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Business Owners & Managers

Why Your Business Needs a Good Cash Flow

By Josh Currivan from Currivan Green Co. Landscape & Construction, Inc.

I've been a victim of the saying "cash is king". No notes to pay, not owing anyone money and a sense of fulfillment that you managed to save and fully pay for that expensive equipment.

Now whoever first told me this is an idiot. Not that cash isn't a player in some circumstances, but if you're running a business that you want to grow, then you need to use credit.

I spent my first two years in business paying out cash for EVERYTHING: truck repairs, mower, compactors, payroll etc. Do you know how much time and money I could have saved by pulling credit and financing some equipment instead?

I'm not pitching that "anyone goes and puts your whole business on loan", but take a minute and think - you can either spend 8k to pay for that mower gives and maybe have a sense of pride (and a empty wallet!), or use one of these 0% for 24 month offers. It's essentially free money!

Save that 8k and reinvest into you business. Put some money into marketing, shirts, yard signs and put a cash reserve aside. I'd rather have a $300 per month loan to pay when things slow down then dishing out 8k and have to make it back just as fast.

I know, I know - some of you will say having debt in early years of business is asking for problems. True, but... if you're a business owner you should be looking at it as positive debt.

If you can't take a loan for equipment or money and make at least 40% off it, you're breaking even or will be out of business soon and need to come up with a better business plan.

Seriously, think about what you've paid cash for and what you could've used that vash for in your business.

Business Credit When Starting Out

I'm not an expert on business credit...yet. Regardless of how you're structured - LLC, s corp, c corp, or LLP - you'll have to have a personal guarantee on all notes for at least the first 3-5 years. This is where you need to think of yourself as the co-signer for the company.

For most loans with a good rate you'll need a minimum of a 670 Credit score. You should be aiming no lower than 700 regardless if you want the best rates lenders have to offer.

Sheffield, for example requires a 660, and I'm not sure if that requires money down. Make sure you are attaching your company name along with a Duns number and TAX ID.

IF you're starting out with no client base and a weak credit score, I wouldn't recommend pulling credit but rather buy used stuff to build a client base. Once you establish a good cash flow, then you can start playing the credit game.

I believe a strong company should have good cash flow, free cash, line of credit (established over time for when needed). Having the ability to access money when you need it is very important in business and growth!

Josh Currivan
Currivan Green Co. Landscape & Construction, Inc.
UAG Member

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