just cause I was tired of looking at the phony casting thread
It is indeed better that we seek for more information that could guide us on how we are going to manage our financial accounts.
Banks are not ant business, you just need to understand how they work and what they want. First off a depositors money becomes a bankers liability, they need to loan it out to make money, they get profits between the loan interest and the interest paid to the depositor, its pretty simple, back in the 80's where depositors were paid at or over 15% and banks charged 15-18% they made about 3% profit and when the loans were defaulted on, banks didn't have the margins to stay in the profit end of the world and went under, today they loan out money for5-12% and pay depositors about 1% or less, not hard to do the math on that, but i'll help you out, thats more than 5-11 times the costs or I'll give you a dollar you give me 5-11 back, not bad huh? Now real-estate loans are less, the land or buildings go nowhere and don't get stolen, so the risk is less, thus lower interest costs on those loans verses iron or machines.
They want collateral to cover the loan, or if you go broke they get paid in full and then some, no worries, like when you deposit 11 dollars and take one out and spend it, you've still got 10 left and don't worry, it didn't go anywhere and its safe, the higher the risk the higher the interest rate, or in your terms those that have the least and have no money and have the least ability to repay the loan pay the most, those that don't need the money and don't care to borrow it in the fist place and can repay it at any time get the best deals, great isn't it.................. now insert your name in the equation, hint its in the first part not the second part.
Next they want a good plan, this and they've never actually run a business of their own so they need your intentions on paper so they don't get lost, and this part is a direct quote from a former bank director, they are not good at managing or running anything and never have and don't know how to turn a bucks profit if it involves physical work, that again is a direct quote I'll never forget, from the same director. Now the intentions need good plan, where theres guaranteed income coming in, like they get a monthly paycheck, anything else gets fuzzy for them because of lack of knowledge or experience in your world. Now your plan is hashed over by several bankers, cause one doesn't know anything about it so they run it by others that know less, again a quote from the director I knew. Next they look to see who else has applied for money to borrow and see whats available, then they draw from the crystal ball and toss up the coin and see if your qualified for the loan, more than one need to agree they don't know much about it and say either yes or no, at the same time they look at your assets, if you have something, they'll loan you more than you need, if not, your not going to get much if anything, next they look to see if an idiot has been willing to co sign the note for you, this gives a bonus for you since they now have another idiot to get repaid from when you go broke, provided he's an idiot with something not already spoken for by another bank and its of value, your wife's sister for a sex slave isn't a good asset, maybe a good piece of *ss but worthless for collateral, her car maybe provided its paid off and worth something.
They then look at your intentions to repay the loan, here's not the time to state "someday" but rather monthly or yearly payments would be preferred, they then look at what you've got to do the repaying with, if anything, like income of any sort, here's where your financial statement comes in and your taxes, now they look at things like depreciation and how much you made in the past and calculate if you can survive and live on what you made last year or the last two years, here its usually law they have this, someone higher up realized they are not the sharpest knife in the drawer so they require them to have this on file in case someone wants to come from the government and check up on them to see their doing their job, in case you've been asleep the last few years with the liar loans and bogus house loans, apparently someone hasn't been doing that job, either at the banks or with the examiners who watch them, bear this in mind how smart they all are and money wise, you'll need it later in life.
Next comes the loan or the refusal and either you've got it or not, if not, consider yourself lucky to dodge that bullet and walk away uninjured, if you get it, then you've got a partner in the form of a banker and he's the slowest thinking one in your business now, also something to remember for later reference. And you get to answer any questions they have, like what color machine did you buy, those type of things, but they will take pictures to help them remember these things to have on file and file a lean on your machine so you can't sell it without them finding out. Now for the repayments, you get to go make those payments and get to answer questions he may have for you at these times so be prepared. Now they can indeed call in your loan at any time if your not only behind on payments but if the bank examiners deem your a high risk loan, those guys that watched over the make sure bankers didn't break any laws and the loans they made were solid loans, yea those guys, so all in all your in good hands, being watched over by the smartest and brightest colleges have to offer being supervised by those that couldn't figure out how the liar loans worked in the fist place and above all the single most important part, when they get fired as a banker, the working sector wants nothing to do with them because they are not qualified to do anything worthwhile, another direct quote from that bank director friend of mine. So now that we went over banking 101 for dummies, aren't you glad you don't qualify most of the time. Sorry to offend bankers everywhere but any time i can poke some fun at them I can't resist.
Now to be serious somewhat, always try to be upfront and honest with them, don't lie to them, and expect the same treatment in return from them. Know your business and how it works and its profit capability and keep an eye on costs, 90% of the loans made to the beginner are made on the person, not the business, they judge you as person and weight that into the equation, put on a suit and tie to deal with them, your not only representing yourself but your business, know what your talking about at all times and don't blow smoke up someone's *ss with hype you can't deliver. Shop around for a good deal and someone you want to deal with, they are in the market to loan money, they can negotiate about anything if they want to, use one verses another to compare rates and collateral needed by each, there is a considerable difference between banks and their policies for collateral. Look for one that somewhat understands your business, not many do, I try to deal with more than one at any given time and ask about deals they are willing to give and I'll pay off a loan and go to another bank at any time if they are a better deal and place to do business with.
