opinions on operating capitol...

[parkerpowersports]

any business owners have any input on the difference in ability to make money based on the amount of operating capitol (money in the bank) in everyday operation.. is it worth getting a loan just to have a small cushion in the bank to take away from the rob peter to pay paul scenario that most business owners struggle with?

 

[Tom Brown]

I would open a line of credit. That will give you the security buffer you need without costing you interest when you don't use it.

 

[Flat Broke]

Nate,

The short answer is,"it depends". A good capital structure for one company could totally suck for another company in the same industry. A couple of things to look at are specifically when and why you need the credit line; and if it's to cover gaps that lead to more revenue, that the profitability on that revenue still exists after accounting for the interest expense associated with using the credit line.you will also need to investigate any fees, restrictions, or covenants your lender may impose as these could also affect the validity of using a credit line for your purposes.

Chris

 

[2FORCEFULL]

any business owners have any input on the difference in ability to make money based on the amount of operating capitol (money in the bank) in everyday operation.. is it worth getting a loan just to have a small cushion in the bank to take away from the rob peter to pay paul scenario that most business owners struggle with?

when I was in the clothing business I would borrow at 25% interest in july and pay back in sept, I would load my stores for back to school, everything was marked up 100% plus,,.. I noticed the big robber of the businees was the rent...

when I sold the stores I had nothing to show for the rent...

when I bought the streetrod business, I bought the building...
never needed to borrow for anything after that...

 

[shintoooo]

I would open a line of credit. That will give you the security buffer you need without costing you interest when you don't use it.

This :thumbsup

 

[zhandfull]

Tough one. Doupt if you can get business loan today, big or small. Maybe personal loan, but again tough being a business owner without substantial collateral. Probably not wise even if you could, as you would find a way to go though it and be back where you started. Keep banging away as you are and I know you'll find a way to make it.:thumbsup

Good advice right there:thumbsup

 

[RiverDave]

I would get the biggest line of credit you can get... and then invest heavily into Lucas Oil, so you can make 30 -40% on your money.

Just my .02

RD

 

[ROC]

I forgot to mention that banks or anyone else for that matter, never lend money to anyone that needs it. I think it would be easier to sprout wings, than get a line of credit today.

Werd.


Nate, getting into debt is seriously risky. If youre talking a lease for a new lathe that's one thing, as long as your lathe jobs can at least cover your lease. But if you're talking a large loan then that's another thing.

Lots of smart folks on rdp, bit, I'd say stay as debt free as you can. Work your ass off, save what you can (plus some) and grow your business one step at a time.

If you're disciplined, get a line of credit and use it only when 100% necessary. If you lack self discipline, stay away from a LOC.


Tapatalk

 

[Cole Trickle]

Can you weld aluminum?

If so what would you charge me to cut and redirect/weld a gas filler when Im in town on august first?

Brandin

 

[ROC]

Can you weld aluminum?

If so what would you charge me to cut and redirect/weld a gas filler when Im in town on august first?

Brandin

Yeah, he's pretty fuggin good. 'Course I figure you know that already


Tapatalk

 

[EpicOne]

If you use the line of credit to purchase product to put in a vehicle repair and you'll then pay off that line when the customer pays you, that is a good use of a line.

If you are purchasing equipment, get a loan. Never put long term debt on a short term credit facility as you'll quickly be in trouble.

For a small shop, a credit card should do.

 

[ROC]

Roc~Is that werd as in weird? Thanks

No. Word. Werd. Whird. Word.


Tapatalk

 

[Flat Broke]

If you use the line of credit to purchase product to put in a vehicle repair and you'll then pay off that line when the customer pays you, that is a good use of a line.

If you are purchasing equipment, get a loan. Never put long term debt on a short term credit facility as you'll quickly be in trouble.

For a small shop, a credit card should do.

This is spot on.

 

[Mandelon]

We typically do 2 to 2.5M$ a year. I started with a $50,000 line of credit at Wells Fargo....after a few years they bumped it up to $ 65,000. I asked for more, but they are pretty conservative.

We use it a few times a year. Usually for short term problems. When business expands too fast, we run short of cash since our turnaround is usually 60 to 90 days. It is handy to have, but not essential.

I don't want them to close it....so every few months I will pull out a little bit, and then pay it back within 60 days. The interest rate is less than credit cards.

If you can get a line, go for it. Even if you have it only for emergencies.

I keep looking at the 2750 Lavey for sale in the classifieds......but its not really an emergency.

 

[MMD]

You've come to the right place for advice on running businesses successfully. RDP's has expert business consultants standing by 24 hours a day.

As for our credentials just check the DCB thread - the RDP business consulting team has already saved that company and put them back on the road to prosperity!

 

[EpicOne]

OPM.

If you need equipment, lease it, don't buy it unless you can get it for pennies on the dollar. Off balance sheet is the way to go. Loans will only bog you down and throw off your ratios. Plenty of equipment leasing companies out there and their approvals are much easier than a bank.

