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financial opinions needed ?

Discussion in 'Commercial Snow Removal' started by green frog, Dec 30, 2008.

  1. green frog

    green frog Senior Member
    Messages: 246

    The last storm in Buffalo, NY I lost the tranny on my good truck. and the plow went down twice on the second truck. I made it with a few subs and snow blowing 24 driveways. Since I will not do that again I am investing the $1800 in the tranny w/ 3 year warranty and puttung a small plow on my jeep 3500. I already carry about $12,000 in a mower payment and business credit card. Would I be better off getting a loan and consolidate or just put new dept on card?
  2. elite1msmith

    elite1msmith 2000 Club Member
    from chicago
    Messages: 2,762

    pay cash, buy used
  3. snowandgo

    snowandgo Senior Member
    Messages: 143

    cash is best but when you don't have it, borrow as little as possible and pay it off as fast as possible.

    I tend to use a card for most things, but I get 1-3% cash back and try not to carry a balance.

    The tranny sounds like the right decision. I wouldn't put the plow on the jeep unless you find a cheap used one. If you have 3 plow vehicles, then you might have 3 broken plow vehicles at the same time.

    No one can give you good advice on a consolidation if you don't list the interest rates and length of any existing and proposed debt. If you are doing any good plowing, you should pay off that $12K at the end of this season. That will put $200-$300 more in your pocket each month.
  4. hammerstein

    hammerstein Senior Member
    Messages: 318

    Paying cash might be the single worst mistake made in a business and decreases a companies value. It may seem to make sense but in the operational and financial world it does not. A debt free business can mean a number of problems, like not having good credit, or cannot qualify for credit, Take advantage of low interest rates and managing debt effectively positions the company positively with lenders, suppliers, and potential buyers. Utilize lines of credit to fund inventory purchases. Mortgages and loans should be used to buy equipment, real estate and other large purchases. Why use your cash (for large items not an $1800 tranny) when you can use someone elses? Be sure to write off loan interest for a tax break, free up cash to increase company's liquidity, and increase your creditworthiness by make your payments ONE TIME.

    The $12,000 is that what you owe or is that your monthly payments? Interest rates, your p&l and cash flow projections should help you make the right decision. If you have things financed with high rates those need to be paid off quickly but if they are at a good rate keep making your payments and hang on to YOUR CASH, because cash is king, and not used paid for equipment.
  5. cretebaby

    cretebaby PlowSite Veteran
    Messages: 4,162

    thats all fine and good until credit dries up like it has recently
  6. Hunter9

    Hunter9 Member
    Messages: 64

    You sound like my last accountant.....like I said LAST.

    Unless you are an extremely large company (think over a million in sales a year) paying cash IS the correct way to go. You need credit but you do not need debt. The number of small businesses (which I would bet the orig poster's company is) in the US that fail do so due to a lack of operating capitol and mounting debt is over 90%.
    Operating capitol should never come from debt, because then it is not really operating capitol. You end up paying your borrowed money back with the money you borrowed from the start...only w/ interest. It is a vicious cycle that ends in bankruptcy.
  7. Brian Young

    Brian Young PlowSite Veteran
    Messages: 3,394

    I was just talking to a couple of friends at a Ford dealer, one is a saleman and the other is thier financial person. She said the "credit crisis" isnt as bad as people think it is. She said if you have lousy credit then dont expect a loan but people who have moderate to good credit are still getting loans. BUT......I think the best way for a business is to put it onto credit then be able to pay off the balance in a month or two while still maintaining cash flow.
  8. DJ Contracting

    DJ Contracting PlowSite.com Addict
    Messages: 1,392

  9. Hunter9

    Hunter9 Member
    Messages: 64

  10. Eronningen

    Eronningen Senior Member
    Messages: 447

  11. DJ Contracting

    DJ Contracting PlowSite.com Addict
    Messages: 1,392

  12. elite1msmith

    elite1msmith 2000 Club Member
    from chicago
    Messages: 2,762

    hey , like i said, cash works for me ... yes credit is important to have..but use it were needed, like buying a house, or a shop, land... things that generaly speaking dont go down in valvue the moment you drive it off the lot

    and that advice might work for me but not you

    If I was gonna get another vehical on the road, or simply as a back up... i would buy it cash. you can find good used plow trucks, for less than 5,000 , easy

    you can find good used plows forless than 1500 , easy

    if you cant pull 5,000 , or 1500 out of your pocket book at the moment,... fix what you have now, and wait till your customers start paying you ..then go get it. If its a back up , there is no need to rush and go into more debit just to get another vehical asap

    If you really NEED this other one....then maybe consider it... but as a last resort

    But i look at it like this, you MADE IT this FARE... a few extra weeks will not kill you. It givesyou time to look around, dont jump the gun.

    Really Honestly , if you still think that your gonna have problems getting 5,000 after your customers pay, then your gonna have a hard time just affording gas , and your other bills.... youd be better off with a good list of 3-4 GOOD subcontractors.

    I have all the trucks i need, and then some , and i still have a list of subs
    Last edited: Dec 30, 2008
  13. Brian Young

    Brian Young PlowSite Veteran
    Messages: 3,394

  14. cretebaby

    cretebaby PlowSite Veteran
    Messages: 4,162

  15. cretebaby

    cretebaby PlowSite Veteran
    Messages: 4,162

    I generally agree with that but some would say not to borrow money for anything that doesnt produce a income
  16. 042500hd

    042500hd Senior Member
    Messages: 251

    If you ever have a need for a sub give me a shout.
  17. Hunter9

    Hunter9 Member
    Messages: 64

    I guess I would put it this way:

    If everyone could borrow their way to riches.....the entire U.S. would be packed full of billionaires instead of 10% unemployment and almost 15% of the home owners going into foreclosure.
  18. BMWSTUD25

    BMWSTUD25 Senior Member
    Messages: 631

    If it werent for credit my business wouldnt be able to grow the way I have been able to. cash is nice and no payments is even better but for the 2% of people that use credit effectively we make out quite nice in cash back and by being able to purchase items when pricing on them is good. I asked myself the same thing when i bought a skid. My payment on that is about 300 a month. got a decent rate on that but nothing to write home about but to rent one around here is 250 a day and now I have it to use and make money with every month. Just be smart about it. I would guess you could probably get a better interest rate and possibly lower payments if you consolidate and do a secured loan vs. paying credit card rates but without knowing rates and times I agree with others, its hard to say.