Get READY for a "BIG TRAIN WRECK"??

[aplusmnt]

If a business has to borrow to pay pay roll then they are just a bump in the road away from being a Fannie and Freddie!

I wished cattle feeding was as simple as janitor. Several years ago I borrowed money to make payroll. It had nothing to do with me being a bump in the road away from Fannie and Freddie it had to do with a packer I sold hundreds of head of cattle to going thru a buyout by another company. Thru a simple banking error all the checks they sent out during the merger or aqusition or whatever it was came from an account with no money in it. Until they could figure out what they or whoever else was at fault had done wrong nobody has any money. Now imagine if you could what it is like to know your cattle are dead and a company you have done business with for years has been bought out by someone with apparently no money. I borrowed to make payroll. The bump in the road was somebody elses but it still affected me. I can only assume you have never sat on a overdue account large enough to effect your bottom line. Some business do.

Those are the kind of situations that business do use their credit for, but once they get that Temporary situation under control they pay that pay roll money back and go back to business using the Operating capital they have saved.

I am not anti credit, just to many businesses today use credit as a crutch to poor planning. Credit has become the norm of doing business today, not just for start up or expansion but every day operation. I believe if you have to borrow for expansion it is dangerous, but if you have to borrow for day to day operating expenses such as feed, then it is ultra dangerous!

Credit has become so much a part of peoples lives today that to think of running a business or even buying a couch with out it seems alien to them!

 

[SRBeef]

I am very disappointed that my non partisan comment/post was removed from this thread but the "GO GET 'EM SARAH" that I was commenting on was not removed.

 

[Herefords.US]

I am very disappointed that my non partisan comment/post was removed from this thread but the "GO GET 'EM SARAH" that I was commenting on was not removed.

My reply to your post probably aided in its removal! Mine was nonpartisan as well, but it was definitely political, as was yours.

George

 

[somn]

I am not anti credit, just to many businesses today use credit as a crutch to poor planning. Credit has become the norm of doing business today, not just for start up or expansion but every day operation. I believe if you have to borrow for expansion it is dangerous, but if you have to borrow for day to day operating expenses such as feed, then it is ultra dangerous!

Here I thought the reason they call a operating line of credit what they call it [operating loans] was because it was used specifically for operating costs such as feed. I can't think off the top off my head a single feedyard of any considerable size that doesn't have a operating line of credit. I wished cattle raisin was as simple and straight forward as other business must be. If it weren't for banks borrowing money to feedyards for operating loans there would not be a need for cows. I guess feedyards work in a ultra dangerous enviroment however few cow calf ranchers feel the same as you it seems they always complain we don't pay enough for their calves the way it is they would like to see it be super ultra dangerous.

 

[aplusmnt]

I am not anti credit, just to many businesses today use credit as a crutch to poor planning. Credit has become the norm of doing business today, not just for start up or expansion but every day operation. I believe if you have to borrow for expansion it is dangerous, but if you have to borrow for day to day operating expenses such as feed, then it is ultra dangerous!

Here I thought the reason they call a operating line of credit what they call it [operating loans] was because it was used specifically for operating costs such as feed. I can't think off the top off my head a single feedyard of any considerable size that doesn't have a operating line of credit. I wished cattle raisin was as simple and straight forward as other business must be. If it weren't for banks borrowing money to feedyards for operating loans there would not be a need for cows. I guess feedyards work in a ultra dangerous enviroment however few cow calf ranchers feel the same as you it seems they always complain we don't pay enough for their calves the way it is they would like to see it be super ultra dangerous.

I am sure if you feed lot guys fail that get to deep into debt and can only exist due to borrowing operating expenses, there will be somone with some cash around to buy them cows everyone has. Just a shame that taxpayers have to bail out people that do not operate their businesses more securely! We have became so engulfed within credit that people like you can not even imagine a world where you pay as you go (after established).

Today's generation has became the generation of debt, and they know no other way!

 

[Brandonm22]

I wonder how many of the crop boys could plant next spring without the annual operating loan to buy seed, fertilizer, diesal, Roundup, labor, etc. I wish people would get smart and cut up the credit cards, pay off their mortgages, ditch the operating loans, drive all the banks out of business FOREVER and we would all operate in a cash economy. The whole world would be a much happier more secure place without paying out all that interest. I don't believe most people have the discipline or the patience to actually do that though.