They are then a partner in your business and use them as such, if you have a customer who your not sure your going to get paid from, ask the banker to do the behind the scenes work to find out for you, they can do anything they want, its after all their money you might get scammed out of and should be willing to help you out with advice, if not hunt elsewhere for one that does. Learn how money works in business and things like return on investment and profitability and also debt to asset ratios, things like that, you don't need to be a rocket scientist to do a good job of understanding how banking works, if your to survive in any business you need to know at least the basics, bankers are not to be feared or a overlord over you, if they are look for the next one, bank policies change all the time so one minute they might be a good partner the next time not so good, its just life. Keep them informed as to whats going on with your business, don't be a stranger in the bank you borrowed money from, let them know about your intentions and what your thinking to do in the future, make them a part of it, keep it business related at all times, and never do business with relatives or family if they are in the banking industry and gleam as much information from them you can, ask questions if you don't know or understand and never sign anything unless you read every word, ask for explanations if needed what things mean, there is no disgrace in this on your part, also don't be overdrawn a lot on your accounts, it makes you look bad and like an idiot who knows nothing. Ask your credit score every year and know what it means, have the bank check for you and find out why it went down and how to prevent it again, see what you can do to get it up higher than it is now. Eliminate credit cards and credit card debt. The wealthiest people in the world have come from modest means and have the most at the end, not the ones with riches and wealth at the start, because they know what it takes to make a dollar and hang onto it longer, another quote from my bank director friend.
Randy, Very well spoken in regards to the banking issues & obtaining credit. I think of them & capital as a tool; it will only perform and be available to you when needed with a direct correlation of how well you manage it.
Try a smaller bank... I too am 21 years old and just borrowed 20k. I personally know everyone in the bank, they know me well as well so that may help. But if I were to have tried at a bigger bank I doubt i would have had success.. I did not have to give any sort of business plan or anything. Simply told them what I wanted to buy and got told "I obviously have no problem with that". Try to develop a relationship with a small town bank!
I just wanna say I check this forum out sometimes cuz I do a little excavating on the side, gotta trackloader and a hoe and a truck. My main bizis farming. But anyway. I agree. Banks are and * *** scam. I have been in biz for 12 years. Built a huge amount of equity. Not gonna get into numbers but I will tell you the ratios. Wanted to buy a farm, anod I did buy it but getting the dollars was hard. I offered to collerteralize the loan 4 to 1, with 1/4 of the colleterall being real estate. So the mortgage would be more then covered just by the land alone. But I had to beat the street every day for 4 weeks to get the money for this deal. I went to every bank I could find that would talk to me. I mean these people are terriable. Will not call back, want all kinds of stupid documentation. It was crazy. They treated me like a criminal. You say go to smal banks. Well my small bank was the worst. I hate those people. I hope they go under, which it sounds like they might because they loan money to people who can't back it up. But they won't loan to me, who can back it up 4 times. Well anyway guys. Don't give up. I wanted the farm and I got it. Just gotta work them banks like there is no tommrow.
Last edited by digger242j; 02-12-2012 at 05:51 AM.
Reason: attempted bypass of the auto-censor
Parker22 there just hit it right smack on the head.
Develop a good working realtionship with a small community bank. Once they get to know you and have some experience with you things will become much easier. The big banks have no authority to do anything at the local branch level. About all they can do at the branch is open an account for you and then hassle you if you want to get your money out. Everything else has to go up the ladder to "underwritting" as they call it.
I dealt with a small community bank for years. They were sold. The new owner left it alone for a year then everything went to hell. The fellow I dealt with there quit and went to a small community bank. I did too after using the same bank for better then 40 years.
If I need money short term on a job I have it in a single phone call. If I want a piece of equipment or vehicle they are right there to help.
The other thing about a bank like this is if you should run into problems they will work with you. Big bank, screw you, they will sell you out in a heart beat.
I do international work also and in those cases get paid by a letter of credit. This is always organized and arranged through the big off shore and domestic banks. I always have a hassle with them holding my money for up to ten days from the time the originating bank releases it. Every time I get the same story. "This would work better if you had an account with us." I don't want it and don't need it. There is no reason why they can't release my money the same day it comes in other then they want to loan it out overnight as they all do and make money off of me in the process in addition to their transaction fees.
Once again you are right Parker 22. Use a small community bank and you will be far ahead.
