Just a brief ramble. The banks are changing the rules. No more credit. I just received notice one of my accounts is being closed. The few who can get it, will pay dearly. This has to change the way we (contractors) do business.
Its changing the way I do business. I just got the ok on a small (under 3K) job for a national corp. I told them I would do it only with a deposit, a progress payment, and final pay within 2 weeks. They said they’re on 30 days net, so No. Fine, I can’t finance people’s jobs anymore.
The cost of contracting will go up. Has to.
edited to add: I still have other accounts. Just saying – when the banks change the rules on us, we have to change the way we do business.
View Image bakersfieldremodel.com
Edited 9/9/2009 3:11 pm by Huck
Replies
Not sure if it's true,
I only have one Credit card and it's not a Home Depot one...........
BUT
A Friend of mine called yesterday and said he got a letter that as of 31 Oct Citibank was cutting off all of it's issued Home Depot cards?
The letter said it had nothing to do with Credit score or individual account activity.............just that they were closing accounts.
A Friend of mine called yesterday and said he got a letter that as of 31 Oct Citibank was cutting off all of it's issued Home Depot cards?
The letter said it had nothing to do with Credit score or individual account activity.............just that they were closing accounts.>>>>>>>>>>>>>>>>>>>
Haven't recieved anything yet.
A Friend of mine called yesterday and said he got a letter that as of 31 Oct Citibank was cutting off all of it's issued Home Depot cards?
The letter said it had nothing to do with Credit score or individual account activity.............just that they were closing accounts.>>>>>>>>>>>>>>>>>>>
Haven't recieved anything yet.
I have an HD card and got the notice a few days ago. For us the card worked great. We just finished building an entire house and, while I bought very little building stuff at HD, charged everything I could to the card because they had a reward system. Turns out I racked up about $4000 worth of points over the course of building the house. With it I got an 8000W generator, a cordless finish nailer, a radial arm saw, chain saw, weedwacker and dozens of smaller things like splashblocks, extension cords, saw horses, poplar for a fireplace mantel, etc.
I'm depressed.
Runnerguy
I haven't been notified.
Yeah, I think some banks are still struggling, and they cut off new loans to preserve cash. Probably a sign that the FDIC will be shutting them down in a month or three.
As I stood before the gates I realized that I never want to be as certain about anything as were the people who built this place. --Rabbi Sheila Peltz, on her visit to Auschwitz
There was an article on CNN Money that discussed the fact that they anticipate more bank closings in 2010 than there were in 2009.
Last week I think.
Some of you very nice guys out there have emailed me with info on business loans and options - which I appreciate! (believe me, I need all the help I can get!)
But my point was, these corporations and others who think we (contractors) should finance their job out of our own pocket, then submit the bill and wait, ought to have another think coming.
I foresee that this will no longer be standard operating procedure in the contracting business. Customers who want work performed should expect the pay the cost as the work progresses. With banks tightening credit, we cannot operate the same way we have in the past. Welcome to the New World Order!View Image bakersfieldremodel.com
Yeah, I remember people here saying I was crazy when I said that a 2-3 part payment was reasonable for home improvement contracts.
As I stood before the gates I realized that I never want to be as certain about anything as were the people who built this place. --Rabbi Sheila Peltz, on her visit to Auschwitz
To be honest with you, most my contracts of any size have been set up with weekly payments, for quite some time now. I did an $85K job awhile back, and I had it set up with $5K+ payments every week. I thought customers would balk, but none have yet.
I think its the way the industry has to go. At least the smart ones.View Image bakersfieldremodel.com
I know commercial works differently, but in the residential field I never built anything out of my pocket...........and over the years I have built a lot of stuff........from total homes to additions to furniture/cabinets......etc.I'd get a hefty down payment and use that money to get started
Then payments at certain stages of the project.It worked well for me probably cause I was small and did my jobs stress free and one at a time. I worked very close with the HO's on a more personal level than good business practice dictates but I see this becoming the model of the future, especially since the banks are getting on the ropes.The Woodshed Tavern Backroom
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<<...in the residential field I never built anything out of my pocket...........and over the years I have built a lot of stuff........from total homes to additions to furniture/cabinets......etc.I'd get a hefty down payment and use that money to get started...>>I agree. On my jobs(cabinets, doors and furniture), I take 50% up front more as earnest money than financing but also because I'm not going to finance somebody's project with my money.Big deposit weeds out the under-financed, the manipulators and the deadbeats and leaves me with customers serious about the work, generally honest and understanding that it's not my job to finance their project. Works for me and in my view, that's the only thing that counts.