 

[HerefordSire]

I wonder how many of the crop boys could plant next spring without the annual operating loan to buy seed, fertilizer, diesal, Roundup, labor, etc. I wish people would get smart and cut up the credit cards, pay off their mortgages, ditch the operating loans, drive all the banks out of business FOREVER and we would all operate in a cash economy. The whole world would be a much happier more secure place without paying out all that interest. I don't believe most people have the discipline or the patience to actually do that though.

Although obviously more risky, one can make more money by using other peoples money. Look at AAPL...they have about $21 Billion in cash and absolutely zero debt. However, they are leaving allot of money on the table by not borrowing money for long term debt. Also, look at the same numbers for MSFT.

 

[Brandonm22]

And if Lehman Brothers had borrowed 25% of what they have borrowed, they probably still exist today. The problem with carrying too much debt is that your cash flow gets tied up trying to service your debts. What's worse leaving money on the table versus giving away all your money in debt service. I think there is a different answer for every business and individual.

The more I ponder the question, the more I think you are right. The Fed will have to unleash inflation. According to a housing expert on Fox Business Channel last week (I don't remember names), 16% of homeowners are "underwater" (they owe more against the house than the house is worth). Another 10% devaluation in the next year and 60% of homeowners could be "underwater" and thus unable to borrow. That IS deflation and that would be a nightmare we don't want to actually see. The only way people are going to build equity and pay off these loans is if the house increases in value and in most markets that means higher wages. The only way the Fed can create inflation is by artificially increasing the money supply.

 

[somn]

I am sure if you feed lot guys fail that get to deep into debt and can only exist due to borrowing operating expenses, there will be somone with some cash around to buy them cows everyone has. Just a shame that taxpayers have to bail out people that do not operate their businesses more securely! We have became so engulfed within credit that people like you can not even imagine a world where you pay as you go (after established).

Today's generation has became the generation of debt, and they know no other way!

Considering a operating loan is only 8% of a feedlots expense I really doubt it will be the operating loan that causes a failure in a feedlot. A $13 upswing in calf prices or a $5 drop in fat cattle prices cost more than the interest. Of course that went completly over your head.

 

[aplusmnt]

I am sure if you feed lot guys fail that get to deep into debt and can only exist due to borrowing operating expenses, there will be somone with some cash around to buy them cows everyone has. Just a shame that taxpayers have to bail out people that do not operate their businesses more securely! We have became so engulfed within credit that people like you can not even imagine a world where you pay as you go (after established).

Today's generation has became the generation of debt, and they know no other way!

Considering a operating loan is only 8% of a feedlots expense I really doubt it will be the operating loan that causes a failure in a feedlot. A $13 upswing in calf prices or a $5 drop in fat cattle prices cost more than the interest. Of course that went completely over your head.

You just proved my point then, if you can not reach a point in a business that you can not cover that small of a portion of your cost then you are operating on thin ice! I wonder how many farmers, ranchers, feed lot owners and other Ag businesses have went belly up over the years? And I wonder how much of that resulted due to not being able to pay the banker?

I have also noticed that when businesses operate on credit they tend to over indulge. That new Truck looks so much more enticing when it gets absorbed into business loans!

Glad to see relying on the credit industry is being so successful for you! Just hope for your sake nothing big happens and banks tighten up and you are not able to make a living due to no credit! Me I will avoid debt at all cost!

 

[somn]

You just proved my point then, if you can not reach a point in a business that you can not cover that small of a portion of your cost then you are operating on thin ice! I wonder how many farmers, ranchers, feed lot owners and other Ag businesses have went belly up over the years? And I wonder how much of that resulted due to not being able to pay the banker?

I have also noticed that when businesses operate on credit they tend to over indulge. That new Truck looks so much more enticing when it gets absorbed into business loans!

Glad to see relying on the credit industry is being so successful for you! Just hope for your sake nothing big happens and banks tighten up and you are not able to make a living due to no credit! Me I will avoid debt at all cost!

