# Equipment Financing



## casey344 (Dec 15, 2005)

For the past few weeks I've talked with 2 banks to try and finance 175k of used equipment and I'm running into road blocks. The equipment I'm considering would cost up to 400k if purchased new. I have always bought 1-2 year old vehicles, buying used has seemed to make sense to me. I have excellent personal credit, the business has shown a profit since it's inception in 2009, and I'm willing to sign a personal guarantee.

Bank of America response: "It looks like we would only be able to do 50,000 because unfortunately we cannot collateralize the equipment you’re buying. If all the equipment was new or just one piece we could so we would basically just be doing an unsecured loan for 50k."

Local credit union: "We do not offer business loans using equipment as collateral. This is not a type of loan we specialize in or offer. We primarily deal only on the consumer side. This would have to be an unsecured loan and the max we offer is around $20k, with a personal guaranty required."

Your thoughts?


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## Chris Johnson (Apr 19, 2007)

Grab the 70k unsecured from the banks, private money @ a higher rate for the balance, pay off the private money asap


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## casey344 (Dec 15, 2005)

*Private Money*

Who lends private money? I haven't heard this term.


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## Spencer (Jul 6, 2005)

Its a lot of money. It takes a while to work your way up even with good credit. My experience has been you just have to work your way higher little by little. 

Do you have a local bank you could try? I do my banking local. I think they take a more personal look at things and if you're legit, you're more likely to get the money you need there.


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## casey344 (Dec 15, 2005)

The credit union is local and I've had mortgages and multiple vehicle loans with them for the past 15 years. No missed payments on any of the loans and most were paid off before the end of their term.


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## Chris Johnson (Apr 19, 2007)

casey344 said:


> Who lends private money? I haven't heard this term.



How long have you been around? Private money is everywhere, its like an investor in you/your business, they will take a financial risk at a premium. You only use it provided you know you can pay it back.

Go see your lawyer or accountant, they can put you in contact with money people.

But I want to tell you this. If the bank said no, you need to know why. Banks are not dumb, I assume they looked at your business records when you applied for the loan...if so, the formulas they use are for a reason, it is based on your books telling them what is a comfortable amount for you to repay. Your trying to better then double it. I'm not saying you can't do it, but your risk is increasing.

The other thing, both banks told you they are not equipment people. Google construction equipment financing and try that route first before private money. If your bank is 6% for unsecured money, equipment financing may be 5% however private money starts at 10% and up.


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## casey344 (Dec 15, 2005)

Thank you Chris ... I'm 40. I've written a check for everything we've needed so far and avoided loans for the business altogether.

The bank has approved the full amount if new. There's just too much depreciation in this equipment, ie: seller is losing 325k on 500k in only 6 years. I'm sure he's made money with this equipment but I'd like to think I can do the same and avoid the rapid depreciation.

I called and emailed a few equipment finance companies yesterday and am waiting on their response. The seller put me in touch with a company who would potentially buy the equipment and lease it back to me.


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## Joasis (Mar 28, 2006)

I get unsolicited offers daily for non traditional funding. Direct Capital and a few others come to mind. 

Do a search for equipment leasing/financing and look for the guys who say they specialize in small businesses. Some that do leases and financing will have killer deals on lease returns, and finance them also. 

https://www.directcapital.com/ConstructionEquipmentLeasingandFinancing

I did business we these guys back years ago, and it was ok, as I grew, I was able to get back into the local bank for a better rate.


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## Pearce Services (Nov 21, 2005)

You could try these guys http://www.capitalleasegroup.com/about/

I spoke with them about 8 months ago, and they told me they would offer a lease program for any trade ins they get from existing leases. So essentially that would be a lease for used equipment.

Your situation is different, but it wouldn't hurt to ask them.


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## Joasis (Mar 28, 2006)

Once you have equipment in place, and any good credit, then it opens doors for more traditional financing with a bank at a better rate....at least, as I have found it to be. My problem with a pure lease was the cost....vs. buying outright. Last time I looked into this, I bought my new ICF bracing set, which was an outlay of about 10k. By the time the lease would be up, and I bought it out at the end for the $1, then it would cost me about $2000 in interest....the advantage was that it was a no fault lease...meaning end it at any time. I ended up just using my capital reserve to buy them, and I guess I am about $1500 ahead....and the 10k would not have earned squat in 18 months interest wise.


