 months overdue on rent or had to borrow at some crazy rate to cover those 2 months. Now business is back up and we've been able to stuff away 10k again. Loan guy now has $17,000 after the $5000 loss due to light business. Cash guy owed 5k had 2k and now owes 3k so ends up with 7k. Loan guy is comfortable with $10k in the account so puts $7000 into the equipment and owes very little and will pay off next year and not pay anywhere near the $1200 in interest. Both survived and end up with about the same amount but cash guy nearly lost it all. Now if we weren't even and cash guy had 20k then fine spend 10 stil have 10.

    If business stays down they're both in trouble.

    I'm sure we can all come up with scenarios but having cash on hand is probably the safest bet whether you loan or pay cash. Having reserves is best, right?
    Posted via Mobile Device
     
    Last edited: Oct 24, 2012
  2. CL&T

    CL&T LawnSite Senior Member
    Posts: 493

    Don't try using logic. It goes right over their head.
     
  3. 32vld

    32vld LawnSite Gold Member
    Posts: 3,984

    "How about this. Let say you had $12,000 in cash on hand. Post tax so it's your 12k. You've researched and realized you need a larger piece of equipment to either expand your offerings or keep up with productivity at a cost of $10k."

    You don't have to expand quickly, or increase capacity if you can't afford it. And if you are keeping up with the work load then there is no urgent need to increase productivity.

    Business takes a slide for whatever reason. Posted via Mobile Device[/QUOTE]

    Yes they can. Not being in debt will increase the chances or surviving. When there is a business down turn the time to cut back is right then, decrease costs, lay offs, is before you go through the any of the $10,000.
     
  4. brucec

    brucec LawnSite Senior Member
    Posts: 469

    I look at it like this. When you pay cash it HURTS. Handing over a fist full of
    100's is painful, signing you name on a line not so much. Spending cash is real you feel the impact immediately. If I were to walk into a dealership and had to hand over 35k CASH for a new truck I would say what the hell am I thinking, and then go find something much cheaper that would still do the job. Studies show that you tend to spend much more than originally planned when using credit. I have seen studies that show people at fast food restaurants spend 20 to 25 percent more when using credit cards instead of using cash. Paying cash eliminates a lot of risk for me. To each their own, my business is debt free and doing very well and I sleep better that way.
     
  5. grandview (2006)

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

    So in a nutshell,people who pay cash their business will survive and people who use credit will not?
     
  6. larryinalabama

    larryinalabama LawnSite Fanatic
    Posts: 16,434

    Just to keep things clear Ive been called stupid ignorant white trash, all for runing my business "Debt Free". Im not the one bashing.

    Ill ask one simple queastion and I mean no harm, do you fellers that have to borrow money to start or stay in business ever think you wil reach a point that you will be able to pay cash to keep operating?
     
  7. grandview (2006)

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

    If everything I did was under the table,I'd pay cash too. But I don't knock on my customers doors each week and collecting cash.
     
  8. larryinalabama

    larryinalabama LawnSite Fanatic
    Posts: 16,434

    Good point!

    Theres 20 year olds all the time posting pics of the equiptment they paid cash for to get there business going or in some cases expanding it.
     
  9. grandview (2006)

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

    Maybe,but I know few who had daddy finance all their toys to start their business.
     
  10. larryinalabama

    larryinalabama LawnSite Fanatic
    Posts: 16,434

    In business paying "cash" often means writing a check for the price of what your buying, or using a credit card that you keep paind in full each billing cycle, or using a debit card. Naturally Bengimn Franklin is alaways welcome.
     

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