mdfriday

I was wondering how and if some of you use debt.

Do you operate debt free?

Do you use a bank line of credit for large jobs and pay it off when paid?

Have you found debt to be a useful tool, or a burden?

Is is possible and probable to build a successful E.C. business with out using debt?

For some, supply house accounts are necessary. I personally do not have one yet. I pay as I order, either with the company debit card, or a check.

I am looking at some options, and just wondered what some success stories, and some horror stories you guys have with debt.

Not talking about us extending credit, but if you would like to expound on that, I will read it. (seems this has been a somewhat frequent discussion lately)

jrannis

The supply houses usually will give $5,000 to $10,000, 30 day credit to anyone walking in off of the street here. Job accounts can have an unlimited amount of credit based on how the project is setup.

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"When a your only tool is a hammer, every problem looks like a nail"

brian john

Supply house credit is a must IMO, though I know a few guys that earn airline miles using a CC.

Other debt must be weighed as you go. We are very cautious about taking on any debt.

Buying warehouse, trucks large and test equipment.

We have a line of credit but seldom use it,, BUT DURN nice to have.

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Brian John
Leesburg, VA

Podagrower

I try to operate debt free, but it is not always possible.
I see it as a burden, simply because I do not like the feeling. On larger jobs, you can not pay for all material up front, but the cost of material delivered should be reflected in your monthly draw, so you should not be carrying that debt for more than a month or two.
Most of us are going to have to finance vehicle purchases.
I don't think you can be a successful EC without incurring some debt,

but it is whether you manage your debt, or you let your debt manage you

that will determine how successful you are.
Supply house accounts are very necessary. I don't think any of my local supply houses will pull a will call order if you don't have an account. They definitely aren't going to order that $4000 breaker you need right now without a deposit. Right now, salesmen are hurting. If I e-mail my salesman for a quote, I will always save money over walking in and ordering it at the counter.

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http://www.theonion.com/articles/hur...ety-tips,8090/

jza

Getting an account with a supplier is establishing a partnership with another business.

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UNCFESTA, 4th year apprentice.

kbsparky

I believe that there is a difference between credit and debt.

I have gobs of credit, but no debt. We pay off our bills in full every month, taking the full prompt-pay discounts offered by our suppliers. I keep track of those discounts, and accumulate $500 or so of `em every year, simply for paying the bills on time.

Same thing goes for credit cards. I might charge $40,000 worth of stuff annually on my cards, but pay -0- in interest and fees. The banks pay me to use their cards!!

Proper use of credit can be done without incurring any debt.

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-KB

Life is uncertain -- eat dessert first!

brian john

And to your advantage, if completed properly.

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Brian John
Leesburg, VA

manchestersparky

You can apply the same tactics to your personnel finances as well.
Credit can be good if used properly. Debt is never good

erics37

I don't own or run a business but my wife and I are 100% debt-free and intending to stay that way. I have a credit card that I buy groceries with and pay off monthly; I've had the same one for like 10 years and I've built up a $20,000 credit limit on it with a really good APR Not that it matters, because I pay it off monthly and never rack up more than a couple hundred bucks on it.

But it's nice to have just in case I get stranded in Zimbabwe or something.

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- Eric

nyerinfl

I pay my vendors with AMEX every time then pay the card off in full every month, and accumulate tons of points doing this. That plus 2x points on gas, was able to get the wife a new pottery barn dining table this xmas with plenty of points leftover, plus the CC method allows you more time to collect and pay.

You really need to open a supply house account, at least one, regardless of how you structure the payment. Will your vendors sell you a light fixture or gear package without one? Will they even quote them for you? Also you will get a better rate at the counter with an account, a rate you may not know even exists if you're buying without an account.

Tiger

We've been debt-free for 12 years. We have credit at a few suppliers and pay every month. Since we do residential service and rarely work for GCs we extend very limited credit to clients. A lot of good contractors went out of business in 2010 and I suspect debt was the major cause.

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www.TigerElectrical.com

B4T

My supply house gives me (60) days.. I am trying to get is down to (30) in the next few months..

Some of the jobs I have been doing are running (90) days for payment..

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There comes a time when people who volunteer their service need to step back and see if it is better for them to retire. A red flag is when they become "cranky" and lose all sense of reality by making decisions that really don't make any sense..

HARRY304E

[/quote]
THats the worst when they think payment is optional

B4T

THats the worst when they think payment is optional[/quote]

State funded jobs that go out to bid and the lowest bid wins..

__________________
There comes a time when people who volunteer their service need to step back and see if it is better for them to retire. A red flag is when they become "cranky" and lose all sense of reality by making decisions that really don't make any sense..

HARRY304E

State funded jobs that go out to bid and the lowest bid wins.. [/quote]
That is the worts or all

JohnR

I know a few contractors who use their account at the supply house and then when that months bill comes due, put it on their cc and extend for another 30 days.
This gives them about 60 days before having to pay, which on larger jobs, allows them to use the money deposited for 30 days. They also have the ability to save all the points for airline and hotels.

One of these guys was doing 40 mil a year gross. All purchases through the cc. If he could have figured out how to put labor on it, he would have.

Jbird66

I operate totally debt free. If I need a new van I take my checkbook. I use credit for monthly purchases but have not paid interest in over 10 years. When I started I used credit very little because I wanted to operate ahead of debt collectors.

If you are getting started I would suggest you get very intense about building up you cash reserve and stay off or get off debt. Here is an example of how it will help you prosper:

The terms at my supply house are 2% 10 net 30. So basically the invoices are due and payable on the 30th but they will knock off 2% if I pay them by the 10th. This is free money if you have the cash so can you not only save interest you can actually reduce what you are paying for material.

I will not go into debt for business. If I can not afford to do the job without borrowing money I stay away. What happens if the job you borrowed money to do goes south and you do not get paid?

oldman

we've been doing this for years...take a nice vacation every year on the amex points....

revolving debt is required for just about any EC larger than 1 man and a helper....revolving debt being supply house credit, credit card, etc...

long term debt is optional, but useful...why pay $20k cash for a new van when you can finance it and make it pay for itself?

it's different than personal debt...you buy a car personally and it's a liability...but a service truck is an asset...