Lending for a new Corp. Where do I turn?

We have just recently finalized paperwork for a new corporation formation. Just curious where we can turn to for business lending that is the easiest and cheapest way to go? We really only need lending of 100-200K. I know we will be fighting an uphill battle due to being a new business without much history. I was considering just applying for a corporate credit card and buying business assets that way until I can establish a better history. Suggestions?


I have heard that the SBA can be a serious PITA to get money and may not be worth messing with. Is there other creative funding I need to know about? This will be a rather short term deal but the problems really comes in the first few months of getting new machines on line and making money to pay the new bills. Does one generally go in with a sizable capital acct to keep things paid or can you request additional funds for this or possibly just a payment deferral?

What do you need money for? Are you starting from scratch or do you already have some business going and just need to make the jump from a garage outfit to a larger operation?

I did an SBA loan in 2002 to make the jump to a larger building. I bought a building with two friends and now lease it back to the company and the SBA was the way to go for us, it involved quite a bit of due diligence as far as 3 years tax returns, proformas and the typical business plan stuff - but in reality, unless you show that kind of due diligence, you shouldn't be borrowing that kind of money anyway (remember Freddie and Fanny?)

We started our business on $10k worth of my savings - kept the bills low (I moved in with my inlaws and sold my house) - old cars, work out of a rented garage, etc. until the business could justify expenses and had steady customers that wanted us to do more. . . then we made the move to a larger building and borrowed money to make it happen.

Tell us what stage you are in as far as the business goes (just starting, expanding, etc.) and that will help give perspective on how to answer your question.

Business is less than 1yr old. Machines that are soley owned by the Corp is 1 Haas VMC and a Mori SL-15 lathe and all the other little things that go along with a machine shop like compressors, tools, saws, etc. Money would fund another new machine. WE are in process of building a building for home/business use so traditional lending could get tricky there. I would say operating but new. Corp is BRAND new. I have contracts in hand and more available if I can fill them. Work is NOT the problem, have the machines and space is.

Other machines and tooling is all paid for. Business really has no liabilities right now.

Anyone had experience with any of these set ups? (there's are a few out there, this is not the only one) It could be an interesting way to get a better return than banks these days....but what is your recourse if the borrower defaults???? The concept is interesting.

https://www.lendingclub.com/info/how-it-works.action

smt

What business segment are you in? If you are making farm or ag related equipment your local Farm Credit institution should be able to lend to you. They may even be able to help if your plant is in a rural area or small town. There are 6 in Kansas, the one you need depends on your location.

Banks require collateral. In the past you could expect machinery and equipment to be utilized at 60% of appraised liquidation value. In today's environment, they may allow even less.

Expect to sign a personal guarantee for any outstanding balances.

The number one thing the banker should look at is your repayment capacity. If you can show you have twice as much repayment capacity as necessary, and offer twice as much collateral as the size of the loan (including the equipment you purchase with the loan) getting a loan should be relatively simple.

You may also be able to lease the machine through a company arranged by the dealer or manufacturer. Expect to pay more, but the financial hurdles should be less.

Well, we have done a few ag jobs but mostly we do aero work. Not sure what they require or how much ag business you must do to qualify for ag lending.

What is the real question?

Are you lookin to finance equipment?

A building?

Or [what is known around here as] an "Ag Line". We have called it that for so long that I kant think the proper name for it? I guess just "Credit line"?


If equipment - I would look to USBank - Machine Tool Finance divission. (I posted a link in a finance thread just a week ago.)


Wells Fargo is known for their credit lines AFAIK. (Never dealt)


As I understand it - you have been in business for 1 yr and everything is pd for. But now you incorporated - thus have a new name? (At least to some degree...) You should still git credit for the past as well as your personal record - as you will hafta "personally guarantee" everything enyhow.

1 yr is awfully little, but it sounds like you have a favorable history...


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Think Snow Eh!
Ox

Sorry Ox, I am really leaving out many details. In general, we have been in the machining business for 4 yrs, we moved into another market mid '07 where we could see rapid growth potential. We are now being presented with parts we cannot make so will need a machine to do that. As far as ability, we will not be the fastest to get up and running but we have vast computer background that helps us in the machining world. We also are fairly diverse in markets and have 1 employee.

I am not really sweating an expensive machine because of our debt/income ratio and we will also outside back up funding, "the wifey" ,if needed. Personal bills are all paid other than 40K on the house.

We recently just incorporated for taxation purposed. As a new corp, this may present a challenge getting financing.

The building is another story and is basically going to be personally owned and leased back to the corp. Funding on the building will be personal with home equity and loans but would be nice to use business funds on it too to help build credit for the business.

OK then - 4 yrs it is!

It won't matter that you just Inc.'d. Your the same folks, running the same business for the most part eh?

I like that! Put the Wifey up for colateral. Who'da thunk'd it!

Makes perfectly good sence when you look at it. If your shop goes down the tubes, you kant afford her enymore enyways. You know - I think your banker(s) will look at that as a responsible approach - and will deduce that you have given much thought to your upcomming situation and are planning on being as responsible with their funds as possible.


Buddy - you aint got no troubles!

Well going from low overhead to high overhead real quick could be an issue as you don't have much history for paying for the big ticket items yet... But I would think they would be tripping over themselves to git in bed with you. (They may require a pic of the collateral tho? )

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Think Snow Eh!
Ox

http://www.usbank.com/cgi_w/cfm/com...ts_and_services/equipment/machine_tool_ps.cfm



I understand your trying to be vague. Not wanting to give out too much info on the net for all eyes. I can go there. I doo the same sometimes. Trouble is - it is hard to hep when the the question is so vague...

Try my chumms at the link up yonder for the machines.


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Think Snow Eh!
Ox

second on us bancorp

I agree with Ox on US Bancorp machine tool finance for machine tools. These guys know the industry and the machine tools and are major players with the equipment builders. A lot of IMTS shows I have bought equipment at had a US representative available for paperwork filing on the spot assigned in a particular booth or area.

They, and everybody else, will probably make you the personal guarantor of the loan even though your business is a corp now you will still be responsible if the corp defaults.

Of all the big banks left they are reported as the most stable too. Your terms and interest will be individual to your size, position, and potential risk.

Also be sure to take advantage of the section 179 or similar equipment purchase tax deductions that will let you take, in some cases, up to 400k write off the first tax year the equipment is placed in service. That means if you can get your new machine operational by 12/31/2008 and you showed profit this year it could spell a major write off.

I expect removing this "motivation to expand business and create jobs" tax break will be one of the first hack's the new guy takes to help spread your wealth. This incentive to risk your butt and expand may not be there much longer in the tax code since you have to help out all those less motivated bums who won't pull their own weight, unless its to pull it off the couch to go down to the post office and get their "fair" share of your HARD earned money.

Sorry for the rant but you and a lot of small business owners have a tough enough row to hoe without some politician walking in front of and behind you planting weeds.

Did anybody else here try getting a lease through US Bankcorp on that Monday that the House rejected the bailout plan?

They were all ready to go the previous Friday afternoon. Couldn't get a call back, couldn't get a person on the phone nothing, my salesman couldn't even get anybody on the phone. Even offering up 25% down, couldn't get a lease that week, I hope its better now.

And its not like we are bums, the bank accounts showed that we were rolling over the money to pay for it in a month, and had the cash to put down 50%. Credit scores of 719 and 734, not great but certainly not bad.

The money is not rolling like it was a few months ago, all you had to do was fart into the phone to prove you were alive and a machine showed up on your doorstep a week later.