Aplus do you ever think before you type? The cost to borrow the money is only 8% of the total feedlot expense. That is the actual out of pocket expense. If $1112 is total money borrowed per calf $80.96 is interest the rest pays calf costs, feed costs, puts and calls, meds the list goes on and on. I knew this would go completely over your head just like it has. I'm sure you buy thousands of $1112 dollar mops every year using your cash reserves. Just curious how do you expect a feedlot owner to build up the cash reserves of $1112 per calf so they will never need to borrow operating money again? Remember the average feedlot only makes $53 per head after expenses. Let me remind you Donald I have forgotten more about the cattle industry than you could ever possibly learn. Your punchline at the bottom of your posts is well suited to follow most of your posts ;-)

 

[somn]

Glad to see relying on the credit industry is being so successful for you! Just hope for your sake nothing big happens and banks tighten up and you are not able to make a living due to no credit! Me I will avoid debt at all cost!

Yeap credit works for me I'm not aware of to many other business where a person can make a 65% return on someone elses money.

 

[TexasBred]

Glad to see relying on the credit industry is being so successful for you! Just hope for your sake nothing big happens and banks tighten up and you are not able to make a living due to no credit! Me I will avoid debt at all cost!

Yeap credit works for me I'm not aware of to many other business where a person can make a 65% return on someone elses money.

A good operator always knows how and when to utilize credit and make money of it. Don't ever be too proud to sign a note when you know it's the best thing you can do for yourself.

 

[backhoeboogie]

Glad to see relying on the credit industry is being so successful for you! Just hope for your sake nothing big happens and banks tighten up and you are not able to make a living due to no credit! Me I will avoid debt at all cost!

Yeap credit works for me I'm not aware of to many other business where a person can make a 65% return on someone elses money.

A good operator always knows how and when to utilize credit and make money of it. Don't ever be too proud to sign a note when you know it's the best thing you can do for yourself.

Been there and done that myself. Was scared to death the first time. No way I would hock my house or anything like that. Just go to the bank with a business case analysis and my good name and walk out with ONLY what I want. They always try to get me to take more.

 

[TexasBred]

I'd look for another banker if he tried to get me to borrow more than I wanted, needed or asked for.

 

[aplusmnt]

Aplus do you ever think before you type? The cost to borrow the money is only 8% of the total feedlot expense. That is the actual out of pocket expense.

That is not what you said in your original post, you said the operating loan not the cost of the operating loan. Don't rag on me because I can not read your mind! Say what you mean!

Considering a operating loan is only 8% of a feedlots expense I really doubt it will be the operating loan that causes a failure in a feedlot.

Ps. 8% may not seem much to you being that you been raised on the Credit teet! But many companies survive on 8% return on their money!

Ps2. I spend 6 figures a year on operating expenses none of it borrowed none of it subsidized!

 

[somn]

Ps. 8% may not seem much to you being that you been raised on the Credit teet! But many companies survive on 8% return on their money!

Now there is a fella a bump in the road away from Freddie and Fannie. I certainly would not brag about a lousy 8% return on my money.

 

[somn]

Ps2. I spend 6 figures a year on operating expenses none of it borrowed none of it subsidized!

It sure would be nice if I had monthly income to pay my operating expenses instead of waiting 6 months in between closeouts. Of course that is cattle industry talk that usually goes right over your head.

 

[Brandonm22]

Now there is a fella a bump in the road away from Freddie and Fannie. I certainly would not brag about a lousy 8% return on my money.

I am not bragging about it; but I have a Van Kampen(sp?) IRA mutual fund that failed and it became a Van Kampen IRA money market fund that is off 16% over the life of the investment (and it goes back to 2002). They even lost money last quarter (how do you lose money in a money market fund?!). I would whole lot rather have been making 8% a year. Heck an 8% capital gain would look good right now.

 

[aplusmnt]

Ps. 8% may not seem much to you being that you been raised on the Credit teet! But many companies survive on 8% return on their money!

Now there is a fella a bump in the road away from Freddie and Fannie. I certainly would not brag about a lousy 8% return on my money.

Exxon Mobil does just fine with their 8% profit margin! I am sure they are bragging ;-)

Besides we are talking about the possibility of increasing your profits 8% not your total profit being 8%. I evaluate my business on how can I make more money not how happy I am with what I currently make! If I see a chance for an 8% increase in a specific area, I would do everything I could to make it happen!

Maybe it is not possible, or maybe it is possible but just 10 years down the road. But you will never know because you are more than happy to give the bank that 8% that could be going into your pocket! I guess the upside is Bankers have to eat also!