Only a fair market value lease or lease with a 10% or greater residual will be off the balance sheet, a dollar buyout lease will be on.

Having a fmv or large residual and then buying out at the end is the worst thing that a business owner can do from a finance rate perspective. An auto repair facility's equipment will generally last well beyond the term of the loan so a loan would be the best in regards to rate and tax purposes unless he is trying to get a minimal downpayment to which I would recommend a lease with dollar buyout.

 

[zhandfull]

If you use the line of credit to purchase product to put in a vehicle repair and you'll then pay off that line when the customer pays you, that is a good use of a line.

I would disagree with this. Using an open account at a supply house would be the prefered method to fund product purchases. Normally with no interest expense if paid within terms.

 

[EpicOne]

I would disagree with this. Using an open account at a supply house would be the prefered method to fund product purchases. Normally with no interest expense if paid within terms.

Agreed. In one scenario a bank loans and the other a vendor loans....... not all small businesses are able to give terms to others which is why he asked about banks.

My credit card has no interest for no less than 25 days and up to 45 days depending on when purchased in cycle. Many companies are net 30 for the most attractive terms.

 

[parkerpowersports]

it just seems like when i need to get parts or material to do a job im short so im always waiting to get one job finished to buy parts for the next job and juggling money never too far behind but late fees and nsf fees add up quick when you get just a little behind then you pay hell trying to get caught back up.. its frustrating :grumble:

 

[Mandelon]

Take bigger deposits! :thumbsup

 

[RiverDave]

You've come to the right place for advice on running businesses successfully. RDP's has expert business consultants standing by 24 hours a day.

As for our credentials just check the DCB thread - the RDP business consulting team has already saved that company and put them back on the road to prosperity!

MMD, do you think you could start and run a successful biz of any type in the marine industry right now? It's freakin rough..

RD

 

[Mandelon]

Sure....given enough capital!

 

[MMD]

MMD, do you think you could start and run a successful biz of any type in the marine industry right now? It's freakin rough..

RD

Jeez Dave, it was obviously a joke.

"Could I run a successful biz of any type in the marine industry right now?"

No, probably not right now and that's why I'm not in that business right now

Most every business is very tight these days (worldwide). And there are international pressures - the solar industry is owned by the Chinese and they're invading the US (when you guys are looking to have solar installed check and see who owns the company that you're working with and where the modules (the panels) came from - most come from China).

Could you run a successful biz of any type in the solar industry right now?

 

[RLJ676]

it just seems like when i need to get parts or material to do a job im short so im always waiting to get one job finished to buy parts for the next job and juggling money never too far behind but late fees and nsf fees add up quick when you get just a little behind then you pay hell trying to get caught back up.. its frustrating :grumble:

So it sounds like your terms w/ your vendors don't allow a grace period? You should ask about coming to some type of grace, net 30 or whatever to buy some time, or as someone mentioned even a personal CC might be a better option to gain timing if you can pay it off each month and can't get a line of credit.

I'm assuming your customers then aren't getting any terms, and pay on delivery? If not offer slight discount for payment on delivery. If you could do both of these it shortens your cash impact.

I assume that you've really looked at your income vs expenses and don't have an underlying profitability issue, and it's just cash flow? I worked at a Small Business Development Center years back and was surprised by some of the small business folks who didn't really do this.

I believe there are quite a few very successful small business owners on here that offer great advice. My experience is with huge multinationals and that's a little different type of finance haha, but I deal w/ some small suppliers as well and see a lot of the risks.

 

[DRIVE BYE]

Side Note; The energy and footprint used by china to manufacture the solar panels that are being marketed to the solar industry outweigh their overall energy savings??

 

[SPL2K]

it just seems like when i need to get parts or material to do a job im short

For a small shop, a credit card should do.

+1

Business credit card is what I use.

 

[Yellowboat]

When it comes to lines of credit, I highly recomend you check the small local banks. For the most part the ones that are still around didn't invest in the crazy housing market. The big ones don't give you the time of day any more. Alteast that has been my exp.

 

[69 1/2]

Small local banks are the only way to go right now. I have a $600k credit line that sweeps to our checking account every night so the checking balance is always zero. This loan is adjustable to prime but sits at a floor of 5% right now. My accounts receivable averages $600k also. I have long term loans with the same bank at the same rate and they are begging me to expand and loan millions more. There are just simply not enough solid businesses out there that want to borrow money to expand so the cash just sits. The bank's profits are down since they can't find solid people/business to borrow some money.

BTW, if you are looking for a business loan, don't even mention internet based sales or internet anything to your banker. Any internet talk beyond an advertising website will almost instantly get you a big fat TD on the loan.

 

[MMD]

Side Note; The energy and footprint used by china to manufacture the solar panels that are being marketed to the solar industry outweigh their overall energy savings??

Huh?

To get the cost of energy used to produce the modules (panels) back, in terms of manufacturing, takes years (if you're asking how long it takes for a module/panel to return the cost of energy used to produce it).

