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Using credit to run a company

The larger the business, in terms of revenue and employees, the more it needs to leverage debt. My business has real estate debt only but I am a sole proprietor. If I add more locations, I will incur debt.
 
I’m on the fence on debt. I see how guys can get big fast by saddling themselves with tons of debt. This is great during the boom times they can make a ton of money. But I would hate to be in their shoes when the times slow and that bell gets rung.

There is a local younger guy in my area that is doing this in the excavation and landscaping area. He had to have spent 2.5 million+ on equipment a fancy shop prime location ect. He does the same stuff my dad does. I would not want to be writing those checks to the bank every month. I do not feel bad for him or the banks if it fails. I just keep looking at all his stuff picking out the stuff I would bid on at a auction lol. During the 07-08 crash the bank had us repoing equipment for them. I got some great deals on equipment that way. Some of which I’m still beating on to this day.

I only finance stuff that’s over 50k anything less get bought outright. I try to only have 1-2 pieces financed at a time. They are on short 5 year notes. I hate borrowing money but it’s they only way I get more crushing equipment. I cannot afford new and the rare chance a piece of the right good used Equipment comes up you need to buy it without hesitation. You wait a week and the fucker will get sold ;(. Right now I have one too many loans but I had to do it. A 30 acre rock next to my quarry came up for sale and had to buy it. In the deal the town gave me a mining permit for the property :smokin:. You would have to offer me more than a million to even consider selling it.
 
I called on a small, 30hp 4wd loader backhoe needing probably $3k in parts, price wasn't listed, he was a "make offer" jack ass, he says he has a buyer coming in a few days with $7k, and he's going to go buy a new kioti for 25k, he's retired, but runs a little dirt work thing.
From a non business stand point, I want a paid for machine, and not pay for the new car smell and I'll put sweat equity in it. But from a sole proprietor standpoint, it makes sense to run a machine 20 hours a week and write off a payment, versus billing 20 hours and turning wrenches for 5 hours

I think we'll see an ugly recession in the fall, leading to a dip in prices, and interest rates in the next year, followed by big-time inflation. I'm thinking it will be the time to finance nicer newer shit and the interest payments will be washed by thev inflation, and the recession price discounts will wash the premium, or new car smell.


edit: not telling anybody how to handle their shit, just thinking out loud
 
Projectjunkie said:
I called on a small, 30hp 4wd loader backhoe needing probably $3k in parts, price wasn't listed, he was a "make offer" jack ass, he says he has a buyer coming in a few days with $7k, and he's going to go buy a new kioti for 25k, he's retired, but runs a little dirt work thing.
From a non business stand point, I want a paid for machine, and not pay for the new car smell and I'll put sweat equity in it. But from a sole proprietor standpoint, it makes sense to run a machine 20 hours a week and write off a payment, versus billing 20 hours and turning wrenches for 5 hours

I think we'll see an ugly recession in the fall, leading to a dip in prices, and interest rates in the next year, followed by big-time inflation. I'm thinking it will be the time to finance nicer newer shit and the interest payments will be washed by thev inflation, and the recession price discounts will wash the premium, or new car smell.


edit: not telling anybody how to handle their shit, just thinking out loud
Click to expand...

As someone who came from the service side I can appreciate a company who owns all their equipment outright. As a project manager i can’t have 4 or 5 thousand bucks an hour waiting on a broken down truck. I’ve had to call the high bidder back after telling them I gave the job to someone else. To see if they could mobilize with no notice. It’s not a good look when you’re broke down on the side of the road and your competitors beat ya to the job.

Now, new equipment doesn’t guarantee against brea downs but it helps.
 
JR4X said:
Now, new equipment doesn’t guarantee against brea downs but it helps.
Click to expand...

a lot of that comes down to perception ... guys rolls in with older equipment and it breaks down most assume its because hes broke or doesnt take care of his equipment. new equipment has issues and most chalk it up to they dont make em like they used to or something to that effect.
 
I own a small business. We are predominantly debt free. That means, anything personal is paid for. The house, the cars, any toys, etc. All done. For the business it means our shop, our trucks, our tools are all paid for. We also have a decent sum in the bank, and ready access to additional cash. If needed, and justified, I could scrape together an easy $10 million. We would probably finance ot for five years, and pay it off in two, because that is how we operate. There a few things that are liberating when running a small business. First, gray hair because you learn that some things are not worth worrying about. Second, no debt, because you know that the only payment you have to worry about is the tax payment. That means, if I am not making the money I feel I am worth, I can pass on a project, and head out in the jeep. If things got ugly tomorrow, I have enough cash to last me an easy 15 years, if I did not make a penny in interest. There is a beauty in being debt free.
now, I have had friends in the construction industry who were of the finance everything philosophy, and their life style showed it. They even took classes and seminars on how to take on even more debt, so that they could feel the need to hustle. I like my lifestyle way more, and have done nothing but grow the past twelve years or so, while they have had to go find jobs. It is a beautiful thing. Best example of debt, is that in September of 08, i had a friend who moved into a beautiful new building for his contracting business. It was really a thing of beauty, 5 acres in a large city, 100,000 sq ft building, over 200 crews going out, every single day. By march of 09, he was totally shut down. No construction, building and all equipment foreclosed. It was ugly, and had severe family problems. Last I heard, he was a department manager at Home Depot. It is a crappy thing to need to worry about,
 
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