I've been hearing some shocking things as this "credit crunch" has progressed. I'll admit up front that I haven't always been as zealous as I should about avoiding debt. But some of the things I've been hearing are shocking. For instance, there are businesses that use lines of credit to make payroll. That seems like an emergency measure to me, but there are businesses that do it regularly. Airlines use lines of credit to fuel up their planes. I always thought that they just fueled up out of cash on hand. In short, many businesses are using debt for pretty much all aspects of their business. That doesn't seem wise at all to me. We're counseled to stay out of debt, and yet one priesthood meeting one of the brethren was going on about how there's "good debt" and the church shouldn't counsel against all forms of debt. I thought at the time that it was strange. But it's becoming very apparent that there are many businesses that consider debt to be a vital part of how they do business. I guess it worked for them for a while, but now we see the tragedy; even if you have a product to sell that people want, you still may not be able to stay in business because your entire business model was predicated on debt.
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If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom, go from us in peace. May your chains sit lightly upon you, and may posterity forget that you were our countrymen! - Samuel Adams
Yeah, I've been thinking the same thing -- businesses running off debt?? Pretty weird... makes you really think of all the times we've been counseled to stay away from debt.
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Life is tough but it's tougher if you're stupid. -John Wayne
From what I understand there are a lot of short term loans...a few days or a week etc. while they purchase products to sell. They then pay off the loan as the product moves.
I got that impression from the articles. But it's still shocking to me. For instance, grocery stores in Iceland are having a hard time buying products because their credit lines are frozen. In my mind, the proper way to run a business is to maybe use credit for the first little while (buy product for a month or two), but you should get to the point where you're buying product out of the profits of what you've sold.
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If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom, go from us in peace. May your chains sit lightly upon you, and may posterity forget that you were our countrymen! - Samuel Adams
BTW, I knew long ago that farms worked that way. They get a huge loan each spring to plant crops, then hope they can pay it off after harvest. They also get crop insurance in case something happens to their crops and they can't pay the loan. But I didn't know that the rest of the business world was that messed up.
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If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom, go from us in peace. May your chains sit lightly upon you, and may posterity forget that you were our countrymen! - Samuel Adams
I remember some random financial adviser calling me up some years ago in Colorado and talking about how she would suggest investing in Walgreens. She said they are popping up all over and the new stores were all being bought outright with cash. She was highly impressed by that.
I also remember there was a brother in our ward who worked for the church building new church buildings. He mentioned that construction companies were always really glad to get a contract to build one of our churches because they know that the money is there and they will get paid in a timely manner. It seems that other churches often end up needing additional fundraisers and such partway through construction to be able to keep making the payments and getting paid is in no way a sure thing.
It's screwy to me that the Walgreens example and our church are the notable exceptions and not the norm. Most businesses are nothing more than a financial house of cards and I think we'll start seeing more and more of the most poorly contructed ones falling down in this economy.
So I caught a former exec of Lehman Brothers on tv bemoning that fact that Lehman wasn't bailed out and other companies were. While he does have a point about the inequity of the bailout, this is really the wrong attitude to have. Entitlement is not a sound financial plan. :P
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"The promptings of the Holy Ghost will always be sufficient for our needs if we keep to the covenant path. Our path is uphill most days, but the help we receive for the climb is literally divine." --Elaine S. Dalton
My dad is an architect and designs a lot of LDS churches and about 10 years ago (give or take 10 years) he became very disappointed in how hard it was for him to get the church to pay him. He's the one who then pays the contractors on behalf of the church. He gave up doing churches for a while. Maybe they've changed things, because he began doing them again a few years ago.
I've interacted with the LDS Church The Corporation for several years now (I'm a subcontracted employee) and have seen some interesting things in business behavior. It has been interesting to hear the talk about The Church The Corporation as opposed to The Church The Gospel. They are not the same thing.
Well, for a long while they didn't pay their employees very well. They've changed that, but they didn't use to pay well. Jason, did your father design churches when they still raised the funds in the ward itself? That is, did fundraisers, had assessments, etc? It would seem to me that would make it harder to pay on time.
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If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom, go from us in peace. May your chains sit lightly upon you, and may posterity forget that you were our countrymen! - Samuel Adams
Pretty weird... makes you really think of all the times we've been counseled to stay away from debt.
