Financing Strategies For Gear Acquisition

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earth tones
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Financing Strategies For Gear Acquisition

Post by earth tones » Sun Mar 31, 2013 10:57 am

This may seem like a strange topic to broach, however I am about to spend a large sum of money on equipment and am wondering if there are any secrets, techniques, tactics or insights that other studio owners could share about maximizing spending budgets.

Instead of paying for gear with cash, would it make more sense to apply for a rewards-based , 0% APR credit card where a small rewards return could be realized along with a credit score boost.

Will dealers incentivize high dollar orders by any means, bundle packages or discounts, free shipping, etc...?

What are your good practices?

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Post by Nick Sevilla » Sun Mar 31, 2013 12:12 pm

1.- Buy used when possible, from a reputable source.
2.- Credit? Stay the HELL away from credit schemes.
3.-If I see anyone use the word "incentivize" one more time, I will be very angry.
4.- Sweetwater has free FedEx shipping. And their service is stellar. NO, they will not discount one Goddamn thing for you, nor anyone else. Would you discount your products/services "just because"? Didn't think so.

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Post by A.David.MacKinnon » Sun Mar 31, 2013 12:51 pm

Agreed. Avoid buying on credit at all costs.
The reality of this business (like many) is that the only way to survive is to keep your overhead as low as humanly possible. Think about what carrying an extra $100 or $250 or $500 on top of rent, bills, living expenses etc would do to you. Then think about what it would do to you in a lean month.
If you want/need gear save up and pay cash. Buy used if possible. Rent if possible until you've saved up to buy.

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Post by kslight » Sun Mar 31, 2013 2:18 pm

If you don't have pending clients knocking on your door, don't buy anything you don't have cash for.

All the best deals are on used gear. Really very little gear should ever be bought new, IMHO...like computers. Even then. With the economy and music industry where it is you can buy all but the very best recording gear very cheaply compared to new prices. Do your research on what is a good buy. For example, buying an older model DBX versus a new model Behringer...Shure versus Neumann... Or whatever. I got a lot of my recording gear buying out a small lake studio, literally paid pennies on the dollar for everything especially microphones. I was able to buy a lot of it and thus got a great deal and covered most of my basics in one fell swoop without a credit card.

Be smart on what you buy. For example, I would suggest you avoid spending lots of money on gear that goes in/out of style and or is obsoleted quickly...software, converters, computers...if you don't have the clients to justify it, you will most likely find older systems more than adequate and substantially less expensive...for example buying a legacy Pro Tools HD system versus a new HDX system...depending on your needs COULD be a good buy if you understand the limitations.

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Post by The Scum » Sun Mar 31, 2013 2:22 pm

If you're looking at a number if items, make up a list, and send it to the likely suspects - Sweetwater, GCPro, Zen Pro, etc. Title it "RFQ" - request for quote. If you're a business, put it on letterhead. This is how institutional buyers (churches, schools, etc) do it. With any luck, they'll add it up and respond.

Free shipping is nearly universal these days, over a certain reasonable limit ($99 or so).

As to credit, there are several approaches to take:

First, Nick and David are correct, but only to a degree. Don't carry debt if you can avoid it - compound interest is a bitch. But if you get perks on a credit card, and can pay it off right away, the risk is minimal. You just have to have the discipline to follow through on paying it off. I do it every month for groceries and gas. Some cards also offer more in terms of "customer satisfaction protection" - warranty extensions, a 3rd party to leverage of the vendor can't follow through, etc.

There's also a flip side - a vendor may offer a discount for an all-cash transaction. The credit card companies take a percentage of the transaction - the vendor doesn't get to keep it. So if you pay cash, they may offer a discount based on the fee savings - at the end of the day, they make the same money, but cut the card company out of the loop.

You might mention the possibility of cash in the RFQ. Though if it's that significant a purchase, actually handling the cash can be a more risky proposition.
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Post by The Scum » Sun Mar 31, 2013 2:31 pm

I'll also agree with the "shop hard, shop used" crowd.

