Business debt

[george]

Was part of a conversation between a couple of people I know last night and discussion got round to the subject of `debt` in business.

One guy, self employed with a couple of part-time employees has and uses a £100,000+ overdraft, so obviously pays a big chunk of interest on that.

Yet he drives a £40k car and takes a `decent` wage.

Wheres the balance? And the `trick` to managing it all?

[Legends]

I know several people/SME's who operate on large overdrafts and the key to it is being able to generate massive amounts of business and use the overdrafts to make up cashflow shortfalls.
One guy runs a sign company and gets some seriously big contracts (MFI refits, Petrol Station Forecourt signs), his company can get involved with a big company and not get paid for several months so he uses overdrafts to pay wages, suppliers etc - he adds the interest on the overdraft into the price for the job.

He makes great money on the jobs - the banks happy to lend him the money as his orderbook is always full.

I think many growing SME's will operate on a overdraft - we have one for £1 19/11

[kathynewman]

Good Grief - would like that sort of business!

You ok George - was only just thinking you been bit quiet recently and there you popped up

Kathy

[gabrielcrowe]

you popped up

get a room, pervs.

[gabrielcrowe]

balance

actually, i think its about how daring you are and how willing you are to go into the red for it.

a plays it safe business will generally work for a very long time at very little profit.

but a go hell for leather expand business will either fail in a short time of boom in a short time.

[Darren B]

You ok George - was only just thinking you been bit quiet recently and there you popped up

Kathy

You and me both Kathy

[Darren B]

actually, i think its about how daring you are and how willing you are to go into the red for it.

a plays it safe business will generally work for a very long time at very little profit.

but a go hell for leather expand business will either fail in a short time of boom in a short time.

Im one of lifes drifters, tooooo much stress to get into that sort of thing for me. i dont do overdraft, if i havent got the money i dont buy it, all my stock is brought and paid for, same as computers and equipment, if things turn bad i dont have someone knocking on my door asking for there money, then taking away the equipment i need to function. dont run before i can walk, not everyonse cup of tea but it works for me.

D