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Financing options for a new business?

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Brute_200

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Joined
Jul 27, 2017
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11
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.
 

Birken Vogt

Charter Member
Joined
Nov 30, 2003
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5,305
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.
 

AzIron

Senior Member
Joined
Jun 14, 2016
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1,541
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
 

crane operator

Senior Member
Joined
Mar 27, 2009
Messages
8,275
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.
 

RjMaan

Active Member
Joined
Mar 23, 2018
Messages
29
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.
 

JPLUMMER

Member
Joined
May 18, 2016
Messages
5
Location
Indianapolis, IN
Occupation
EQUIPMENT FINANCE
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.
 

kimhamilton9

New Member
Joined
Jul 30, 2020
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1
Location
new york
I'm as long as you have a salary and no debts, you can take out a loan, especially since everything is much easier now.
 

BigWrench55

Senior Member
Joined
Oct 11, 2018
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1,176
Location
Somewhere
I'm shocked to see that you guys that have a business are encouraging someone to go into debt to start a business. I get the need to do so because everything is so expensive. But credit is the reason why everything is so expensive. I personally don't think it's wise to go into debt to start a business. Nothing is certain. the customers you have today might not be there tomorrow. You don't want to be taking any old job to make payments. Ideally you would want to have the ability to walk away from some jobs. It's a vicious cycle. You become slave to your business always having to hustle to make those payments to keep your business afloat. Yes it takes longer, but work and save money. Then go to those auctions and buy the other guy who financed his business and couldn't hack it equipment. You can always rent and the job will cover the costs of rental. But add a precentage to the rental fees for your time and your own capital being tied up. Good luck to anyone who has the balls and sticks his neck out there to start a business. I have been on the fence for a long time considering this very thing. In the meantime while I am finding my balls I am collecting things to make it possible to go on my own.
 

mitch504

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Feb 27, 2010
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5,776
Location
Andrews SC
I didn't see anybody in that thread that is in business encouraging him. Most of what's in that thread is finance people.
 

DMiller

Senior Member
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Feb 21, 2010
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16,432
Location
Hermann, Missouri
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Cheap "old" Geezer
Would build time at GC couple of years MINIMUM, get a good trades start even with the Degree then look to expand out, no time on base, no heavy money to establish yourself you are playing the dice pretty hard and as I am aware Snake eyes or Boxcars comes up often at those odds where YOU hold the debt and someone else gains the company as well machines, been there done that as many of us here have.
 

CM1995

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Jan 21, 2007
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13,250
Location
Alabama
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Running what I brung and taking what I win
This thread started back in 2018 and has drawn the spam. I'm going to close it and do some house cleaning.
 
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