If you don't need a turnkey bundle right away, sit on the money, and watch Ebay, MGR, GCUsed and CL like a hawk. When deals pop up, grab them. I tend to like a little serendipity in my purchases, and at this point, I've got a functional studio, and I'm looking for interesting things to round it out.

Of course, this assumes that you don't need everything on the list right away, and that your time spent on the prowl for gear isn't particularly valuable.
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Post by earth tones » Sun Mar 31, 2013 2:36 pm

The Scum wrote:
First, Nick and David are correct, but only to a degree. Don't carry debt if you can avoid it - compound interest is a bitch. But if you get perks on a credit card, and can pay it off right away, the risk is minimal. You just have to have the discipline to follow through on paying it off. I do it every month for groceries and gas. Some cards also offer more in terms of "customer satisfaction protection" - warranty extensions, a 3rd party to leverage of the vendor can't follow through, etc.
That is the angle from which I was approaching the credit scenario, although I didn't clearly express that. I have the cash saved to cover the entire purchase, but I was contemplating other methods of utilizing that cash to my benefit (to build credit). If I used a credit card the sum would be paid down before term and monthly payments would well exceed the minimum, consistently.

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Post by kslight » Sun Mar 31, 2013 2:41 pm

earth tones wrote:
The Scum wrote:
First, Nick and David are correct, but only to a degree. Don't carry debt if you can avoid it - compound interest is a bitch. But if you get perks on a credit card, and can pay it off right away, the risk is minimal. You just have to have the discipline to follow through on paying it off. I do it every month for groceries and gas. Some cards also offer more in terms of "customer satisfaction protection" - warranty extensions, a 3rd party to leverage of the vendor can't follow through, etc.
That is the angle from which I was approaching the credit scenario, although I didn't clearly express that. I have the cash saved to cover the entire purchase, but I was contemplating other methods of utilizing that cash to my benefit (to build credit). If I used a credit card the sum would be paid down before term and monthly payments would well exceed the minimum, consistently.
Yes I do this, I use a credit card to pay most of my bills and any purchases, and pay it off right away. Its a dangerous game, if you aren't disciplined.

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Post by Osumosan » Sun Mar 31, 2013 3:10 pm

To be clear: using a credit card is not buying on credit. Not paying your credit card is buying on credit. Always use your card to get 1% back. If you don't get 1% on your credit card, get a credit card that gives you $$ back.

...and make your own cables!

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Post by Marc Alan Goodman » Sun Mar 31, 2013 3:42 pm

Credit is dangerous, but it's also a very powerful tool. I'd make a concerned effort not to take out any loan that you can't already pay back with the consistent work you're already getting. Avoid store-offered financing like the plague, they don't offer it for your benefit. 0% APR cards are a better choice, especially if you're going to pay them off within the 0% window, but some people seem to have luck rolling them over in to new cards every 12 months or so. It's just a lot of work and if you screw up you get hit with HUGE fees.

Up until a couple years ago I'd run our studio without any sort of debt and was proud of it, but when we got in to building our new space we took out a big old bank loan. I waited until we were already making enough money every month to afford it and make sure we can pay our own bills and eat. So far it's going great, we're paying our bills and are even starting to put some money away for rainy months, but it certainly doesn't seem to go that way for everybody.

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Post by Jeff White » Mon Apr 01, 2013 9:20 am

Some advice that I have used over the years:

1. Shop used. This doesn't have to mean strictly ebay, this can mean Apple refurbished, etc. But you can use search limitation on ebay to find out what gear has gone for used for the past several weeks, and decide what a fair price is from there. I picked up my MBP 17" through Apple for something like $400 off. I also don't own a single microphone that I didn't purchase used, with the exception of my Oktava MK-012 pair and an SM57.

2. Like everyone has said, don't finance a studio on a CC. If you can afford to pay it off, then fine, use a CC as a temporary means.

