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Thanks. It was rough going for 2-3 years but I think we played it right. I believe Tommy missed the point about selling for a multiple. For the type of business it was (coffeehouse/cafe) dozens closed before and after us without getting a dime of goodwill. We got $100K worth. So that was the trade-off.
Besides, a ton of small businesses are started by people in the late 40s/early 50s who were making comfy salaries and got laid off due to cheaper alternatives. Where do Tommy and his ilk think they get startup cash from? It's mostly home equity/stocks/retirement. It ain't Kickstarter.
Definitely sucks to have gone through most of one's life with credit scores usually in high 700s/low 800s then bottom out when you're most vulnerable and really need a job. The message there is to not take risks, get some crappy job and deal with the man.
I've been through what you were through as well about 25 years ago. An ex stuck me with a solid five figures of debt I had nothing to do with. Long story I won't get into here, but it only took me two years to bounce back from that. I was younger and still upwardly mobile back then, so more a speedbump than a sinkhole. Thankfully I never shared my Amex account with her or I would've been crushed.
I'm confused about your post:
"selling for a multiple"? I don't have a clue what that means.
"getting a dime of goodwill" Goodwill in the form of what and from who?
Startup cash from most businesses in my opinion comes mostly from personal savings, I don't see what that has to do with ultimately raiding a retirement plan to keep an unprofitable business going.
I don't suggest anyone get a crappy no risk job with the man, (what's so bad about dealing with the man?) but it does make sense to grow the operation (or your personal savings) step by step while keeping any debt to a reasonable level. That'll keep you outta trouble with creditors, which is the theme of this whole thread.
I'm a landlord and I hear stories constantly from tenants/applicants about why their credit is sub-par. In all but a few medical related situations, the scenarios that I've seen could have been easily averted. Too many people simply will not take responsibility for their poor choices.
I must have missed something. Nothing you mentioned would adversely affect your credit, would it? All I Know are the credit checks I had to go through for military and federal positions. I dealt with a credit counselor and understood a lot more about it. That's a great thing no matter what your credit score.
I think maxing out your credit would only be bad if you defaulted on it. Not if you paid it back as agreed.
... And you'd be wrong. Having maxed out balances looks bad. It will drop your credit score.
I charged $5000 on a $7500 card and my FICO score dropped 20 points. The following month when I paid it off in full I got the 20 points back.
Carry large balances near your credit limits and your scores will decrease.
"selling for a multiple"? I don't have a clue what that means.
"getting a dime of goodwill" Goodwill in the form of what and from who?
Startup cash from most businesses in my opinion comes mostly from personal savings, I don't see what that has to do with ultimately raiding a retirement plan to keep an unprofitable business going.
I don't suggest anyone get a crappy no risk job with the man, (what's so bad about dealing with the man?) but it does make sense to grow the operation (or your personal savings) step by step while keeping any debt to a reasonable level. That'll keep you outta trouble with creditors, which is the theme of this whole thread.
I'm a landlord and I hear stories constantly from tenants/applicants about why their credit is sub-par. In all but a few medical related situations, the scenarios that I've seen could have been easily averted. Too many people simply will not take responsibility for their poor choices.
Earnings = what you, as the owner keep each year.
Goodwill = in a business sale, that part of a business that isn't a physical asset. Databases, "brand" value/reputation, etc. etc.
Multiple = the sale price as expressed as a multiple of earnings, typically referred to as 2x, 3x, etc.
It makes perfect sense you're a landlord. You expect the worst from people.
So, you want to start a restaurant. Do you just dip into your "personal savings" for $200K or more? Nobody I know has that kind of scratch sitting in a bank. Maybe some have it in stocks that aren't in a 401K/Roth. But not that many. Most entrepreneurs leverage their home equity, sell whatever stocks they do have, then go to the retirement account, which is exactly what we did. As the other poster mentioned, it's my retirement and I invested it in me hoping to a) create a job for myself, and b) build a business asset. I did both.
And fwiw, you can't have goodwill for an unprofitable business (well you could, but that would mean totally cooked books). The business wasn't unprofitable. It just wasn't enough for two people to live on given where we were and wasn't headed in a upward trajectory that made sense to keep it long term. So we sold it. For considerably more than what the physical inventory/equipment was worth. A large chunk of that was used to pay off creditors, so it's not like we skipped out on bills. But we were overextended, thus took a significant credit score hit.
Had we decided to sell the business two years earlier in the middle of the recession we likely would have made nothing, and at best, significantly less than we did. You don't want to sell a business coming off its worst year.
It isn't fair to discriminate against people with poorer credit histories. How can they have a good credit history with no job?
As far as crime goes, there is a lot of white collar crime that goes unreported or uncaught! Might have a great credit history for the moment, but it doesn't mean anything.
By some of the highfalutin attitudes we have in here, these are the people that I would be worried about.
Status:
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Location: Log "cabin" west of Bangor
7,064 posts, read 9,129,393 times
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Quote:
Originally Posted by Yiuppy
But those are merely presumptions about a person's character you don't truly know anything about, right? And there isn't any kind of empirical data proving that people with a lower credit rating have poorer work performance, or is there?
Poor credit rating = bad judgment and poor decision-making skills, you're out, too much risk. That's the bottom line and there is no getting around it.
It's not simple. Your logic is simplistic. People have poor credit for a variety of reasons. Poor health and medical bills have effected friends of mine.
We are small business owners and we have two people who work for us. We conduct background checks. We don't employ anyone who lies on an application about past employment or education.
Those are the people whose character is questionable.
Employees are not slaves. Some things are not our business.
I don't think we are talking about small business owners sorting through a few applications every few years but large employers sorting through hundreds of applicants every day. So they need something that will provide a reliable indicator of who may be a good or bad employee and some have decided to use credit scores.
You yourself do background checks. How is that less invasive than a credit check? It seems more invasive to me. Is that information really your business or are you invading the privacy of your potential employees as well?
Credit checks for jobs were not done for many years. This is a relatively new phenomenon (in job interview history). Credit checks to determine how much you should pay for auto insurance is also a more recent phenomenon. It is ridiculous that credit checks should be related to and have power over so many things when they have been shown to be so faulty and error-ridden.
Location: Huntersville/Charlotte, NC and Washington, DC
26,709 posts, read 41,896,644 times
Reputation: 41447
Quote:
Originally Posted by Zymer
Poor credit rating = bad judgment and poor decision-making skills, you're out, too much risk. That's the bottom line and there is no getting around it.
This attitude is one that displays a huge lack of critical thinking skills.
Credit checks for jobs were not done for many years. This is a relatively new phenomenon (in job interview history). Credit checks to determine how much you should pay for auto insurance is also a more recent phenomenon. It is ridiculous that credit checks should be related to and have power over so many things when they have been shown to be so faulty and error-ridden.
I think you're right. And I think years ago credit wasn't as carelessly or commonly used then as it is today.
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