PROCUT - Continuing to read your posts and other users, I do see where you were using your line of credit to purchase your costs of materials, and either you pay for the project with a hold on the payment for 45-60 days or the job goes to your competition. However, I still just can't see any logic going into entering those agreements/decisions if you could not afford to pay that debt from your own liquid assets.
Another scenario... Bank lends you the money as you said, you buy the materials, and as the payment comes in, you pay that loan off, make your profit, and for the next job take that profit and apply to the principle to save on interest with the next job (just as you said you were doing). But what would have happened if one of those 'big jobs' turned into a bad debt, especially with the economy going sour, your line of credit was now maxed with your bank, and the future work orders you were relying off that line of credit to purchase materials is no longer available...now again the wheel of your business gets put to a stop. This easy scenario would put you just into the same situation as the bank throwing a curve ball at you by taking smaller job deposits to pay loan for the big job. All especially at the time of the economy going sour anything could happen to your customers in a 2 month period and now your out, just as your vendors were out when you got put to a stop, you through a curve ball to them and hopefully you did not cause any major strains to them. I'm sure we both can agree your vendors as you said trusted you, who let your employees sign on behalf of you and let them walk out with a $9,000.00 new mower on good faith, but in an instant something that could have been prevented with better decision making changed, and now your vendor is out. Business is just like a chain, you have your: customers, contractors, vendors, employees, and finance resources - one link breaks it effects everyone. Fortunately I understand that concept, I pledge to my customers, employees, partners, and most importantly community that we will always "Walk the high road."--always strive to make the most ethical business decisions because anything like that affects everyone, and sometimes something out of your control can go wrong and now can have a detrimental impact on one of your vendors. But better decision making I believe could have prevented that and taking the strategy to grow a little slower. I was wanted to take advantage of growth, and fast. But I have learned this quote, it is pertinent to both life and business..."LIFE/BUSINESS IS A MARATHON, NOT A SPRINT."
Again, I do not and will never know 100% of the story, but I do think that was poor decision making. With the economy, it is a customer market, they hold the power in many markets..because contractors have allowed them to. But stick with your work on your terms, you said you had plenty of it. Let your competition take a HUGE risk with those sticky customers with crappy payment terms.
I do disagree with you saying you can grow fast as long as you do it smart. When you "leap" up the ladder and "fast", only means when you fall off the ladder, instead of falling one rung down, you as well fall "long, hard, and fast." If I had other work and was doing well, I would turn down a big project like that-because that is a smart decision. I just surely would never go 80% into the negative for 60 days on a project.
For me, I just never enter into an agreement where for any length of time I am putting my own companies money into purchasing materials or would use line of credit to purchase those materials, even if there is a pot of gold profit waiting at the end. My thought process is, what would happen if this big job I finance something happens on their end and payment does not come through, now I AM RESPONSIBLE for that debt, I'm now out of my own money, business time, and the severe impact it will have on your business of a bad debt that you truly do not have an emergency savings fund allocated for.
I do agree keep banking accounts and loan accounts separated with different institutions. But, if they make some changes because of some fine print and now they are after your cash deposits, they will go after it. It likely will not take place instantly with a click like your situation, but all it will take is a warrant of debt on you from that bank and they now own your other bank accounts within a weeks time.