The final deal killer is a lack of cash. If the business and its owner do not have much cash on hand, proving the ability to step in and cover payments should revenue slow, the bank will not take the risk of lending. This can present a challenge for a specialty boom truck financing lender as well, but if the crane is purchased at a good price the down payment required might be low.For additional information on any of these programs go here.
Why get cash from your crane? Is your business expanding rapidly? Do you need new equipment to fulfill upcoming contracts? Is working capital tight? Does your bank have you locked out of additional borrowing facilities? There are times that businesses need capital to move forward and grow from their current situation. If they are not able to qualify for additional financing from a bank, what do they do? If the business has capital equipment there may be an alternative not previously considered. The equipment must be in good working order. It cannot be encumbered with any liens or the amount owed on the original financing is low. Businesses can pull cash from crane equity. This can provide the working capital they need for new projects, markets, or employees. It’s a way to leverage asset equity to progress from the current situation. There are many reasons to get cash from your crane. The important thing to remember is to use the cash wisely. Make sure the additional profit you make exceeds the cost of borrowing. Using cash for your crane equity can propel your business to new heights! Talk to us today about getting cash from your crane!
Over the years in this industry I’ve worked with many a different crane equipment lender, from banks to hedge funds to family offices and private funds. Most of the articles written on due diligence involve coaching a borrower on how to prepare a loan submission package that will increase their chances for an approval. That’s important. It is also important you screen the lender, to make sure it is right for you. Through some hard earned lessons I’ve come up with several tips I used to fully vet a crane equipment lender for a particular deal. I provide this service on behalf of my clients, but it’s prudent for any borrower to do the same. 1) Ask for references. If an equipment lender will not provide them, move on. If they do, actually call the reference! Amazing how few people do this. You want to know if the lender can actually perform, the ease of their process, do they provide clear communication, etc. 2) Ask about the procedure for submission and due diligence. Take notes. The process should match the explanation given at the beginning. If there is a variance, ask why. Sometimes there is a reasonable explanation unique to your application. 3) Try to obtain a copy of the lender’s standard loan document package as early in the process as possible. Some won’t give it until they are ready to close, but if you can get it during due diligence, have your legal counsel review it. Problems with conditions and requirements (like guarantees) are addressed promptly, instead of when you’re headed to the closing table. 4) Finally, and this really is just common sense, pay attention to how you’re treated during the process. Do you get complete answers? When you reach out with a message, do you get a prompt response? Does the lender behave as if your loan is important to them? You do have to hold up your end. Everything you expect from the lender in terms of their service you need to reciprocate by providing information they request in the same manner they do. The goal is to work through the process cooperatively, so that the loan can be funded as quickly as possible.
In this article about cash flow and the importance of keeping healthy cash levels in any business, I want to review a sale and leaseback agreement. I closed a loan for a customer that provides an excellent example of how to use equity in your company assets to provide a better cash position and increase cash flow. So I thought I would summarize the deal to explain how this type of transaction works. The customer has a healthy and profitable business. He provides mobile crushing and screening services for construction companies and government roadworks divisions. In six years he’s built the business to more than $1.2M in revenue. He estimates that over that time he has purchased over $1M worth of equipment as well. Because he is responsible for every part of the business, he fell behind on certain items, mainly his bookkeeping. This put him in a position where he was paying $12,000 per month on equipment loans. He also paid $1200 per month to the IRS for back taxes. He had several large contracts coming up that would take up to 90 days to collect payment. This caused a shortage of cash to move forward. One thing he did well was take care of his equipment. We did a site inspection and found all of his large equipment – which included screeners, crushers, excavators, and loaders – to be in excellent condition. Some of the equipment needed upgrades. Some of it was owned with no loan on it. We performed a valuation on his equipment and provided options for buying the equipment and leasing it back to him. I set up a sale and leaseback agreement that will pay off 3 of his current equipment loans and provide him with an additional $50,000+ in cash. We are also reducing his monthly payment by more than $5000. He now has the cash to perform the upgrades on the older equipment, thus extending their useful life, and cover the initial expenses of performing the work on his new contracts. At the end of 90-120 days he will have increased his net monthly incoming cash flow by nearly $8000. This insures a healthy liquidity position for him moving forward in addition to increasing his profits.
Most of the boom truck financing customers I speak with have become a bit fatigued. Hours of preparing financial statements and projections, writing out a business plan, and filling out applications have them worn out. Especially since they can’t find a lender willing to finance their equipment purchase. They’re about to give up, forgoing growth opportunities to spare themselves further frustration and dejection. I’ve found one of the primary reasons for this is that most business owners are not aware that there are options to borrowing from a bank. Or if they are aware, they are reluctant to use a private lender. Following is a basic explanation of how private boom truck financing programs are designed to work through, or around, borrower problems that prevent banks from approving a loan. One of the first killers of loan approvals is poor credit. Banks think borrowers with credit issues are too risky. One solution to this is a specialized collateral lender. A private lender specializing in boom truck financing is concerned with the value of the crane more than borrower credit. They can lend against cranes with good value despite credit issues. The second loan denial reason is lack of collateral. Banks reduce risk by insuring the borrower has assets to liquidate to repay the loan should the borrower default. Specialty boom truck financing lenders can fund a purchase if the crane meets their value requirements and the buyer can contribute some cash to the purchase. The borrowing business does not need additional assets to satisfy collateral requirements of a traditional bank. Banks are also hesitant with newer or start up companies. The lack of history creates a perception of higher risk, as the business has not proven it can last. If the business owner has experience working with crane equipment a specialty lender can help.