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Rivendell $110K in debt(20 posts)

Rivendell $110K in debtgtx
Sep 5, 2003 9:21 AM
Got my latest catalog yesterday. Grant writes that they're $110K in dept, and mostly on credit cards! Don't know much about running that kind of business, but that can't be healthy. Wonder how much longer they'll last...
ooo, ouch........rwbadley
Sep 5, 2003 9:31 AM
That is considerable for a small business. It really depends on the rest of the cash flow numbers. CC debt is the worst to carry, as it is the highest interest debt available. Most small business aren't able to finance without collateral, and I don't think banks have much interest in small bike parts and frames. They want property, houses and the like.

In the past, Grant has wrung his hands over finances, and come out OK. We'll see how it goes...
ooo, ouch........MrCelloBoy
Sep 5, 2003 9:41 AM
Grant is an intersting and inspiring character. His products are much like the wool jerseys he likes and promotes; popular with a narrow audience, well made and durable. Unfortunately the audience he appeals to is not the audience thet buys 90 or more percent of the bikes and accessories on the market. I admire him for sticking to his beliefs in the face of low profits.
he's $110k in debt! I don't think he's showing any profit (nm)ColnagoFE
Sep 5, 2003 9:59 AM
Aren't we all $110k in debt?PdxMark
Sep 5, 2003 9:38 AM
Though that is alot of credit card debt...
He shouldlotterypick
Sep 5, 2003 9:46 AM
Get a home mortgage and then write off the interest. Thus sayeth the Lord.
So you're, "The Lord" now? nmKristin
Sep 5, 2003 9:49 AM
That's what my wife calls me.lotterypick
Sep 5, 2003 10:03 AM
Just kidding, but certainly now I'll get flamed.

It's Friday. I rode 23 miles into work and will cruise home. Got a Craft undershirt, that worked great and life is good.

Thus sayeth the lord (small l).
The Lord must not have a mortgagemohair_chair
Sep 5, 2003 9:55 AM
That is the dumbest thing I've heard in a long time, on so many levels. Primarily, because who is going to give a loan to a guy who has put $110K on credit cards??? The only organization that would do that is the mafia. Plus, you can't get a home mortgage and apply it towards your business. Not only will the bank be very unhappy when it finds out, but now you are going to lose your business and your house, because if you have $110K on credit cards, you obviously can't manage your finances very well. Plus you could end up with legal troubles for lying to the bank.
plus I'm guessing he probably has a double mortgage already-nmColnagoFE
Sep 5, 2003 10:01 AM
Sorry I meant Home Equity line nmlotterypick
Sep 5, 2003 10:02 AM
.
Oh no. Citibank would give him the money.Kristin
Sep 5, 2003 10:02 AM
At 28.2%, but you know... Your assessment is correct. Even if he could put his house up as equity, why would he? If the business goes under he can default on lots of things. Its not good business practice to never pay your creditors, but it can be legally done. If he ties his house to it and then folds, he loses his home. The courts would be forced to liquidate it to pay the debts. Not wise on any level...and not even close to being biblically wise.
The Lord must not have a mortgageFatnslow
Sep 5, 2003 10:06 AM
The bank would be very unhappy IF...big IF it finds out.

99.99999% of the time, once the bank is making a nice chunk of change off of the interest you're paying them, they could care less what you do with the money as long as they get paid back.

NOW, like you said, getting someone to give you a loan when you have 110 grand in credit card debt is another thing altogether.

In any case, using a mortgage to get yourself out of business credit card debt is not a very good move.
The Lord must not have a mortgageFatnslow
Sep 5, 2003 10:08 AM
The bank would be very unhappy IF...big IF it finds out.

99.99999% of the time, once the bank is making a nice chunk of change off of the interest you're paying them, they could care less what you do with the money as long as they get paid back.

NOW, like you said, getting someone to give you a loan when you have 110 grand in credit card debt is another thing altogether.

In any case, using a mortgage to get yourself out of business credit card debt is not a very good move.
He shouldCary1
Sep 5, 2003 9:58 AM
I'll actually disagree here. If he actually ends up not making it, the second on his house is secured and he will have to pay off that debt or lose the house. The credit cards he can walk away from. His credit will be trashed, and potentially the credit card companies can sue and get a judgement, but he will still have his most valuable asset, his house.

People will argue that it is dishonest to walk away from the credit cards. Willingly charging up debt for personal gains and defaulting is dishonest, trying to make a business work and failing is not. Given the credit card issuers charge higher rates because of these potential defaults, I do not feel bad for them.

As a final note, I hope Rivendale makes it. I have no interest in their bikes, but they offer a nice product and when I have spoken with them (I live about 4 miles from them) they have been very nice.

Cary
Agreed, but there are probably bigger issues herePdxMark
Sep 5, 2003 10:15 AM
$110k at 23% interest is maybe $2000-$2500/month payment. That's not very much if the business has any sort of cash flow. If this level of expense is too much, then the business has much bigger problems.
It dependslotterypick
Sep 5, 2003 10:22 AM
I was assuming business was okay but the burden of 23% was very high.

Home Equity loans are running at what 5-6 percent.

That way, if business is okay, he can either use the extra money to pay down the debt (ratherthan just running up more interest) and get things under control.

Then he could write off the 5-6 % interest on his taxes.

Certainly all benefits to help a business get things under control.
drive by....gregario
Sep 5, 2003 10:06 AM
Grant is ALWAYS whining about being in debt. If you read his stuff he should have gone bankrupt years ago.
Ok, my opinionGinz
Sep 5, 2003 11:04 AM
As a trained accountant (cough, cough....), I can say that all companies have debt of some sort. It's unfortunate that Riv's debt is $110k on credit cards. However, that interest is tax deductible as any old business expense.

You don't see Harvard MBA's mortgaging their houses to prop up their failing corporate empires. I wouldn't advise Riv do that, either. If they have credit cards in the company name, well then, they've negotiated a line of business credit. Good for them. The interest rate just stinks.

Also, just because a company has debt, doesn't mean they aren't "profitable", neither from an accounting perspective nor a tax perspective. Even if their cash flow is negative, they could still be profitable.

If their expenses, including interest, are less than their revenues, they are profitable.

Am I really this big a nerd?
-Ginz
Yes, Yes you areSpecialTater
Sep 5, 2003 11:32 AM
but so am I. Thanks for getting it right. I love reading posts from those who have no clue but have to respond in order to "flame".