Year End “distributor or manufacturer buying” unintended consequences reminder

It is common for veterinary businesses to be offered 'special deals' for delayed billing on purchases.  Vaccines are often packaged this way with up to six months delayed billing.  I saw one $125,000 deal recently in which the product would be shipped as needed beginning in December and payment would be due in June.  At first blush these deals look too good to pass and they may be. 

Keep in mind that the $125,000 drops onto the balance sheet as DEBT the day the contract is signed.  If you plan to have a financial event early in the next year, such as seeking an operating line of credit, a buy-in, a buy-out, a private equity roll-up, or refinancing, etc, a $125,000 debt may adversely affect your debt ratio in the opinion of the lender in any of those transactions. 

The debt ratio compares a company's total debt to its total assets. This ratio is used to gain a general idea as to the amount of leverage being used by a company. A low percentage means that the company is less dependent on leverage, i.e., money borrowed from and/or owed to others. 

Always be vigilant for the law of unintended consequences!   

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