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Here is what we know!

Updating excavation equipment is favorable when wishing to increase the efficiency and quality of your fleet. 

From a lending perspective, earthworks equipment represents an outstanding collateral value because of their long life and strong resale value.

Summary: Underwriting for excavation equipment and earth work equipment should be relatively easy to finance with good credit.

Let’s unpack the different lending options, structures, and rates, available for various credit composites when adding to a fleet.

About Your Author; Doug Fuller | 816.423.8021 | dfuller@slsfinancial.com

President of SLS Financial, an accountant, former Board Member of one of the safest banks in America, and owner of multiple businesses.   

For more than 30 years he has assisted buyers and sellers of equipment with competitive finance and commercial lending programs.

Preferred Financial Services Programs

Your Bank may provide financing for excavation equipment (however, not usually lease financing). A bank may also (but not always) require a larger down payment, albeit sometimes with lower interest rates, than Commercial Equipment Lenders.

Wells Fargo has a robust equipment financing division ~ we know because they, in part, underwrite us (SLS)  https://www.wellsfargo.com/com/financing/equipment-financing/ and we offer their programs along with our own.

Next, Dealers often will provide financing options from lenders that have been vetted by them. These are usually reliable options.

Other commercial lenders ~ However, I do not recommend choosing a random online lender as often – you simply don’t know what you don’t know. 

At the end of the day … you may wish to contact us (www.slsfinancial.com) SLS Financial Services for lending, guidance, and direction.  

For research into what pieces of equipment are the right choices to update, or add to your fleet, check out:

http://www.cat.com/en_US/products/new/equipment.html

Financing Structures for Excavation Equipment

First ~ Let’s start with the typical and popular structures!

A 60-month term is very common and may be structured as a lease with a 20% TRAC Lease (simple language definition: a lease with a 20% of original cost end of term commitment) or a 60-month loan with a 20% balloon. The math (payment) on both is usually similar although the impact of depreciation might adjust the lease payment.

Lease and Loan terms can be as long as 84 months in some cases. 

Most commercial lenders provide terms from 24 – 60 months for both Leases and Loans.

Leases may be found in the following forms:

            Finance Lease – examples of which are a $1.00 purchase option (or some other bargain purchase option) and are treated as a loan for federal income tax and accounting purposes.

            True Leases – do not contain a bargain purchase option ~ yet may still contain a purchase option. 

            TRAC Lease – Terminal Residual Adjustment Clause. An IRS provision for some titled vehicles that allow for the expensing of payments when properly structured.

http://www.leasing-101.com/2012.11Writ/TRACLeaseAnatomy.pdf

Is a loan or lease preferable? The answer is usually easy to conclude if we have the proper company financial variables. Financial information, like taxable income, liquidity, and the total of other equipment acquisitions in the year of acquisition are each an important part of the analysis. 

IRS Code Section 179 is a very important consideration in this analysis.  https://www.irs.gov/publications/p946/ch02.html

Next, let’s discuss credit quality.  

Here is how most business lenders will underwrite a commercial credit application. 

 

The credit evaluation process

Business credit providers have been well grounded in the 5 C’s of Credit for decades. And that foundational approach to credit remains today. The Infographic on the left gives a basic explanation of the key components that go into the underwriting process.

Think of the credit process as a big sliding scale. If a business has strong equity in the asset to be financed, more consideration can be given to personal credit challenges. If there is a long time-in-business and strong personal credit, more consideration can be given to equipment that has poor secondary market value or has little money invested up front. Each lender evaluates all of these criteria and determines their own requirements, exceptions and limitations.

At SLS, we take the entire credit picture in account when underwriting story credit transactions. Furthermore, we’ve never forgotten the owner behind the application and believe in a simple, transparent process. Should you have questions about our approach, we’d welcome a conversation any time.

 

Rates ~

Please know that there are usually compelling rate options for A, B & C credits when acquiring this equipment class. 

As a general rule … the lower the risk perceived by the lender the lower the rate. 

  • For A Credit rates will usually range from 3.9% to 7.9%
  • For B Credits rates will usually range from 8% – 12.5%
  • And rates for the C Credit composite will usually be higher than these yields of course.

