SMALL BUSINESS START UP - BEST WAY TO FINANCE

[Anonymous]

Hi there, I just discovered that this site had a forum ....... glad to have found it.  My question is quite timely, as I must make my purchase before months end.  I have been planning a small internet based work from home business for over a year now - I will continue to work full time at my current job.  Thus far, I have paid cash for all of my computer, software, classes, etc. in an effort to keep my business as debt free as possible.  As I am growing closer to start date, I must purchase a $5K  piece of equipment that will require financing.  I currently have a great FICO score and do not want to jeapordize it. 

So, my question is would it be safer to use available credit on an existing credit card  - (ample credit remaining, but carries a $1000 current balance with a 2.9% APR for the life of that balance) or apply for a new 0% credit card or balance transfer?  Which is less damaging?  I have made several large purchases this way in the past and am very disciplined in not using the card for anything until the original transaction is paid in full. Of course, if I were to add to the existing balance, we know the interest would be astronomical as they apply all payments to the original balance and let the interest mount up on the new amount. ..........  or at least I think that is the way it works. 

In reading some of the other posts here, I see where incorporating your business is highly recommended.  In my state, the cost to do so is much more than I can justify for this small venture.  So, I have acquired my EIN as the sole proprieter, along with the required business licenses, and have opened my business checking account. My husband and I may want to refinance our home in the near future and do not want to do anything to hurt my credit score.  If at all possible, I will not be using credit cards to pay for my operating expenses. 

I suppose I could postpone the purchase and my business until after we refinance, but I would miss a sizeable promotional bonus of $1000 in materials that would have to be purchased before I could make my first sale. 

Please offer any suggestions or experiences you may have on the subject.

Thanks!

[Anonymous]

I would see if the vendor has a lease program. Or find a good lease company to work with since you have a good score, you should have no problems. The lease payment will be a 100% expense against your income for tax purposes.

JmO

[Anonymous]

Hey- thanks so much, that is a great idea - but already tried that with no luck.  The special deal is from the manufacturer.  There is only one distributor in my area, and they do not lease equipment.  I could have all of my work outsourced by the distributor, but the cost for them to do the work would be more than what I plan to charge my customers.  

Again, thanks for the response - and please, if you come up with anything do tell me.

[Anonymous]

If your score is around 650 or better, you can go to a leasing company. Search on the internet for companies that will lease computer equipment or whatever type of equipment it is.

You really should have no problem at all, you may have to provide a first and last payment at most.

I WOULD NOT put it on a credit card because you are consuming available credit. A lease does not do that.

Just talk with your researched lease companies and make sure that you would fit their requirements before they start pulling credit.

Lease companies don't work on an interest percentage that most folks are used to seeing, they call it factoring which is basically the same thing, you can figure out your cost easily by multiplying the payment by the term and subtracting the acquisition cost.

Some lease companies offer a 'ramp up' program, where your initial payments are lower until your business comes up to speed. Also look for companies that say 'startups ok'.

Ok, so I'm harping on a lease, but I think this is your best way to go, least out of pocket and a verifible business 'expense'.

Edit to add the following:

You may want to ask this over in the Business Credit forum as well you may get more response there.

Message Edited by meJeff on 03-26-2008 10:44 AM

[llecs]

Here's the way not to do it:

I figured I'd like to start a new business venture. So, anticipating this, I saved up money anticipating I would be making some major purchases soon (NOTE: this is a good thing).

So, I want an office. I rent an office in suburban DC (not cheap!) and sign a lease for a year. I figured that I would hire an employee or two so I need a couple extra computers. Bought those. Need furniture. Check. Need phone system. Check. Need a well drafted contract and need to do startup biz stuff; hire a lawyer. Check. Need to advertise. Check. Need a company car. Check. Alrighty. Ready.

Realized I could have started on a shoestring. Didn't need the computers. Never hired anyone. Operated via my cell, didn't need the phone lines. Didn't need to advertise as I realized 3 clients was all I could handle at the moment. And I missed my family and our newborn daughter so I worked from home. Wasted $$$$, but hey, great tax write off that year!

Started and currently a sole-prop and did so without biz credit (recently got some but didn't need it).

[Anonymous]

OK - so I am in agreement with you there ............ Yes, I am definitely starting out small - one computer, home office, no business phone yet - free checking account ...... no attorney, did acquire an hour of CPA time to ensure I had all required tax certificates and permits to stay legal.  Building my own website - and keeping my full time day job commuting 100 miles per day (round trip).  I may need the extra income just to pay for the gas to go to my REAL job that I need to keep my healthcare coverage!!!

This one purchase is pretty much a necessity since there seem to be no Epson wide format printers for lease that I have been able to locate.  My business is in art and photo reproduction on canvas so it has to be the best I can afford.  While I don't like going in to debt I can surely recover the cost before the 0% intro runs out. 

Thanks for confirming the way NOT to do it ............

BTW - do we post our Fico scores on here??  Sorry, I'm new here and I assume that is what those numbers mean?

[llecs]

I'm against leases anyway. Your stuck with payments on equipment that's not worth the price anymore, then you have to return it if you don't buy it out. I think it is cheaper to finance.

The scores are in my siggy and appear at the end of each post. Saves time for answering questions on what my score was and when.

[Anonymous]

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@llecs wrote:

I'm against leases anyway. Your stuck with payments on equipment that's not worth the price anymore, then you have to return it if you don't buy it out. I think it is cheaper to finance.

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HO Hum;

A lease is a method of financing, normally will report on a business credit profile rather than a personal FICO score, if you hook up with the right lease company.

I have been in business over 30 years and have leased several times for various reasons, I personally feel that this is the best way to go for the facts that were presented.

I don't like or dislike leases, just like I don't like or dislike credit cards, loans, card sharks or bad car salesmen. It is a tool to be used, like all of the rest of things in our bags of tricks.

I can see there is only room for a 'few' here to give suggestions, sorry for the inconvenience.

J

[llecs]

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meJeff wrote:

HO Hum;

A lease is a method of financing, normally will report on a business credit profile rather than a personal FICO score, if you hook up with the right lease company.

I have been in business over 30 years and have leased several times for various reasons, I personally feel that this is the best way to go for the facts that were presented.

I don't like or dislike leases, just like I don't like or dislike credit cards, loans, card sharks or bad car salesmen. It is a tool to be used, like all of the rest of things in our bags of tricks.

I can see there is only room for a 'few' here to give suggestions, sorry for the inconvenience.

J

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I certainly hope that I didn't come off as stand-offish. Just pointing out a personal experience. I know of many business owners who lease anything from small computers to large construction equipment, for example, and they are quite happy with their results.

[Anonymous]

I have experienced many internet errors tonight for some reason "could not find server" when I tried to access this forum. 

Did I miss something??  I didn't think I had ignored anyone's suggestions - and they are all welcome.  I had thought about leasing myself back at the beginning, but have not been able to find anyone who leases these things.  I work for a major Hotel chain (accounting) and have access to many equipment lease providers in my area, but none could tell me where to lease this particular piece of equipment. 

Again - thank you all for your input.

And good night.