Let’s get this out of the way right off the bat – I’m a dog person. I can’t say it runs in the family though. On my mom’s side of the family, there are two households that have 2+ cats. Yes, we do get along, but the debate rages on… We all love our furry friends, no matter if we’re cat people or dog people. In fact, we love them so much that we’re spending record amounts on their well-being! https://www.nbcnews.com/business/consumer/americans-will-spend-more-60-billion-their-pets-year-n390181

Yes, we want to pamper our pets, but our connection goes deeper than that. We want to keep them healthy so they can be there for our big days, and cheer us up when things go sour. They’re our family, and we want to treat them as such. When your family is unwell, you take them to get professional care. In that regard, veterinarians are becoming a bigger and bigger part of the American economy. Maybe you’ve noticed an increase in demand recently?

As you know, there are plenty of pieces that keep the machine running, so-to-speak, and you need to stay up-to-date to become a trusted extended member of the family. The list of equipment necessary to give the best care to man’s best friends (and cats too) can get pretty extensive – we found a good resource here: https://www.dreveterinary.com/ – and we know that acquiring all of this equipment can get pretty expensive. How can it be possible to keep up with all of that ever-advancing technology without breaking the bank? With a little concept that is known as LEVERAGE. Let us explain:

What about the money? 

Leverage (borrowing) is a powerful tool when properly used (that is why it is called “leverage”).

For instance … financing equipment allows you to more effectively match revenues (from the use of the asset) with the monthly payments. It should much more than pay for itself to be a wise and prudent use of capital (capital is a fancy word for money). Cash flow (again a fancy word for money that is left after you made the payment and paid the bills) is an important consideration when analyzing a capital investment. So, imagine that you generate extra cash each month (free cash flow) from your acquisition of equipment. This is THE ANALYSIS to determine if an acquisition makes good business sense … all else being equipment ~  Is there free cash flow?  Is there money left after I paid the paid for everything associated with the new asset including the payments, the people and all other expenses (fuel, insurance, repairs, etc.).

For example:

Gross Revenue

Less: Payment

Less: All Expenses

Equal:  Free Cash Flow

At SLS … We hope to explain easy concepts in easy to understand terms. Leverage sounds fancy, yet it is really pretty uncomplicated ~ it is just simple math.

So, if you would like to have a straightforward conversation about commercial lending ~ call or email anytime and we will be glad to help!

Call Doug

Doug Fuller

dfuller@slsfinancial.com

816.423.8021