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Financing options for a new business?

Discussion in 'Financing' started by Brute_200, Mar 31, 2018.

  1. Brute_200

    Brute_200 Member

    Joined:
    Jul 27, 2017
    Messages:
    10
    Location:
    Missouri
    After a business plan is made up, how difficult would it be to obtain financing on used equipment for a new business with lack of any credit/work history? I know it would be nice to rent first until you build up clientele and can have some numbers to show the lender but forestry mulchers aren't really rented out due to the beating they're prone to (at least that's what i've been told in my area). I would want the loan to be made through the business but even when it comes to my personal credit, I don't have much to show for. Just a year of credit card use and I got a $14,000 left on a loan for my duramax. Just graduated college 5 months ago. Got a good job with a local GC for now, but I'd rather get started on my own career path one day soon. Just fishin' for some thoughts. Thanks.
     
  2. Birken Vogt

    Birken Vogt Charter Member

    Joined:
    Nov 30, 2003
    Messages:
    2,210
    Location:
    Grass Valley, Ca
    First off I would not take out a loan for that machine. Especially if I was new to the business. I don't know about mulching but for me plan A would be to save a few pennies and buy a jalopy machine, even Bobcat-sized that I could afford and work upwards from there.

    Fail early, fail small is what I heard someone say once. If it is going to work then you can grow on your own cash flow, if it does not work then you do not go down in too big a fireball.

    Put yourselves in the shoes of the other guy. Who would want to invest in you? Especially with other peoples' money they are responsible for?

    If you are dead set to do this on credit then I have often wondered about peer-to-peer lending sites like Propsper.com or LendingClub.com. I hear tell they find a lender for just about anyone. If this makes sense for you, try it out and let us know how it goes.
     
  3. AzIron

    AzIron Senior Member

    Joined:
    Jun 15, 2016
    Messages:
    276
    Location:
    Az
    i am sure someone would loan the money right now but what will the loan cost and does that leave any money for you all set and done. if you dont have a list of steady customers it can get pretty tough always seems like everyone wants you at the same time then no one wants you for 2 or 3 weeks the cash flow problem will hurt. payments are not a bad thing when common sense is used. loans in the start up portion of a business can be the thing that sinks you before you even start
     
  4. crane operator

    crane operator Senior Member

    Joined:
    Mar 27, 2009
    Messages:
    2,555
    Location:
    sw missouri
    Glad to see you graduated college and are working for a good GC. Just a couple things.

    You can borrow $ as a business, but you will sign for it personally too. The banker won't let you get off that easy. The banker wants you to have skin in the game, and if you don't make payments, the machine goes to auction and he sends you a bill for the difference between what you borrowed and what he got at auction. Its not pretty.

    Whatever you are looking at borrowing for $, you should have at least half that amount in cash. If you want a $40,000 forestry machine, you should have 20,000 of it. (I'm just using the 40k as a example- I have no idea what $ amounts you're looking at). And that money needs to be cash, not "equity" in a house/ truck etc.

    Just because its good experience, go meet with a banker. Not the young guy at the bank with no experience, find the 50-60 year old guy. Just meet with him and show him your business plan and see what he says. It won't cost you anything and you might learn something.

    Probably a better thing, is find a 50- 60 year old guy that has a dozer and a excavator or similar business to what you want to do, and get to know him. Help him out on the weekends greasing equipment, fixing stuff. Nothing teaches like experience, and he'll know more than a banker will.
     
    CM1995, bam1968, Junkyard and 2 others like this.
  5. gruntscoreboard

    gruntscoreboard Well-Known Member

    Joined:
    Mar 23, 2014
    Messages:
    52
    Location:
    PH
    Financing or try get a business loan for a start-up capital in buying equipment will be an option.
     
  6. RjMaan

    RjMaan Active Member

    Joined:
    Mar 23, 2018
    Messages:
    28
    Location:
    Pakistan
    I think you should try see if you could raise a capital from your home while for the remaining amount you should try to approach the bank in your city. Put the same business model in front of the manager and ensure him that you will return his money within the prescribed time. After having enough money then think about making company that deals with heavy equipment and also on registering your company. After registration try to work hard and make your clients through proper advertising. Hope you will be successful in future.
     
  7. JPLUMMER

    JPLUMMER New Member

    Joined:
    May 18, 2016
    Messages:
    1
    Occupation:
    EQUIPMENT FINANCE
    Location:
    Indianapolis, IN
    Typically unless you have good credit, substantial verifiable experience, along with your business plan most local banks will not consider you for financing as a start up business. Unless you have sufficient collateral to protect the lending institution from a potential loss. Having said that there are a lot of alternative finance companies that will finance just about anyone with a pulse. The only advice I would give you if your local bank will not consider your financing needs be careful on the secondary market. Make sure you have a clear understanding of the implied rate you are paying on what you are borrowing. Commercial finance does not work the same as consumer finance. I have seen companies obtain financing and went through the numbers with them to discover they are paying extremely high rates. The highest I have ever seen personally is 103%. The secondary commercial finance market will be higher rates than your primary market and consumer markets. That being said if you are able to get your local bank or credit union to finance you that will almost always be your best option. If not just make sure you are educated about what you are getting into.