The Credit Thread (bankruptcy, loan, transaction, percentage)
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Business Owner 1 makes a decent living of $48,000 per yr.
In order to make this $4,000 a month this owner needs to SPEND $10,000 a month on inventory, supplies, etc...
This is not a rare situation.
Please explain sterlinggirl how this person is going to spend that $10,000 a month to bring in $14,000 without credit?
The same way things have been done throughout history....
You start out small and slowly build your business reserves until you have that $10K sitting in your business reserves. Once you get to that point you save a little more for hard times.
Once you aren't paying interest on your WIP or collectibles, your business is more profitable.
We are not talking about a five and dime...we are talking about several hundred thousand dollars for new xray machines, diagnostic tools, etc. Do you have disposable money like that on your darling little debit card? What a joke. Maybe I'll just keep my money tied up to a debit card. Good idea! Here's how it works...we buy the things we need, the patients come and their insurance pays us, we pay our creditors...does that make sense??? I have only had a balance on my card ONCE...ONCE in my life. Don't preach to me about credit when you are obviously still wet behind the ears.
I know all about it and only accept cash patients because I refuse to spend half my time doing paperwork for insurance companies. My A/R is never over 30 days, and if you had any imagination at all, you could accept that I meant it is ok to keep liquid business reserves in a MM fund and transfer them to checking as needed for use with a debit card. Granted, you don't make a lot in interest with a MM, but you don't pay interest either.
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So, next time you need to go to the doctors and they do not have the equipment needed to treat you, maybe they will have some snake oil, an aspirin, or a sweet pat on the back. It takes spending money to make money...do you understand that?
Not even a PDR? Oh....the horrors!!
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Go start a business and get back to us... or better yet, continue to pump gas for a living.
I prefer to flip burgers. Would you like a side of fries with that?
Bottom line commercial credit gets tighter, rates are rising, some businesses and companies are running on low margins as is with higher rates something will have to give, things will go downhill fast, worst case lending becomes extremely hard to find many businesses/ companies are going to be caught between a rock and a hard place, it will effect everyone in a negative way.
Bottom line commercial credit gets tighter, rates are rising, some businesses and companies are running on low margins as is with higher rates something will have to give, things will go downhill fast, worst case lending becomes extremely hard to find many businesses/ companies are going to be caught between a rock and a hard place, it will effect everyone in a negative way.
If businesses cannot turn a profit with interest rates at market-set levels, not at drugged levels set by crazed government fiat, then they should go out of business: they should have never gone into business.
The same goes for deadbeat homedebtors.
Government-set interest rates and credit policies have led to the mass mis-allocation of resources and the US economy is poorly structured to compete in the global economy.
The OP misses the entire point: this bailout is for the corrupt money-men in the banking industry and government and all this propaganda about credit completely drying up is tantamount to extortion.
If businesses cannot turn a profit with interest rates at market-set levels, not at drugged levels set by crazed government fiat, then they should go out of business: they should have never gone into business.
The same goes for deadbeat homedebtors.
Government-set interest rates and credit policies have led to the mass mis-allocation of resources and the US economy is poorly structured to compete in the global economy.
The OP misses the entire point: this bailout is for the corrupt money-men in the banking industry and government and all this propaganda about credit completely drying up is tantamount to extortion.
Really? And as to the OP about credit, you're starting to see the effects of credit drying up now. An example: Sonic Drive-in's had to stop remodling and building new stores because the credit to do so dried up.
Now whether you like sonic or not or whether you think they should be in buisness or not is not the point. The point is that a profitable buisness is trying to expand and modernize and the CAN'T because the credit pool dried up all of a sudden.
Most companies use credit for capital improvements so I'd postulate that if that credit pool dries up then many companies will do the same.
It isn't propaganda and if those who think it is will come out of their bunkers long enough to look around they'd see it's starting to effect main street via small buisness.
The OP misses the entire point: this bailout is for the corrupt money-men in the banking industry and government and all this propaganda about credit completely drying up is tantamount to extortion.
You 100% sure on that last point? Because if you aren't LOTS of NON corrupt money-men go down with the system because of it.
As I stated SEVERAL times that you must not have read. I am not quite sold that the bail out is needed to keep responsible credit lines intact, then again would I bet my business on it? Nope.