Also, it is noteworthy that Pre-Owned Drywall Cranes may also be readily financed. Rates for pre-owned cranes may be slightly higher … all else being equal.

 

Credit information needed / Underwriting

 

Depending on the lender and, of course, the amount (dollars) involved, there are generally two approaches to underwriting financing for Excavation Equipment.

Application with financial disclosure (common)

  • Credit Application
  • Personal Financial Statement
  • Your most recent company financial statement. (balance sheet / profit & loss)
  • Last two years’ personal and business tax returns. 
  • Last two years’ end-business financial statements.
  • Equipment proposal or invoice.

Application only ~ or limited financial information disclosure.

  • Credit Application
  • Bank Statements
  • Equipment Proposal or Invoice
  • Other ~

Need More Information? Call: (816) 423-8021

or

Would you like to apply online? Click below!

Since 1986 SLS Financial has provided uncomplicated lending solutions for all types of assets. 

Contact us anytime to begin building a professional relationship with an industry leader.

Doug 816.423.8021

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As we’ve covered in a previous post, the real estate market in Kansas City is robust right now, and buyers and sellers are rightly looking to capitalize on the opportunities this brings.

While there are many ways to purchase real estate, there is one option that gets overlooked: Rent-to-Own.

While these kinds of properties can be rare, it’s good to know the basics if you are seeking this method of acquistion.

Rent-to-Own agreements come in two forms:

  • Lease Agreement with Option to Purchase
  • Lease Agreement with Purchase Agreement

In a Lease Agreement with Option to Purchase, you will often pay a fee (or sometimes put up collateral) at the beginning of your transaction for the OPTION to purchase the property in the future.

From our perspective, all things being equal, the following may be the superior solution.

In a Lease Agreement with Purchase Agreement, you set up your purchase at the beginning, using either a fixed purchase price, or a plan to close with a future appraisal.

Take a look at a related article on Trulia for more information.

If you plan accordingly, with the appropriate agreement, you might be able begin your journey to property ownership, even if you do not have the cash for a down payment.

Keep your eye out for these overlooked method of acquisition during your search. If you have any questions on how you can use Rent-to-Own agreements in your real estate endeavors, feel free to reach out! Call Doug Fuller for more information:

Doug Fuller

dfuller@slsfinancial.com

816.423.8021

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Purchasing capital assets is an integral part of every business. Whether the purchase be for a replacement, or for future sustained growth, you have put in the time researching, testing, and comparing countless pieces of equipment to find the one that best fits your business. Now here comes the fun part… the actual transaction of purchasing the equipment.

There are two primary ways to purchase equipment: cash or financing. Perhaps you want to avoid the headaches of dealing with the bank and going through the long drawn out process of financing, so you purchase the equipment in cash. There is nothing wrong with purchasing your equipment in cash. However, there are many benefits of financing equipment. Additionally, financing equipment with a reputable financial services company is a simple and easy process. Within 48 hours, you can have the equipment purchased and contributing to your bottom line. Below is a step-by-step guide to lead you in the process of getting your equipment financed.

 

Step 1: Find a commercial lender.

Seems simple enough. However, there are hundreds of financial lenders to choose from. Picking the wrong one will exponentially increase the hassle. Not only that, but fraudulent businesses have unfortunately been known to target the financial services sector. Do your research, google reviews, ask your dealer for recommendations, and avoid sending any up-front payment charges. The best advice? Pick a company that has been in business long-term, has the experience, and has many satisfied repeat clients. Finding a trusted lender is the most important part of the financing process.

 

Step 2: Supply the necessary documents for underwriting

Many finance firms provide “app only” offers for their customers. However, you should be wary of application only packages. Long story short, a typical credit package includes:

  • 2 years most recent business tax returns and/or personal tax returns
  • Business Financial Statements (current balance sheet, income statement, & cash flow)
  • Personal Financial Statement
  • Application
  • Equipment Invoice

Ultimately, the goal is to use this information to paint the full credit package. Oftentimes, additional information allows lenders to offer you better options (less money down, lower rates, longer terms, etc.).

 

Step 3: Wait for a credit decision

Once you have sent in all of your credit information, all you need to do now is relax and wait! Typically, a successful financial services company will provide you with a credit decision within 24 hours… Sometimes even sooner!