50% WOW. The state of Maryland only allows a 1/3 deposit.
I hate this state.
I'm in British Columbia so don't have those limitations.It works because all my projects are referrals so my bona fides are already established. The customer is the unknown, not me.
I have the same letter. Citibank is closing the "points with using the card" accounts effective end October (I think). Sucks cause that's all I used 'cause of the points.
So cash in the points asap! Best "value" is HD gift cards.
Last I bought on credit from HD - maybe 1-1/2 years ago, it was GE Capital handling their credit accounts. Must've been a change I missed noticing - or maybe the consumer credit is different card from the contractor line.Most of my lines of credit are shrinking. The Amex unlimited dropped from unlimited to ten grand. Another card went from ten grand to one thousand. My bank wanted a side tie-in to my home mortgage to keep my business line of credit open.Last winter was the residential credit problem.Several economists and advisors have been saying that the sh!t hits the fan this winter on commercial credit and that the country has to get thru this one before it starts any real recovery.
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>>Most of my lines of credit are shrinking<<I was using Advanta as my biz card, and when they pulled the plug on that I was able to get two new biz credit cards, one from capital one and one from chase.My Advanta had been a 20K line of credit. The capital one arrived with 20K line of credit. The chase card arrived with a paltry line of credit. I called and asked if they could up it, and they raised it to 18K, but they lowered the line on my personal chase card, which was fine, as I never use it anyway.Steve
for pewrsonal, Chase has been my longest history account, and the best re interest rates. They did not lower my limits, two accounts with 20K each.I tried to close one acount a year or two ago, and they talked me into keeping it. I ended up with that because ( I think I remeber this all) I had a wachovia card, and they sold that account to caap one or bank one or somebody else, and then Chase ended up with it when I alreday had an account with them
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
I've had chase and capital one for quite a few years.I was frankly a little surprised at how easy it was to get the new cards in the current climate (this was about six months ago). I have way too many cards already. Probably have 120K in available lines on various cards. I carry no balances other than the occasional 0% promotion when I decide to do some work on my house. Chase shut one down on me due to lack of use about a year or more ago, so I was a little surprised they issued me another one.I still get several "pre-approved" offers a month.Steve
Closing accounts, especially those with high limits will hurt your credit score, though you may not care about that.
Having an available credit exposure that is too high for you income can hurt your score too. Though it seems not to in my case. I could get myself in real trouble real fast with the lines available to me.
Income is not part of your credit score.
I guess I'm wrong to say it can affect your credit score. It can affect your ability to get a loan though. I have been denied loans in the past with the explanation that my credit exposure with respect to my income was too great. I killed off a couple of cards after that experience, and I don't think it affected my credit score much.Steve
Edited 9/12/2009 1:11 pm by mmoogie
I hear that nobody fiance the project big or small, which is fine, but what about the contractor that they a deposit and then run with it never to be seen again, or the contactor that bails on the last 10% of the job never to be seen again. My dad still looking for a contractor that screwed him in 1977 over a 10% finish job.what is best for both parties
Good point. Maybe an escrow account?
"My dad still looking for a contractor that screwed him in 1977 over a 10% finish job."I'm sure somebody has shot and buried him by nowOr he went into politics
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
By the way, have you checked with the SBA? I know relatively little about them, but they did get a big chunk of stimulus money to be used for loans. They're also purchasing securities on the secondary market to encourage business loans, and may be interested in hearing your problems -- to know what banks are not "playing nice".
My plumbers have spent weeks working with a SCORE volunteer and the SBA to get a small loan. They've written up everything half a dozen times under the SCORE guy's tutelage. Got in to see the banker who actually loans the money last Friday. After a 2 hour sit down he turned them down cold. The SCORE guy was shocked and said do. Banker told them that their papers looked great but they weren't making anymore business loans. Begs the question of why he wasted their time. She called me yesterday wanting to know if I knew any venture capitalist.
