Twenty Nickels
If you save twenty nickels, you’ve made a dollar
by
Raymond Matkowsky
www.datastats.com
email: rdm@datastats.com
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Issue 6-10 June 2010
Do you really want to play this game?
by
Raymond Matkowsky
Cash is king! Don’t let anyone tell you differently. With the exception of certain businesses, such as automobile financing where the salesman earns a commission on the deal and the financing is just one more factor that can be manipulated to make you think that you are getting a better deal than you are, cash is much preferred to a credit transaction.
There is nothing to replace cash that can offer you peace of mind, cost savings and control of your own business’s destiny. When a business is under pressure, only cash can keep you from moving deeper into the red, paying excessive credit costs, or having someone else dictate how you will run your business.
Cash flow affects every aspect of a business from payrolls to inventories. Cash flow is the main reason for over 70% of business failures. Furthermore, poor cash flow can put an end to an otherwise successful business. Cash creates a level of safety!
Most banks will use some sort of benchmark to calculate loan rates. The “Prime Rate” is used as the starting point most often. Occasionally, the “Libor Rate” (London Interbank Offer Rate) will be used. As of June 16, 2010, the prime rate was 3.25%. The average small business will be quoted some rate a few percentage points above that benchmark. As of June 17, 2010, small business loans ranging from US$5,000 to US$500,000 carried an average rate of 6.89 % to 7.73%. Therefore, for a US$250,000 loan, you would pay upward of US$17,500/yr. US$17,500 is 11.7% of what the IRS says is the typical small business profit in the U.S. It doesn’t stop there though, all financial institutions add a variety of fees on top of their interest rates. These fees vary from institution to institution. The only common factor is that you have to pay the fees in order to get the loan.
Credit became much tighter in 2008-2010. Closed off credit markets made investments in your business difficult even for day by day expenses. Credit lines were restricted or evaporated on a moment’s notice. Those banks that did continue lending would put onerous requirements on the business and its main principals. In short, the financial institutions told business owners how to run their businesses.
Some businesses resorted to credit cards. But according to an article in the December 18, 2008 issue of The New York Times, they were charged as much as 29.99% interest in addition to fees.
Clearly, the reduction or elimination of borrowing costs would result in a huge savings and remember all savings go right to your bottom line. All savings are pure profit!
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A Call For Reader Input
We at Data Stats would like to see this newsletter become a reader supported forum for help questions, answers, or general comments on anything appearing in this newsletter or Data Stats’ website. If you have a question, answer, or comment to contribute send them to me at newsletter@datastats.com. I will try to publish it here.
If you have an urgent question to ask, you don't have to wait for our newsletter to come out. We will try to find you a reader or one of our experts that may be able to help you. So, if you have a question, comment, or think that you can be of help, send us an email at once to: newsletter@datastats.com.
Also, in your email, please let us know if we have permission to share your email address with experts that may be able to exchange ideas with you directly.
Raymond D. Matkowsky
Copyright © 2010 Raymond D. Matkowsky
Data Stats
P.O Box 672
Old Bridge, New Jersey 08857-0672
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