3. I recently paid for a bunch of touring gear purchased at AMS via their 5 easy payments deal. I'm working on payment 3 right now. It really helped me out. I've never done it before, but it was certainly easy indeed.

4. Learn the benefit of borrowing gear/sharing gear as a community. It has significantly helped me over the years, as well as helped out my friends.

5. Remember, if you are a business or a sole proprietor, gear purchases are write-offs for you taxes. If you make a huge purchase, make sure that it benefits your taxes. These laws are there to be used to your benefit.

Jeff
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Post by T-rex » Mon Apr 01, 2013 10:29 am

Nick Sevilla wrote:1.- Buy used when possible, from a reputable source.
2.- Credit? Stay the HELL away from credit schemes.
3.-If I see anyone use the word "incentivize" one more time, I will be very angry.
4.- Sweetwater has free FedEx shipping. And their service is stellar. NO, they will not discount one Goddamn thing for you, nor anyone else. Would you discount your products/services "just because"? Didn't think so.

Happy Easter Bunny chasing
Agree with everything here except Sweetwater will discount for you if you talk to a sales rep and ask. It's not some super secret crazy discount or anything, but I haven't paid retail for anything I have bought from Sweetwater in years. Although, try to buy used as much as you possibly can. Would you rather buy a mic for $600 and then sell it for $300 later if you outgrow it or buy it used for $300 and turn around two years later and sell it for $300?
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Post by GooberNumber9 » Mon Apr 01, 2013 10:53 am

Another look at the larger question of credit:

If you actually have the cash on-hand to pay for something, AND you have an offer of interest-free financing, then there is some sense to financing it.

Clearly, interest-free financing does not have a cost (actually, inflation provides a slight discount), but it does have risk. If you can completely mitigate the risk by having reserves enough to pay off the debt if something unexpected happens, then you can realize the inflationary "discount" without the risk that goes along with it.

Assuming you'd rather produce some music instead of closely watching your finances, it still might not be worth it, but it's something to think about.

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Post by llmonty » Tue Apr 02, 2013 8:10 am

Good advice here. Yes used, yes ask for deals - if you want it all at once and new, you will likely get some good discounts.

If you have time and you want to space it out, develop a list and a desired price, and stay on the look out. Set up ebay notifications, check here, gearslutz, etc. often. When you see something in your price range, snag it. If on the boards and the price isn't right, be polite and uprfont in asking if they would consider your offer.

On CC - totally agree that if you use a card like cash, there are many benefits -- the float, the rewards, the CC company preferential treatment (don't laugh - at least sometimes this has come in handy). Look for the right card for you. 1% cash back, small biz, etc. If this will be a personal card and you would use it for other purposes, check which card works best for the way you use -- like groceries, home stores, department stores, gas, etc. The Amex Blue Cash is pretty great, though not quite as great as it used to me.
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Post by Jim Williams » Tue Apr 02, 2013 8:38 am

CC's are not a problem unless you can't pay them off. It's another tool.

For me, never buy any audio gear new. No need to. There are plenty of sad sacks willing to let go their last purchase for a loss = your gain.

I broke this rule once in the last ten years: I bought a new Bricasti M7 'cause there wern't any used ones available.

The rest is used stuff, all restored, modified and hot-rodded to hell and back. Most was built in the 1980's and 90's. I found most analog stuff made this century to be lacking in quality, probably due to the record biz collapse and the rise of low fi audio acceptance. Standards are very low now.

Being a clever sort, I rework all this gear myself and build quite a bit from scratch. I build my own mics, preamps, converters, processors, EQ's, etc. Some designs are sold to commercial manufacturers. I even build my own guns here. I stop at the Jeep, I pay smart folks to work on that.

If you are a can-do sort, nothing holds you back. A pile of cash will suffice if you are lacking in those skills. I suspect most here are not in that situation. I hit the books in college, it paid off in spades.
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