Off Road Equipment
Saturday, January 16th, 2010
Truck loan and leasing for start-ups and over-the-road owner-operator
Owners usually are interested in four key areas underwriting, When a truck equipment leasing application:
A) Credit history of the applicant (s). Landlord wants to be sure that the guarantor a history of the company pay their bills and that it no liens would have priority if the tenant encounters some financial problems and can no payment.
2) Time in business (TIB). The landlord is responsible for at least two years in business, is looking for so that they confirm that there is a sufficient monthly income from the business generated to create payments on the truck (n).
3) cash reserve in the bank. Again, the landlord is concerned about the ability of tenants to reimburse Payments should be dipped in it the source of income. Owners generally to bank reserves consistent that at least in the amount of monthly payment.
4) Enter You are the truck. There are all types of work trucks. Without naming all kinds of trucks, and lease may be funded, it is sufficient to say that ANY over-the-road tractor / Trailers that are risky to finance for the lessor. Why? Simply put, the essence of being on the road every day make long hours on the open roads it risky for a landlord to finance the purchase. The risk of the truck involved in an accident is greater to the lessor. While the truck is always assured there is always a greater risk that the equipment because of the dangers of the open road.
Memo: Depending on how conservative the technical parameters Landlord, it can other screening elements that are considered for a truck-leasing application. However, these considerations, the four most important for an owner-operator need to understand, / before applying for lease financing deal.
Let us consider each of these four elements underwriting and determine what, if any, can the owner-operators to do off-set any negative derogatories.
A) Credit history. Regardless of the nature of the company, this is an important, if not the most important point may lead to the new truck companies have rejected. This credit hurdle must be achieved before any hope of lease financing can be satisfied be. However, there are ways to off-set a low score on credit.
The simplest and most secure for the lessor of such cooperation have guarantors, the business secure. Some owners are more specific about who can be the co-guarantor. Some will be a co-guarantor under the truck industry want, with a success story. Other are less specific, and who has a good credit score and is willing to secure the cooperation to take over the financing.
Note that some landlords a very mechanical scoring method to determine whether or not all guarantors have sufficient credit to qualify depth. Other landlords are not so concerned about the hard score (FICO), as they are about the history behind the guests.
So, if rejected, try another source leasing. Do not overlook alternative sources for the lease financing. There are other sources than banks or captive leasing arm of the truck dealer. These alternative sources are becoming more flexible in their underwriting Parameters. There are sources that are even leasing financing of private party transactions.
2) In time business (TIB). Without adequate TIB, landlords have no history, to give them a warm fuzzy feeling that it is paid. So, in addition to the truck, the lease is funded, the landlord is (that) will be for additional collateral to secure a view to financing.
This is often on real estate (as the safest form of credit will be). Others accept equipment that is 100% in possession of the tenant is. But keep in mind that leasing companies often limit the Loan to Value (LTV) to $ 0.25 against the dollar on used equipment.
Some landlords will accept individual entrepreneur with two years in business, if it can demonstrate, with TIB 2 years Schedule C's from their tax returns and the owner is ready to re-organize as a Limited Liability Company (LLC).
3) Cash Reserve. Since the forwarding is new, it is likely to be little cash reserve in the bank. It are exceptions, as some start-up carriers are well financed, and the landlord has the expected requirements in this area. In the absence of the necessary economic resources, is the owner (s) or co-guarantors must have sufficient reserves in their personal checking accounts.
Some landlords who are less conservative, sometimes to accept personal reserves off-set lack of economic reserves. This is one of the reasons that have to guarantee personally guarantee the lease financing.
4) Enter the truck. There are no fixed off-set for an over-the-Road Truck risk, other than the three above-mentioned areas. The more the other three points, the more apt it is the lessor, the start-up is approved, over-the-road owners and operators of trucking companies. Furthermore, there are some conservative landlords that the new trucking companies are at least organize as a Limited Liability Company (LLC) to further protect the company's assets.
In summary, Start-up owner-operators, over-the-road carriers can lease financing to get their buy trucks. However, they must concentrate on these four areas approved and on land, the strength of each of these key elements to strengthen their chances of ever. If weak in a certain area, in other areas, very strongly, to off-set that weakness. Regardless of the landlord, who will ultimately fund this type of business, the tenant is not going to interest rates because of the associated risks enjoy.
About the Author
Robert Jacobs is a business financing consultant. Core competencies include heavy equipment lease-financing, invoice-factoring and structured financing. He can be reached at 800-313-6433. More information available at… www.cashxchangegroup.com
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