I agree a credit union might be a better place to start. If you try to post used equip as equity it is going to be tough. The bank managers have not much to work with as far as true loan value, so you should get al your value facts together 1st. the internet sales records available from auctions are a good place to start, also a good used equip dealer have some loan value books that may help you or give you a good idea of trade in values. also be ready to talk about maint upkeep and run costs/per/hour, insurances\ce ECT. IF YOU LOOK AND SOUND IMPRESSIVE YOU WILL GET YOUR LOAN. Refinancing or posting real estate is also a good way if they turn you down... Woops i just read back a bit on this post and I got lost. I can,t find the individual that needs to get a loan for what??? sorry
Banks change all the time, as new managers come along, comes different ideas on loans they want to work with, so a bank that was good to deal with a few years back are really bad today, you just need to remember anytime theres a change in personnel there's a potential problem with what type of business your in, not you per say personally. I've left several banks over the years because of this, new management came in set up the policy that excavation was high risk and when new loans are to made out, jack the interest rates and collateral requirements needed, it had nothing to do with my prior performance on loans or how sound my business was, it was strictly bank policy set up by new management, so I shopped elsewhere for someone wanting my loans or business. I always keep an eye out and try to do business with more than one bank at a time, that way when policy in one changes, I'm not completely out of options and have time to find the next replacement lender as I get rid of the one with new policy changes.
Also once you somewhat understand how banks operate, use one against the other, I've applied many times for loans at up to a half dozen banks at the same time, all were approved and I chose the one with the best terms for me, and told the others sorry maybe next time they'll do a better job of competing. A bank board dirctor friend of mine told me once to do this and I found out fast that there is a big difference in banks policiies and loan requirements, what one bank considers a good risk another considers a bad risk, you just need to shop around to find out who's willing to deal with you and how bad they want you. The terms and interst rates tell you more about a banks inner policy than anything the loan officer says. When one bank comes back 4% higher interst rate than another bank, they might want your loan but you know right away they are labeling you a higher risk than another bank is. Same goes for collateral terms, if one bank wants everything you own tied up for a simple laon verses the next bank that only wants say 10% more than what they are loaning you for collateral, you know immediately who has you lableled high risk and who doesn't. So if one bank turns you down, just shop around, and even if one accepts you, shop around anyhow, somoene might do better for you than the first to approve your loan.
Your in business to make money, plain and simple, unless you do charity work and are rich enough to do work for no pay, you are in essence in business. You have to compete against others out there to get business, or bid work, or however you get the work, your competing for that market share, make banks do the same for you, don't just hand them your business and take what they offer you, make them work for it and compete with other banks to offer you the best deal they can and take the best deal offered to you by the one willing to do the most on your behalf. Most shop around for the best deal on a machine, the lowest price, best service, best interst rate on the financing, whatever, just do the same for banks, they are not some god to be feared or hated, they just handle money, nothing else, some don't understand this are afraid of them, some hate them, others still avoid them, however or whatever catagory your in, just remember they are in business, same as you, they just offer a different service than you do is all, once you understand how they work, get the best deal and terms you can from them, if or when bank policy changes, move on and go somewhere else to do business with the next one.
Randy 88 has it right, But in most cases the Banker talking to a Business man makes less than the Business man & is jealous....Jealousy breeds contempt....Bankers have no common sense, their lazy & all their decisions are made by guide books, computers & group therapy know as the committee meets on Thursday....Don't ever be afraid to sue a bank if your right....There is a statute called lender liability....I was in business for 50 years & have borrowed untold millions....Back in 1985 I was Banking with the biggest there was, Well they got a new branch manager & he didn't like me, Hard to believe I know....Well he called in my loan for no reason, Off to the legal eagle I go, send them nasty letter, see you in court, now understand they have a mortgage on my commercial property which is a cash cow....I'll make this short after 12 years in court I won, The judge fined the bank $ 25,000 which was awarded to me, they had to pay my lawyers fees which were $ 66,000, The mortgage was vacated which was $ 187,000 & I was awarded $ 125,000 in damages....Then in 1997 the same thing happened with another biggee, but they were all demand notes, about $ 200,000.... lawyer sent them letter we would sue & cited my case law, to this day we haven't heard a word, they just wrote it off....So if your right fight them but get a good lawyer who's not afraid of a fight & doesn't live in the same town.............P.S In the case of the first bank they had a stand alone building in a shopping mall....Guess who owned the land & building....You got it....
Unfortunately banks initially look at only a few things before looking deeper into the deal: credit score, equipment cost, and time in business. A minimum of 2 years is typical for any lending institution. When these criteria aren't up to par they usually just scratch the deal no matter what your revenue plans are. Your best bet is to go through an equipment leasing company and see what they can do for you. Banks are more likely to approve deals when a financial professional already has the research and information ready for them to review. Banks don't want like dealing with individual people and unfortunately, the younger and less experienced you are, the more banks find you risky.
Last edited by digger242j; 05-22-2013 at 04:39 PM.
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