That is why I needed to vent because this is a very unknown situation for quite a bit of people who, according to experts, could get hurt for no reason of their own.
What about the small businesses that use credit to buy inventory, or tools to do their job? They NEED this credit to make the money to then PAY OFF the credit plus pocket the income that helps them survive.
Businesses can still get loans from regional banks and their suppliers. Every story I hear about a business being effected by the tighten in credit is the same story. The business is starting to do badly and needs a loan to stay operational and perhaps throw some money at their problem in the hopes of doing better. No bank is going to be interested in this though and they shouldn't be interested in it.
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In order to make this $4,000 a month this owner needs to SPEND $10,000 a month on inventory, supplies, etc...
Then the owner should have $10k in capital. I've never understood why businesses do this, especially small businesses. They go into debt to purchase merchandise with the hopes that they will be able to flip that merchandise and pay off the debt. Now, this strategy works okay if you have a predictable cash-flow each month. But as soon as their is a slow down in cash-flow for whatever reason the whole thing collapses unless you inject more debt into it.
Regardless, there are a number of small and large businesses that are credit addicted and only can exist so long as their is an ever increasing supply of credit. The bailout isn't going to fix their problems, their problem is an unsound business model. We've reached peak credit, the game is over, let the suckers fail. Other stronger businesses will pick up the pieces. I'll do my best to help in this regard = )
Now, funding for expansion...that is a different story.
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The point is that a profitable buisness is trying to expand and modernize and the CAN'T because the credit pool dried up all of a sudden.
But is the pool of credit drying up because attitudes about the future of the economy changing or because credit is drying up in the shadow banking industry? I really don't know, but every sob story I hear about a business not getting a loan, when analyzed, isn't so clear cut.
One of the nightly news (we flip around, sorry can't remember which) had a great little educational cartoon about how tightening the credit results in basically a slow down of the entire economy, which of course leads to job loss. Was credit out of control? Yes, but some credit is necessary - think about all the bills you get in the mail. Technically, you have 30 days (or thereabouts) to pay them, right? That's credit. The electric company had to spend money to provide your electricity and yet you don't pay for it until 30 days later. We do need credit to run the economy, we just let it get too far out of control.
If you want some really sobering truth about the credit crisis - read this article:
Businesses can still get loans from regional banks and their suppliers. Every story I hear about a business being effected by the tighten in credit is the same story. The business is starting to do badly and needs a loan to stay operational and perhaps throw some money at their problem in the hopes of doing better. No bank is going to be interested in this though and they shouldn't be interested in it.
Then the owner should have $10k in capital. I've never understood why businesses do this, especially small businesses. They go into debt to purchase merchandise with the hopes that they will be able to flip that merchandise and pay off the debt. Now, this strategy works okay if you have a predictable cash-flow each month. But as soon as their is a slow down in cash-flow for whatever reason the whole thing collapses unless you inject more debt into it.
Regardless, there are a number of small and large businesses that are credit addicted and only can exist so long as their is an ever increasing supply of credit. The bailout isn't going to fix their problems, their problem is an unsound business model. We've reached peak credit, the game is over, let the suckers fail. Other stronger businesses will pick up the pieces. I'll do my best to help in this regard = )
Now, funding for expansion...that is a different story.
But is the pool of credit drying up because attitudes about the future of the economy changing or because credit is drying up in the shadow banking industry? I really don't know, but every sob story I hear about a business not getting a loan, when analyzed, isn't so clear cut.
Exactly.
Any manager - whether of a household or a small business or big business or a country - worth a grain of wheat, has long seen this crisis coming and has stocked his barn with at least two years worth of provisions.
Worthwhile suppliers of credit are still supplying credit to creditworthy recipients.
The US economy needs to restructure from skin to bones.
These extortionists are threatening the day-to-day payments system. Let's call their bluff.
If their threat is baseless, so what? Let the chips fall where they may.
If they act on their threat, is it worth living in such an environment?
It can be done without credit. Years ago I owned a Subway sandwich shop(a lot of years) and I paid everthing with cash. I rented.
My husband doesn't believe in renting for businesses so he always owned his buildings outright and paid cash in his varied businesses. He was able to do this because he "owned" the real estate where his businesses were.
Yes our system does run on credit and if everyone is in the same boat I'm sure something would be worked out for the responsible business owners.
Lisa
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