"She called me yesterday wanting to know if I knew any venture capitalist.
"I do know a couple, and believe me, they are as far from investing in a plumbing business as I am from vacationing on the moon! They have become very conservative to boot.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
A similar story was on NPR last year. Guy with a metal fab shop gets a million dollar order and goes to his bank for a short term $250K loan. Bank say they will loan him the money as soon as he opens an account with $250K in it!
I say to he11 with the banks, lets just borrow from each other.
Just to add a point of view ...
How does not paying interest increase the cost of contracting? Now the business has changed where you have to watch your cash flow more closely, maybe and allow some reserve to do the job.
While progress payments and a deposit works, you have to appreciate the clients having to hold back some $ to ensure the job is done well/right. Expecting final payments inside of 30 days is a stretch IMO.
My subs rarely asked for money up front. My concrete contractor sat on the work he started for several months waiting for my structural approval to be final w/out so much as a request for $. I don't know how he did his business, but he did good work and I didn't have issues.
Working for e.g. corporate, you can't expect payment in less than 30 days at all IMO. But I'm no expert in the business end of things, just know what little I've seen.
maybe and allow some reserve to do the job
Therein lies the problem. Most tradespeople don't charge enought to every build up a reserve.
I've been working with a gutter sub that insists on getting paid as soon as the job is done. One thing that I noticed about his operation is that he spends a considerable amount of time chasing checks and driving to the bank. He wastes a considerable amount of productivity time dealing with his financial situation. He has created himself a catch 22. If he would work more, he wouldn't have to worry so much about collecting checks.
Too many construction "businesses" are undercapitalized and the owners either don't know it or don't want to do anything about it. They won't raise their prices. They won't delegate non productive duties. They won't employ salespeople. They won't advertise. They won't....The list goes on and on....
How much money would a tradesman need to bankroll 30 to 45 days? What is the cost of that capital? It's pennys.
A lot of what you say applies to a lot of people. Still, a gross oversimplification of the problems with our industry today. And for your sub chasing checks - the other guy's problems always seem so easy, don't they?View Image bakersfieldremodel.com
And for your sub chasing checks - the other guy's problems always seem so easy, don't they?
Remember, I was a sub for twenty years. I don't remember blowing off many work days chasing checks. Want to know the sad thing about this particular guy? I'm going to switch vendors because he can't seem to keep his schedule. Do we see a pattern here?
Jim, I can sympathize with the fellow. I think you may be correct. He is not charging enough or is a spendthrift.
I remember haveing trouble back in the early 90's. Of course, it was my fault. Tied up to much of my business with one large developer.
30 days is fine, my problem started when it went to 60, then 90, then 10years!
30 days has and will be the norm for most larger businesses, in your case, you are working with the fellows lack of cash management.
By the way, does he have enough help for them to do the installs without him?
my problem started when it went to 60, then 90, then 10 years!
hahaha! Yeah, I kinda see where that might be a problem!View Image bakersfieldremodel.com
Huck, bad part is it is at 18 yrs and counting!
No, he basically works alone and occassionally with a helper.
He apologized today for hounding me: "I'm sorry that I'm in this bind, I can't do anything about it. I hate bothering people but...."
I doubt that I'm going to use him again.
I had one sub (a roofer) who made harassing phone calls to my wife the day his work was completed! I told him under no circumstances EVER call my wife and speak in a threatening or harassing manner. That was the last time I ever used him. When they are that desperate for pay, I always suspect drugs, or loan sharks from Vegas!View Image bakersfieldremodel.com
I recently had a guy threaten to 1) lien the house, 2) beat my ####, 3) blah,blah blah.
His collection methods didn't seem to fit anywhere in the book" How To Win Friends and Influence People."
The funny thing is that I told him "if you were done, I'd get in the truck and meet you halfway anywhere. I've been toting the check in my briefcase for more than a week.
His excuse for not finishing (he needed to repaint the ceiling of a 6 x 10 foyer) was that the owner wouldn't let him in earlier in the day. He had showed up there without scheduling it or calling her. My only suggestion was "maybe you should call before you show up to someone's house if you are doing interior work."
