Forums: Discussions for entrepreneurs and small business.

Sorry it took me so long to answer, I was out of town. 

I`m simply saying that the folks I counsel (individual as well as small business) are usually at the end of their rope financially.  If you`ve ever sat and cried with someone because they think they need to file bankruptcy, you`d know what I`m talking about. 

Regardless of wether or not the actual numbers make sense, it is still a very real problem.  My business is prospering without debt.  Why?  Because I help people every single day who have gotten into trouble by using debt as a `wealth-building`, `investement-building` or `business-growing` strategy.

You can tell me all abou how many points and free t-shirts you earn every month, but the studies show that 70% of points go unredeemed.

You can tell me all kinds of statistics on how credit is great for your business and I`m happy that you`re doing well.  If you knew the people that I see and work with every day (people just like you and probably a few people reading this post but who will never answer because of guilt and shame) you will have no problem seeing why debt is such a problem in personal and small business today.

Credit is not meant to hurt your business.  The banks are there to lend money and make money in the process.  They don`t want to hurt you or your business because they may not get paid if they do (bankruptcy).

In the end what it all comes down to is this.  I have no debt and thus I`ve eliminated all the risk that entails entirely.  If you want to use debt as a `tool` that`s fine with me.  I`ll be in a business for a long time helping people though and I`m happy to do it.


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www.LukasCoaching.com

Low-cost website design, payroll processing, bill payment, bookkeeping and financial coaching for the distressed or well-off consumer or business.

Full service coaching firm offering, career, financial, health & nutrition and business coaching.

We are talking about small business, not personal credit card usage.

Any business that deals with inventory is going to use some kind of debt (credit card, net 30, etc.) management to help manage their cash flow unless they have a nice pile of capital sitting around.

My brick-n-mortar store goes through 15k-20k of inventory per month, and while I could probably prepay for most of my inventory now, I certainly couldnt do it within the first 3 years of being operational.

Outside of running a 100% cash based payment due on the spot kinda thing (don`t we all wish we could) you are going to have float. I don`t know of many businesses doing B2B that will cut you a check on the spot when said product/service is delivered.  They are going to float you 30-45 days on average.  Have enough of those types of customers and you absolutely need to be able to float some of that debt yourself without severely impacting your cash flow.

I`m certainly not an expert nor have I been doing this as long as other people have, but one thing I have learned is that cash flow is king, the money needs to flow in faster than it flows out.  I would be willing to bet a very very large portion of your business clients who come in to file bankruptcy had an enormous amount of monies in their  Accounts Receivable that was 90-120+ days past due.  When the monies are slow in coming in (perfect world everyone would pay when order is placed, but its just not realistic), and you continue to pay all your overhead, cost-of-goods-sold, payroll, etc. directly from your cash reserve, said reserve will be gone before you know it.

Having the ability to float some of that debt until the accounts receivable empties out is a gigantic tool that can be used.

I am a big fan of Dave Ramsey (of which your particular service is based around), used to listen to him on the radio every day until the stupid station switched to an all Disney format (uggh), but the envelope and debit card "system" he advocates isnt 100% realistic or feasible with every business model out there.

The sooner people as a whole start taking responisbility for their own actions and choices, the people like Dave Ramsey will have to find a new line of work. 

Poor personal spending habits or the inability to manage one`s own finances does not mean that using debt in a business model is a bad way to run a business.

 

 

Hey jlukesavige, welcome back from your trip. I hope it was enjoyable.

I understand the nature of your comments now and I appreciate people like you, who want to help others and, in the process, see too many folks in trouble in a regular basis.

However, I`d like for you to understand that negative comments based on wrong forecasts are just not welcome. There are many people right now toying with the idea of starting their own business. As they read wrong information saying that only 30% of businesses are making money, they become discourage. Because this kind of comment is discouraging and scary.  The reality is 70% of business are between making money and breakeven. Not to mention that research shows that a lot of business report loss because they dont report cash transactions to avoid taxes. These numbers are encouraging, uplifting, positive and they are real...very real.

So, point taken. I agree that poor manegement of credit cards can be as distructive as anything else in business. Hondo makes a great point about cashflow and the benefits of using creadit cards. We need to be careful and responsible. Just dont start to spin the numbers in order to make a point that isnt real. Businesses are doing well, creadit card can help, and most of the times it does, otherwise there would be no credit cards cause everyone using it would be out of business. We need to pass a positive message, when the message is real.

Thanks a lot again. 

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jump! jump! jump!...didn`t it feel good!!!

I did a lot of research on business credit cards when I started my business a few years ago. Like a lot of people, I used credit to finance my start up.

I wanted a card that would allow me to transfer some existing business-related debt (start-up expenses), charge a reasonable percentage on the debt I was carrying, and not gouge me for additional charges.

The best one I found is from Advanta - I`m paying 2.99% on the transferred amount and 9.99% on additional expenses. It`s been a lifesaver.

:) Jennifer

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I thought advanta was great as well, until they upped our interest rate from 7.99% to 25.99% with no options but to close our account.  No notice in the mail, no e-mail, no phone call; simply jack it up and wait until the customer noticed and calls in an outrage.  Very poor care of customer, which you can`t always expect superior support from credit card companies, but this was appalling.  We have never made a late payment and have great credit with other institutions.  I would stay away from Advanta all together.
Best Regards,
-Scott



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Scott Mickelson - Owner/CEO
Cari Mickelson - Admin. Assistant/Web Designer
Syscom Digital Technologies, LLC.
Missoula, MT
Phone: (406)549-3171
Primary e-mail: smickelson@syscomdt.com