 

Step 4: Work out payment details

Once you have accepted an approval, the lender will typically ask for the equipment dealer’s contact information. They will use this information to work out all the payment details in advance, so all you’ll need to do is pick up the equipment (or wait for the scheduled delivery).

 

Step 5: Make regularly scheduled payments

Pay off your equipment as agreed upon in the approval. Most lenders will accept ACH payments or checks. A good lender will check back with you after the first month just to make sure everything is running smoothly and to see if you have any additional questions.

 

Need additional resources? We can help! With over 30 years of experience, we know the financing process front-to-back, and we’ve helped many businesses grow with our expertise. Call SLS Financial and we will gladly help guide you through the financing process.

Doug Fuller

dfuller@slsfinancial.com

816.423.8021

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If it is negative online information … It’s not us!

We are SLS Financial / Security Leasing Services, Inc. and S & P Financial Services, Inc. headquartered in Kansas City, Missouri – www.slsfinancial.com

 

We are a commercial / business lender and have zero affiliation to any other SLS company.

We have no known negative reviews online or elsewhere for that matter.

 

We have 32 years of successful operations with highly satisfied customers in most every state over the years.

We have been a nominee for the Kansas City Chamber of Commerce Small Business of the Year nearly every year for the past 20 years … along with other awards and recognitions.

 

We have professional relationships that date to the early 1990’s & before with the following outstanding organizations:

 

Missouri Bank & Trust:  www.mobank.com  ~ Our president has served on the board of directors of this institution. (Call Charley Benson EVP ~ 816.881.8255)

Platte Valley Bank of Missouri:  www.plattevalleybank.com ~ SLS Principals have a banking relationship dating to 1989. (Call Kelly Parkhurst, EVP (816) 858-5400)

Wells Fargo:  https://www.wellsfargo.com/com/financing/equipment-financing/

 

Other references are available upon request.

 

We are proud of our STERLING reputation and in case you are considering doing business with SLS Financial Services in Kansas City, Sioux Falls, or elsewhere around the country, please rest assured that we are focused on satisfaction.

 

Call us confidently any time for your commercial lending and business lending needs.

Doug Fuller

Doug Fuller

dfuller@slsfinancial.com

816.423.8021

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If you are a professional real estate investor / renovator you may find that our commercial lending tools are of unique value to you.

Terms from 6 – 12 months with rates starting at prime plus 8; Flash Funding is available too!

 

For more information ~

 

Nicole Hall

Tel. Direct (816) 605-1204 e-Fax (866) 821-2439

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Here is a good explanation of Hard Money lending from Wikipedia:  https://en.wikipedia.org/wiki/Hard_money_loan

A hard money loan is a specific type of asset-based loan financing through which a borrower receives funds secured by real property. Hard money loans are typically issued by private investors or companies. Interest rates are typically higher than conventional commercial or residential property loans, starting at 7.7%,[1] because of the higher risk and shorter duration of the loan. Most hard money loans are used for projects lasting from a few months to a few years. Hard money is similar to a bridge loan, which usually has similar criteria for lending as well as cost to the borrowers. The primary difference is that a bridge loan often refers to a commercial property or investment property that may be in transition and does not yet qualify for traditional financing, whereas hard money often refers to not only an asset-based loan with a high interest rate, but possibly a distressed financial situation, such as arrears on the existing mortgage, or where bankruptcy and foreclosure proceedings are occurring.[2]

Hard Money is a term that is used almost exclusively in the United States and Canada where these types of loans are most common. In commercial real estate, hard money developed as an alternative “last resort” for property owners seeking capital against the value of their holdings. The industry began in the late 1950s when the credit industry in the U.S. underwent drastic changes.[3]

From inception, the hard money field has always been formally unregulated by state or federal laws, although some restrictions on interest rates (usury laws) by state governments restrict the rates of hard money such that operations in several states, including Tennessee and Arkansas are virtually untenable for lending firms.[4]

The hard money loan mortgage market has greatly expanded since the 2009 mortgage crisis with the passing of the Dodd Frank Act. The reason for this expansion is primarily due to the strict regulation put on banks and lenders in the mortgage qualification process. The Dodd Frank and Truth in Lending Act set forth Federal guidelines requiring mortgage originators, lenders, and mortgage brokers to evaluate the borrower’s ability to repay the loan on primary residences or face huge fines for noncompliance. Therefore hard money lenders only lend on business purpose or commercial loans in order to avoid the risk of the loan falling within Dodd Frank, TILA, and HOEPA guidelines.

