Posted: Oct 10, 2017 9:01 pm
Credit is just a tool as cash is....use it stupidly or wisely. You cannot really run a business needing inventory and carrying receivables without finance unless you are well off already.
Example ...I could pay cash for a new van .....but then I have to reduce inventory by an equal amount restricting my income.
Financing cars is very inexpensive for cost of capital ( it's a marketing tool for them . So it's far better for me to pay $400 a month and keep $20k worth of inventory turning over every three months ....at 14% margin and 4 turns a year that's 11,200 in profit in one year against a vehicle finance cost of $4800 which does include some principle and which the government lets me write off entirely on my taxes.
On occasion ....those flash cars some businessmen drive are actually suggested by their accountants to get them down a bracket......the rich get richer ....
Rinse and repeat.
Example ...I could pay cash for a new van .....but then I have to reduce inventory by an equal amount restricting my income.
Financing cars is very inexpensive for cost of capital ( it's a marketing tool for them . So it's far better for me to pay $400 a month and keep $20k worth of inventory turning over every three months ....at 14% margin and 4 turns a year that's 11,200 in profit in one year against a vehicle finance cost of $4800 which does include some principle and which the government lets me write off entirely on my taxes.
On occasion ....those flash cars some businessmen drive are actually suggested by their accountants to get them down a bracket......the rich get richer ....
Rinse and repeat.