The CASH MAN

“I handle everything with cash…” Yes, I get it, I get it… I owned a small business too and there are many initial advantages of doing cash business. Everything might go okay for a while but what happens if or when you start to grow? Larger corporate clients don’t do business in cash; everything is well documented so you would limit the type of clients you can work with. Even small businesses that have been audited once or twice learn not to do business on a cash basis. What about your business credit? You pay cash so you have no history of borrowing which means when you start to expand or land that big contract and need to borrow money or finance equipment you can’t. In the finance world it’s called “comp credit” or comparable borrowing history; it records what you have financed in the past that a lender could look at to determine your past payment history. No “comp credit” is a common reason lenders decline a request or if they approve it because other factors are solid then you will still pay a higher rate. So whatever benefit you think you might have gotten quickly disappears.

I understand the CASH MAN will pay less tax but limiting your business potential, besides the fact you will be looking over your shoulder, is not worth that type of business approach. After twenty years of financing small and medium size businesses, I’ve seen it time and again and the businesses that survive and flourish follow the IRS guidelines, borrow capital, maintain good financials and credit records and will sleep better at night.