Because the primary basis for making a hard money loan is the liquidation value of the collateral backing the note, hard money lenders will always want to determine the LTV (loan to value) prior to making any extension of financing. A hard money lender determines the value of the property through a BPO (broker price opinion) or a independent appraisal done by a licensed appraiser in the state in which the property is located.

  • Asset-based loan — a similar type of commercial loan based on real estate, indicating the loan will be based upon a percentage of the properties appraised value, as the key criteria.
  • Private money — refers to lending money to a company or individual by a private individual or organization.
  • Bridge loan — a similar type of commercial loan based on real estate.
  • Non-conforming loan — a loan that fails to meet bank criteria for funding.

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Perhaps you’ve probably been a little underwhelmed by how little some finance alternatives may know about your business. Sure, they can talk about blended interest rates and residual values or even operate a funny calculator that uses something called reverse polish notation. Yes—that’s really a thing. But what they can’t seem to do is “get” you. Because of this, business owners try to figure things out on their own and stop seeking advice. Well… stop that. You’re looking in the wrong place.

One of the hardest things about being a small business owner is feeling the overwhelming requirement of being the Jack-of-all-trades. The thing is, Jack was a master of none. And most mid-sized business owners will tell you they grew beyond small business status—by realizing they can’t know it all and were willing to seek advice from experts. This may never be more true than in matters of finance.

Once you face the need for real advice, it will be most productive to spend your time finding the right experts rather than spending your time trying to figure it out on your own. And sure, this may involve lots of time up front, talking to finance partners about their real experience in your type of business. Yet, it will be obvious, quickly, how much they really know about the challenges you face in your type of business.

Once found, this partner can open doors for you that were previously unimagined. They can guide you through real ROI conversations because they know your equipment or talk about equipment life cycles and how best to position your cash flows. They can talk to you about tax benefits your accountant may even have to look up. They can position you for success with financing whether a young business or seasoned pros.

At SLS, being a real partner that provides business lending for American Enterprises is what we do. And helping people achieve more in their business is in our blood. Feel at ease, ask for help and always know that we keep things uncomplicated. Let’s talk!

Contact Doug:

Doug Fuller

816.423.8021

dfuller@slsfinancial.com

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We think there MANY reasons to use equipment financing. We’ve curated multiple lists in the past, but we think this is our most complete list yet. Take a look at our top ten reasons to use equipment financing.

 

  1. Free up cash for essential business operations

You may have heard the old saying, “Don’t spend all your money at once”. This popular childhood saying can be applied to your business as well. Purchasing new equipment can be an expensive endeavor. However, by utilizing financing options you can leave money for other aspects of your business whether it be hiring a new employee, stockpiling material, upgrading other equipment, or hedging unforeseen business risks/expenses. Whatever your reason, it is always smart to know how much operational cash is required for your business.

 

  1. Expand business capabilities by buying all essential equipment

Have aging assets? Instead of replacing only one piece of equipment, financing options allow you to replace all your old equipment. With financing, instead of paying $30,000 and only getting the benefit of one new piece of equipment you can put down 10% on three pieces of equipment and save the rest for day to day operating expenses.  This allows you to benefit from all the new equipment without breaking the bank.

 

  1. Bundle all costs associated with your new equipment into one easy to manage, fixed payment solution

Business owners often overlook costs associated with their new equipment. Installation costs, shipping costs, taxes, & software upgrades can add a substantial amount to the original price of the equipment. However, by working with an experienced commercial lending firm, that understands your industry, these headaches can be avoided. Financing firms provide the tools you need to bundle all associated costs into one simple easy to understand monthly payment.

 

  1. Procure the latest equipment to maximize the bottom line

Equipment is expensive!! Why short yourself by shelling out thousands of dollars to get the base level equipment, without the features you need? Financing options can allow you to purchase the equipment you really want. Whether it be the latest in GPS technology, 4k video, longer warranties, or any other extra feature that makes work easier; it can be affordable with financing tools catered to you.

