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For those of you with loans on your business

J

jokergerm

New member
Just wondering for those of you that have loans on your current business. How much you pay a month on them. And what % of gross sales would you loan payment be, Just for a point of reference, so you are not telling to much of your personal information.

For example, with rent. I live by the theroy that your rent should never be more than 5% of your sales. So just wondering what your loan payments are along the same lines.

thanks
 
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When I had a loan, every dime that was not required for something else went to paying off the loan.
 
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I am currently paying 7% of my sales towards my loan. I would be paying more but I have another loan on another business that I am paying 35% of my sales towards but that is a car wash with nowhere near the overhead of a pizzeria. When I have the car wash loan paid off I will probably pay as high as 10% of my sales to get it paid off.
 
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I was a bit lucky to be able to flush my debt (loans) this summer. Like Daddio, I turned every penny in profit back to the debt, and/or towards more investment in the business. Debt free is a nice place to be again. 🙂

That’s not to say I’m against debt (leverage). I’m not and think its a valuable tool when used properly. Its interesting to note that even very rich and very big corporations carry debt, a lot in the form of bonds because of the historically low rates. Wal-Mart, Google, Microsoft to name a few. They do this because of projections that ROI from those bonds will exceed other capital strategies of investing current cash on hand and be a lot less risky in today’s environment. (Piper will probably disagree)

Looking back, as a percentage of sales, rent was slightly above 13% for the 1st year. IF that was the end result I wouldn’t have bothered because its much too high, at least for beginning pizza businesses. This year, that rent will be a tad below 6%, including 3 years of annual increases. Much more manageable and within original forecasts.

But I wouldn’t mind paying $200K/yr rent if I could knock down 2 mil in sales.
 
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My loan is a just a hair over 10% of gross sales. I think it will be about 10.1-10.4% this year, that is about the maximum I would be able to do. In '09, my loan came out to be approx 12% of sales, that became really tough to stay above water.

About the rent % of sales…

I’ve always read that the goal should be between 4-8% of sales. 5% would be ideal, but some regions would make that goal pretty much impossible. There are so many variables that need to be considered, it almost needs to be on a case-by-case situation. My rent is about 7% of my sales, I could cut that in half moving to a cheaper part of town, but it would make delivering a nightmare. On the other hand, i could move to the nicest area in town, my rent would double, but sales would probably increase by 25% due to the updated building and higher traffic flow. Like the above poster said, if you are doing $2 million in sales, 10% rent wouldnt be so bad! 😃
 
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My rent % of sales is 4.5% at one store and just over 2% at the new store

Yes I know that’s unheard of, some how I managed to get 2000 square feet for 825 a month
 
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My loan is 15% of my sales, but I’m buying my building, and will have the “business” part of the loan paid off next year after only 3 years.
 
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