Should I have to tell grown men that? LOL
He went on ranting that he couldn't get back to do that work for two weeks because he was booked so heavily.
All this, and more for $175 total on a small patch job.
There are a lot of morons in the trades.
ROFLMAO!! ya think?View Image bakersfieldremodel.com
It has certainly gotten a little more difficult recently. Cards are a mess, with outfits like Advanta turning off the lights.For me, the silver bullet has been a line of credit from my bank. Prime plus one, with a $250 fee yearly. It carries me over if I misallocate a payment or something goes sideways. I do structure payments so neither the client or I are too ahead at any given point, but I've found the flexibility the LOC provides has changed my interactions with clients about money, and for the better.
fool!!
Good summary of the way things used to be.View Image bakersfieldremodel.com
Banks are going to revamp all credit cards next year. Wait till you see what they plan on doing. Things are really gonna change.
Banks are going to revamp all credit cards next year>>>>>>>>>>>>>>>>
Have anything we can read about this statement?
I know things will change somewhat with the new law, but I don't forsee any radical change.
Nothing pubicly out yet. Supposedly biggies have the lawyers working on anything and everything to make money. Rumors are, no more free cards, interest from day of purchase, no more points.... the list goes on.
And most of them are planning massive layoffs from a loss of customers. Might get interesting.
They make a large portion of their money from transaction charges. I wouldn't think they would cut off that large portion of their income stream. Maybe I'm wrong. I do know they will lose a all their transaction fees from my purchases if they start charging, but it won't cost me a thing.I've made a lot of money off of credit cards over the years. Too bad those days are over.
If you really look at the bill, the big thing I saw was the notification in change of terms went to 45 days from 30.
If they really wanted to mess with the cc companies, they should have reinstalled usuary laws.
But usury laws are anti-business.
As I stood before the gates I realized that I never want to be as certain about anything as were the people who built this place. --Rabbi Sheila Peltz, on her visit to Auschwitz
I relly don't think so Dan. Just a guidance of what the maximun interest should be.
Sounds socialistic to me. Government taking over the banks and telling them what to do.
As I stood before the gates I realized that I never want to be as certain about anything as were the people who built this place. --Rabbi Sheila Peltz, on her visit to Auschwitz
Right. Better to let the banks do what they want then have taxpayers pick up the tab for their stupidity!!
If the government would let me lend at the same rates as they let the CC companies, I might agree with you.
A lawyer told my Mom that I couldn't pay her 8% on a loan. He said that the contract was illegal that we agreed to.
The only limit on interest I know of for interpersonal loans is that it must be "market rates" if the interest is to be deducted on taxes or if the loan needs to be written off on taxes as a bad loan should it go bad.Our home loan from my MIL was 8%. Perfectly legal, drawn by a lawyer.
As I stood before the gates I realized that I never want to be as certain about anything as were the people who built this place. --Rabbi Sheila Peltz, on her visit to Auschwitz
Different state, different laws?
The point is that the US discriminates in their lawmaking. They allow their royalty to charge whatever, then limits the peasants.
Well, actually the STATES discriminate, and the US government doesn't step in and override "states' rights".
As I stood before the gates I realized that I never want to be as certain about anything as were the people who built this place. --Rabbi Sheila Peltz, on her visit to Auschwitz
The feds are the ones changing and controlling the credit card laws. They shouldn't be, but they are.
Decades after "Marquette" created a "wild west" credit card situation they're finally getting around to imposing some rational limits.
As I stood before the gates I realized that I never want to be as certain about anything as were the people who built this place. --Rabbi Sheila Peltz, on her visit to Auschwitz
I'm surprised that you actually think the feds are fixing something. They wouldn't do anything to harm their campaign finaciers.
If the feds really wanted to put some rational regulations in place on the cc companys, they would have implement the rules starting immediately, instead of letting them jack everyone around for two years before the new law takes effect.
The entire eastern seaboard is corrupt and criminal. The lemmings allow this to happen.
Most likely the long delay got put in to placate some interests somewhere. My best guess would be that it bought some Republican votes on the bill, but that's obviously just speculation.