 

  1. Avoid maintenance costs and other risks on updated machinery

Stretching that old piece of equipment one more year could be costly. Unexpected breakdowns can have a huge effect on profits. Not only will the machine require repair costs, but the breakdown can bring a stall to the whole operation.  Aside from the costly repairs and delay in production, using outdated machinery could also put risks on your most important assets, your employees.  Using machinery for longer than its intended life span could pose safety risks to your employees.  Having updated equipment reduces unexpected breakdown costs and keeps your employees safer.

 

  1. Have the necessary equipment for expansion

One of the most frustrating parts of business is not having the capabilities to fulfill demand.  Avoid costly upfront equipment costs when expanding your business. With financing, your company can have the necessary equipment to fulfill increasing demand for products/services.

 

  1. Payment options to match your cash flow

Does your industry have uneven cash flows based on seasonal business cycles?  Take the guess work out of matching fixed payment to uneven cash flows.  Financing tools can match your cash flow with payment options. Simply put, have higher payments during peak season and lower payments during the slower months.

 

  1. Put your money to work by increasing your ROI

Internal rate of return is an important metric in measuring the profitability of your business. Increase IRR by using financing to obtain capital equipment. See example:

A $100,000 machine will increase cash flow by $40,000/year for the next 10 years.

Option A: Purchase the machine in cash

Option B: Put 10% down finance the rest on a 48-month agreement ($30,000/year in payments)

  1. Take advantage of Section 179 tax write-offs

Equipment can be more affordable than you think.  Take advantage of Section 179 and make capital equipment costs cheaper.  Section 179 allows businesses to write off the full amount of equipment purchases (up to $500,000) in the first year of purchase. For example: if a business purchases a $100,000 piece of equipment in 2017 they can save an estimated $35,000 (in a 35% tax bracket) by writing off the full cost in the year purchased. With a well-structured equipment finance agreement in conjunction with Section 179 deduction could literally put money in your pocket. You could purchase that same piece of equipment for $10,000 down and still be eligible for the $35,000 tax write off in 2017.

 

  1. Keep the equity of your business, use debt financing

One huge advantage of using debt financing is that once the equipment is paid off it is 100% yours. This is much different than selling equity to buy equipment. By selling equity someone will always own a piece of your assets and a piece of your profits.  It is true that equity financing does not require monthly payments. However, in exchange, a portion of your profits will be split… perpetually.

If you would like to discuss how you can use financing to help grow your business feel free to reach out below:

Doug Fuller

816.423.8021

dfuller@slsfinancial.com

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As I have been driving in nearby counties – running errands, visiting family and friends – I have been noticing parking lots of various businesses (like gas stations, for instance) sporting new 4-wheeled additions to their paved properties. Even more curiously – they smelled delicious!! Curious as to what was wafting my way, I found a few great new food trucks that have enjoyed my repeat business. A few recent trips have been filled with mobile masterpieces as well, and I began to wonder if there was something to this increase.

An article on The Economist has a couple charts that have been tracking the growth of food trucks in the United States since the mid-2000s and have found that the industry on the whole is growing. There are particular hot spots, like Portland, OR for instance, but even in places with tighter restrictions, the growth has continued. With the popularity comes more visibility – reality television has been jumping on-board, and food truck pods are popping up in some of the bigger cities in the country. It’s a great time to get in to the industry, but you have to make sure you have a plan in place before you roll out.

Food trucks have many different expenses, including the actual ingredients for a start! If you use up too much of your operating expenses on your truck, well you’re only filling out half of what makes food trucks “FOOD trucks”. Financing can be a huge help in getting your costs down to manageable monthly payments so you can have more room to improve your recipe for success. We know what the landscape is like out there for your industry and we’re here to help. We’ve been working with food truck operators like you to help them get their start, and we can help veterans of the trade upgrade to better equipment to stay ahead of the game. If you’re looking for a lender that sees the story behind the application. Look no further. Give us a call, and let’s see what we can do – 816.423.8021

Doug Fuller

dfuller@slsfinancial.com

816.423.8021

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