Ideal conditions for operating a contracting business would be to always be in the black with a certain amount of operating capitol.  i.e. no need for credit.  That rarely happens.

One use of credit can be exemplified by an experience I had early on in my business venture.  I had installed two manufactured home pedestals for the families of two brothers on the same piece of property.  I did the job in the summer and the families moved in soon after.

That winter it was cold and windy and their furnaces quit; both of them at the same time.  That was an oddity.  When I checked them out, I found that the main breaker on both pedestals had gone bad.  That compounded the oddity.

I went to my supplier to get replacement breakers and they had none on hand.  The lead time to acquire them would be one week.  Well!  A week without power would freeze up both homes.  Then there would be plumbing to fix also.  The supplier did have two new pedestals on hand so I purchased them, on credit.  I also ordered the new breakers.

I took the pedestals to the job site, removed the bad breakers from the existing pedestals and replaced them with the new ones in the new pedestals.  The power was back on.

I took the faulty breakers back to the dealer for credit, and one week later when I picked up the new breakers I put them with the new pedestals.  Now I just had to use the new pedestals on jobs.  That wasn’t going to happen in the winter, but I eventually sold both of them.

I couldn’t have done that without credit.

Borrowing is a different matter.

It can be disastrous.  For instance, one time I was working on a job in downtown Spokane and I needed an extension ladder.  Being new to owning my own business, an extension ladder was not something I had purchased yet.

One of my friends was working nearby so I made a short trip to ask if I could borrow one of his extension ladders.  Success!  At the end of the day, since I wasn’t quite done, I put the ladder on the top of the flat roof of the building, out of sight, and went home.  The next day person or persons unknown had “borrowed” the ladder themselves.  I never saw it again.  Now my business had to buy a ladder; one that I wouldn’t have.

I guess I was a little slow in learning a lesson about “borrowed” ladders.  Later on I left a $300.00 ladder on the job overnight.  It too was “borrowed” by the time I returned.

I wound up buying three ladders and owning one.