Payroll Loans

Economics Economics Questions
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1

I work for a 20 person company. I make around $50k/yearas do most of my coworkers. I asked my boss if he ever had to take a loan to make payroll. He told me that he has enough money in a account to cover pay for six months. So we started talking economics a somemore. I am very comfortable with my job now.

Who is running their businesses so “shoe string” that they cannot cover payroll after payroll and need a loan to cover it. I heard a story on the news about a 90’s year old car dealership owner who had to go out of business after 65 years becuase he could not get a loan to cover payroll. Why is this dealership still in business if after 65 years he does not have enough cash on hand to pay his employees. The republicrats are talking about this like every company is in this position. I would like all to know it is not this way. My boss is acctually buying up a fair weather company who couldn’t make payroll.

So my point is responisble people can take care of their money and employees, why should n’t those who are not responible be allowed to fail? Why should companies be able to get loans for payday, and goverment is trying to shut down “payday loans”?

Please forgie all spelling errors. I rely heavily on spell check which I cannot get to work. LOL

2

Cash flow management is a key skill that many would be entrepreneurs do not have. Whether you are going through a period of increased or decreased profitability, more often than not, the short term is dictated by cash on hand.

3

Yep, and again, it takes a great deal of discipline not to give yourself an extra draw and run the business off the credit line.

4

An extra draw, a secretary or 3, a corporate retreat at a resort location, an expensive company vehicle, capital goods investment…

So many people don’t understand that cash is not profit, and profit is not cash.

5

This is interesting because the media keeps pushing the idea that the “credit crisis” as it is now called, is preventing companies from doing stuff like meeting payroll. Obviously making that statement will help persuade the average person that all this government intervention is absolutely necessary. I wonder though how typical is it that a company needs to rely on some form of borrowing to meet basic expenses like payroll? I could maybe see in a one time emergency, but a business that has to do this regularly doesnt seem financially sound to begin with.

Maybe I’m wrong and this is a common practice, but it seems more like propaganda to me.