Most of the Chinese produced modules are exported as China's domestic PV (photovoltaic) energy generation is minimal but growing. Once they own an industry they then look to their own market :grumble: growth.

By the way, they copied wind turbines made by other companies and they now own that industry too. But they're using wind turbines in China (big time).

 

[ductape1000]

Nate,

I have a couple of house accounts and a couple of credit cards for my small business. This works for me at the size that I am. On my bigger jobs, I pull progress draws since they seem to pay at 30 days. My smaller jobs are pay on completion. Being able to carry some costs help, but you really need to watch where the money is going. I have seen times where the income has slowed just enough to where all I can do is pay the bills, and not pay down the credit cards. That makes for a tense moment. Stay disiplined no matter what! Always manage the business before you pay yourself. That will help with keeping the business in perspective. When your employees are making money from you and not just from the work they are producing, you will know it, and it will make it easier to correct it. In talking with you I know you care about people, so i'm sure you feel responcible for your employee's well being. But, you went into business for you and your family first. Don't give away your hard work and all the hours that you put in to run you business. Like Vic said, manage your cost.

Good Luck!! T

 

[Tom Brown]

If you lack self discipline, stay away from a LOC.

There's some great advice. :thumbsup

A buddy of mine took out a LOC for $75K. The idea was to capitalize his business but he's a consultant so I'm not sure what he would need to capitalize, other than use it to float while he is paid on the Net180 terms that are so popular today.

Anyway, he would have been better off taking a $75K mortgage because he burned through that in about 60 days. lol! Now, he tells me he has a harder time paying down his credit cards because of the minimum LOC payment.

I've never understood people who don't realize there is a consequence to borrowing money. lol!

 

[EpicOne]

You must be an accountant. Accountants sometimes don't understand its cheaper to spend a few more bucks to keep shit off your balance sheet and save the credit for when you really need it.

Not at all. I'm just bringing down my advice to the level of business that it seems that he runs. Small businesses only need one ratio and that is cash flow.

If you run a business, I can tell it is most likely substantially larger than the one that the OP is running as it takes a good amount of credit with a bank before they start caring about ratios.

 

[EpicOne]

Sounds like you have your hands full. First thing is you gotta somehow stop the nsf's. Talk to your suppliers. Maybe they'll give you a small house account. Offer them some collateral if it will help. Start small, build their trust, then ask them to increase your line. Get a deposit on larger jobs from your customers. Take a look at your labor. Are you paying people just to keep them employed? Can you schedule their hours so they're more productive. Measure their productivity. If you have 6 hours of paying work and are paying them 8 because you're a nice guy, stop being a nice guy. Those 2 non productive hours just ate up a big chunk of your profits. Sounds brutal, and it is. The flip side is those 2 hours (repeated over and over again) can put you out of business. So ask your people, would you like 6hrs a day or 0?

Managing your costs can and should be a big part of your job. But if you aren't doing it, who is? If you don't closely monitor your costs, you're going to get yourself in trouble.

I'll be honest. I know jack about retail sales or the auto service industry. But I do know how to price, sell, measure, and monitor labor hours. We do almost 200K man hours a year. Labor in a service business is usually your #1 expense. If you don't have it under control, you're screwed.

Good luck.

Great post.

 

[boatnam2]

I dont know the first thing about owning or running a company, I will be a hourly worker until i die.....But if I planned on trying it i would be over at riverland buying tecate's and getting all the advice i could get from rvRrat, dude sounds like he know what the hell is going on.

 

[Groper]

Here's the problem. You need liquid to get a line of credit. If you need a line, you probably dont have liquid.

Banks suck ass right now. They have for the past 3-4 years.

That being said, if your business is strong and you have legit financials to back it up, and you have decent credit and a positive net worth, you can probably get a line. lol Fuckin bankers.


If you're going to go in to debt with the intent of making money, you better have a damn good plan and a damn profitable business. If not, keep chipping away at what you're doing now and save like a maniac.

Agreed, in the last few years, I have had lines of credit with several Vendors and my Bank. I have been very fortunate the last two years also, and was able to pay off all my lines of credit including my Business credit cards. I have always kept a reserve that was more that what I owed. Which was very diffucult to do.

The moment I had "NO DEBT" was the same moment my lines of credit went away or were reduced to almost nothing. The Banks are scared shitless, with all the defaults, even though I had never defaulted or was late on any of my payments.

Now with today's climate in some cases you have to show/prove that you have the capital to finance your project. It you can use the banks money and keep your cash, I would do so, cash is king.

 

[Motor Boater]

I dont know if it has been said but I have always thought a place like parker would be tough to do business because of how much things slow down in the winter. We have all seen restraunts and little shops that go up in parker/Havasu and thrive all summer but dont have enough capital to make it through the winter. Im not sure if this is the case with your business but I would be caucious and understand that the level you grow your business to in the summer months may not stay that same through the winter. Just a thought.