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## Chris Johnson (Apr 19, 2007)

I lease our TotalStation, $342 a month plus tax. Or somewhere in that area. Over 5 years I pay 3k in interest, which seams like a lot, but the benefits with leasing it are calibration no charge, free updates, free on site training anytime, free repairs with a loaner while in the shop. And my buyout is I think $1 at the end.


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## Joasis (Mar 28, 2006)

I looked at a total station....if I were younger and more tech savvy, I think I would have tried to get one also.


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## Chris Johnson (Apr 19, 2007)

I'll admit it. I can program the Total Station in the office (load the layout on to it), but in site I've not used it. The HILTI rep can show the guys how to use it in an hour apparently...I've never been there while he does it with them.

I will add though that layouts have been perfect since using one and you can move the unit and be reset to continue layout in minutes.

We do a lot of multi floor units. I program the point loads into the unit, I'll use a common item from every floor (stairwell, elevator, etc) as the benchmark for set up. It takes the guys minutes to set it up and establish it locations, then they can plot the point loads and carry on building.


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## builditguy (Nov 10, 2013)

Again, try a local bank. The credit union may be local as in, "located in your town", but a credit union is different from a bank. They loan money different and are more of a corporate business. (They don't even pay taxes)

Bank of America is Nationwide (probably global) and nobody local makes a decision. The numbers are forwarded to parts unknown and the computer tells them whether they can make the loan.

A local bank is one that has a board of directors and investors that live in the area. They will have a few branches, but only do business in your local area.

I do all my business at local banks. Things have changed over the years. I have to fill out applications and provide financial statements. Years ago, I just called, told them how much I needed, and they said, "write the check, the money will be in your account." Even now I can get approval within an hour or so. Your local banker will be the one who knows of you and your business. He (she) will also know the climate of your business. They are more likely to invest in the person, even when the numbers don't look that great.

Try to find some local banks. It is a completely different atmosphere. 

At least in my experience.


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## bdoles (Sep 11, 2007)

Check out National Funding - https://www.nationalfunding.com/

I used them when I was in a pinch, and it worked out perfectly. They have many options.


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## Donohue Const (Dec 31, 2011)

I like dealing with the local bank

The owner of the bank is there everyday, I get to talk to him when I go in and the decision is made right away 

No loan application or approval process 

I just tell him what I'm thinking, and they usually say, ok let me know what you get and we will do the paperwork then.

I like going somewhere where I'm not just a number, sure I might be able to get a little better rate somewhere else, but I like the way things work at my bank


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## MetalStretcher (Apr 9, 2015)

I know this topic is a bit old, but for anyone else coming through in the future and who has not been in business for a long time like the OP, equipment financing is great for new businesses who can't get a large loan from the bank. 

You will have to PG the loan, but it doesn't affect or show on your personal credit unless you default (with most companies) The advantage to this is should you go to buy a house, car or something you need financing for personally it wont show on your personal report. This was a big deal to us and still is. 

Of course its also directly building business credit which will play huge when you've been open a few years and are eligible to start talking to traditional banks.

The unfortunate thing for new businesses is even with perfect personal credit when doing equipment financing you are going to be in the 30% range on interest. Certain companies (Capital Direct is one) have preferred suppliers that if you purchase from them will get you in the 20% range. But 30% is the general guideline on financing equipment for new businesses through one of these companies.

Anyway that's been my experience with these companies, I'm going to look into National Funding as they have a lowest price guarantee.


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## GettingBy (Aug 19, 2010)

casey344 said:


> 175k of used equipment
> 
> unfortunately we cannot collateralize the equipment you’re buying. If all the equipment *was new or just one piece *we could so we would basically just be doing an unsecured loan for 50k."
> 
> ...


The second is more risk-averse but this seems to be too much risk for these banks and they don't want to quote you outrageous interest to cover the risk.

If someone or some org. tells you they will, I'd read that contract very carefully. 

Asking around is free, like asking for bids. Ask three more just for info.


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