As I stood before the gates I realized that I never want to be as certain about anything as were the people who built this place. --Rabbi Sheila Peltz, on her visit to Auschwitz
Actually Jim, I believe it is the courts that decided the old laws on usuary by state were illegal. Has to do with the restraint of trade across state lines.
Currently, the only people affected bu state laws are banks or institutions wholely in one state.
>>If the government would let me lend at the same rates as they let the CC companies, I might agree with you.<<Can you elaborate on that jim? I've got a client I'm going to have to start charging interest on this month. I very rarely get in that position, but in the past I've charged 1.5% per month (18% annualized). Steve
Every state has their own rules regarding interest rates. If you are overcharging it is illegal and you won't have a leg to stand on if they stop paying. Check your state laws.
>>Check your state laws.<<I found this online:http://www.lectlaw.com/files/ban02.htmLists the legal, usury and judgment limits for each state. Says NY is 9% legal, 16% usury. This is what it says about where legal limit versus usury limit applies:>>The usury limit which is stated as the general usury limit is the rate
that can be charged by one person or corporation to another, in other
words, if you lend your next door neighbor $ 100.00, the rate stated is
the limit. To charge more you must get a banking, pawnbroking, or
whatever license. This also means that special kinds of loans, like
those from pawnbrokers or small loan companies are not stated.In some states we also have a "legal rate." In such states, as a general
rule, if you have a contractual obligation that provides simply for
interest without a specific term, or "interest at the highest legal
rate" then the "legal rate" what applies. In other instances we have
stated a "judgment rate." That's the rate that final judgments bear. In
states without a usury limit, there still may be a federally imposed
limit because at certain astronomical rates of interest "loan sharking"
will be inferred by the federal government.<<Of course interstate banks are exempt.Steve
Of course interstate banks are exempt.
Of course! What's good for the goose isn't good for the gander.
When I lived in MI, I couldn't own or operate a casino either. Only Indians could.
What has happened to the idea of being free in this country?
Only indians are free in this country.
Interstate banks aren't exempt, they just have to follow the laws in the state where they're chartered. And several states have very "liberal" (in a very different sense of the term) banking laws. This is the effect of the "Marquette" decision.
As I stood before the gates I realized that I never want to be as certain about anything as were the people who built this place. --Rabbi Sheila Peltz, on her visit to Auschwitz
One way around that 30 day net business is to raise your prices enough to cover the cost of the money you're fronting. I did that a few times in my engineering days when the 30 day net customers were actually taking 60 - 90 days to pay up. The first time I did it was at the suggestion of one of my customers who recognized that their accounts payable people were incompetent.
Sorry to hear about how difficult it has become.
Have you tried a credit union? The loans made this year at our credit union is up from last year and business is good.
As for the national corporation, perhaps paying a visit to an appropriate person there could help. I work as an engineer for a Fortune 200 company. We stretched out payment to suppliers during the last recession to 60 days. But, we also support and are sympathetic to small businesses in our community. We all live together in the same few towns and understand the situation. So, I've gone to bat for, and without much trouble, have been able to get an exception to the payment rules to pay some small contractors as quickly as net zero. The trick was to not go too high up in the organization, kind of just sneaking it in. If you need the work perhaps trying again would help. Maybe getting your contact to push for it with purchasing rather than you pushing on purchasing.
I screwed myself a couple of year ago. Put too much on the line of credit, ran into an accounting problem with a major credit card company's line of credit. Their little accounting error led me through 9 months of hell, with them finally admitting their accoutning error, I was right, but I now owed them payment in full, as I'd stopped payment 6 months prior in my effort to fight their claims.
Screwed myself in the end. But, that forced me to stop relying on the line of credit and lumber yard accounts. I still have the lumber yard accounts, but I no longer finance anyones project. Big or Small.
Lack or easy credit then forced me to be smarter now. I do laugh now, as it seems the rest of the world has fallen into my poor credit boat. Last year I had bad credit, now I have average credit and am 5 years ahead of everyone else in the boat as far as paying it off and getting out of the boat.
When it's all said and done and I am 100% debt free, I will never run a business or household based on credit. It's forced me to run a tighter ship. And suprisingly enough, the customers keep signing the contracts where their materials are all paid for up front. Vic