Financing Question

Even with perfect credit in these economic times a loan in that amount would be hard to get.If you can come up with between $3500.00 to $6000.00 you could try Lone Mountain Truck Leasing.Google LMTL and talk to them,its a start.

 

More than likely you will need real estate or some other type of collateral other than the equipment to secure the loan. You may be able to get either a home equity loan or commercial loan or line of credit. Most lenders prefer a credit score of over 700 and even then, it could be problematic. Most lenders will want you to have money in the business. If you need to borrow everything, including working capital, to get started, then you need to rethink your decision to get into this business. You should NEVER get into any business without some of your own cash being at risk.

Lenders will consider your experience in the industry when making a loan for class 8 equipment. If he wants to buy a truck, then it would be much better if he also drove it himself. There just isn't all that much profit for one person to drive and have 2 incomes from a single truck. Many lenders will also want to see some history on a company before offering a line of credit or commercial loan. If he has a personal relationship with a banker, he might be able to get money for the equipment as long as he has a good down payment, but most banks don't like to loan money for class 8 equipment. My guess is that he or you will need from 10-30% down to buy a truck and/or trailer. You should also have sufficient funds on hand to run the business until money comes back into the coffers. If you don't have the resources to cover yourself, then perhaps you should wait until you can get your credit cleaned up and save enough to buy a truck or your friend can save enough for a good down payment and working capital without having to go to the bank.

 

Unless you can pledge other hard assets, such as real estate, I doubt that you will be able to qualify for a line of credit or other financing other than the cost of the equipment. Most lenders will require 10-30% down on capital equipment. From your post, I gather that you plan on getting your own authority? Rates are all over the place right now. Have you run your numbers with lower rates and a sluggish economy? I don't recall your mentioning the type of trailer you plan on using, so I will assume you will pull a van? If you have been in this business for any length of time, you should know that during winter months freight can drop off significantly. Some may only be able to run 1,800-2,200 miles per week during the slow time of year. When I do projections, I usually do an average of 2,500 miles per week for the year. That is usually attainable if you take the annual average. When calculating costs and revenue, I find it better to under estimate revenue and over estimate costs.

My question is would you be able to finance the equipment if you had to pay the big down payment and still have the funds to keep the business running until the money turned around? If you plan to run your authority you will need to pay the cost of base plates and insurance in addition to the down payment on your equipment. Base plates can run $1,500-2,200/year. 2290 will cost $550. Insurance will likely run somewhere between $6,000-12,000, but could be higher. Your down payment for the equipment you listed will likely be between about $3,500-$15,000. That makes no allowance for working capital. Even if you factor your receivables or use quick pay from brokers, you could need to front a couple of weeks of fuel and expenses on the road.

Unless you or your friend have some hard cash to put into this deal, I think you will have a difficult time making it work. One of the primary reasons most businesses fail is due to lack of capital.

 

Supertruckerporkchop, I am glad to see that you have pulled back and taken a second look at the situation. It is better to wait and do it right than to jump in too soon and lose your shirt. By the time you get ready to make the leap, the economy may have settled down and things will be a little easier.

 

There was one thing that didn't get mentioned. Never pledge personal real estate holdings in the trucking bus. #### good way to lose your home.

Times are tough and are likely to stay tough through the next election. IMO save your money and keep gathering info. Re-evaluate your position based on the economy and the election results. Trucking will still be here.

Mind you that's my opinion.