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Old 03-13-2014, 05:50 AM
ryan41 ryan41 is offline
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2 year in business - Tax question ?

This is my second year in business. I am looking to purchase a used 2500 or 3500 truck for around $20k. I haven't decided to go with a regular box or a dump yet, but i know for sure its going to be a diesel! Anyway, i have a OK credit score but what i am concerned with is how much i show for profit. on paper i grossed 47K this year (we mainly just stick to maintenance). Almost triple what i did my first year. My accountant wants to make sure i write off everything i can. I understand writing off business expenses, but i would like to show a little more NET for the bank. He says what i NET is too low for a bank, so it wont matter. How big of a role does the NET income matter in determining if i can get a loan or not? This would be a loan in my name not the business name.

Thanks,
Ryan
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Old 03-13-2014, 06:27 AM
AllAmericanLawnCare AllAmericanLawnCare is offline
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Hey Ryan. It's Mike with All American. It's not always net they look at its your income to debt ratios. Because of the predatory lending in the past they want to make sure this truck you want to purchase is not over a x% of your net income combined with your other debts. Clear as mud?
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Old 03-13-2014, 06:42 AM
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Charles Charles is online now
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Yea it is not up to you. You have to provide(accurately) the information the bank wants. Some want gross and some want net. Some want debt to gross income ratios or debt to net income ratios. Just give them what they ask for according to your tax returns and your debt payments. I think Auto loans are easier to qualify than home loans
They are much stricter now than they were 5 or 10 years ago when so many defaulted on their loans. Yes write offs are great--until you need a loan. Sometimes that can work against you. Just a no win situation. Really can help if you save up a large down payment. That can make you look better to banks

Last edited by Charles; 03-13-2014 at 06:47 AM.
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Old 03-13-2014, 08:50 AM
xclusive xclusive is offline
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My suggestion is go to the bank or dealer and see what they can do for you. A lot of times they will tell you how much you need to put down and how much you can finance based on your credit score. Like whiffy spark said don't buy a 10k POS because it will cost you more in the long run.
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Old 03-13-2014, 03:32 PM
Bryan27 Bryan27 is offline
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Quote:
Originally Posted by ryan41 View Post
This is my second year in business. I am looking to purchase a used 2500 or 3500 truck for around $20k. I haven't decided to go with a regular box or a dump yet, but i know for sure its going to be a diesel! Anyway, i have a OK credit score but what i am concerned with is how much i show for profit. on paper i grossed 47K this year (we mainly just stick to maintenance). Almost triple what i did my first year. My accountant wants to make sure i write off everything i can. I understand writing off business expenses, but i would like to show a little more NET for the bank. He says what i NET is too low for a bank, so it wont matter. How big of a role does the NET income matter in determining if i can get a loan or not? This would be a loan in my name not the business name.

Thanks,
Ryan
They'll likely look at a number of things, go talk to your bank or just call them up and find out what they want, make them earn their paycheck!

Also, don't have a heart attack when you see the terms of the loan they're going to give you on a used $20,000 diesel truck. For a diesel to be $20k it's likely got high-ish miles and has more than a few year on it. Banks are more likely to make a loan on a new truck that's twice the price than they are to make a loan on a 7 year old truck with 140,000 miles on it.
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Old 03-13-2014, 04:11 PM
xclusive xclusive is offline
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Originally Posted by JContracting View Post

My accountant advised to do as much depreciating as possible this year so that's what we did to reduce the net. If you were to save up say $5000 for a down payment on whichever truck you buy, that'd certainly help in the effort to get a loan.
Keep in mind that there is no guarantee the IRS is going to continue with the accelerated depreciation (Section 179) for 2014. I sure hope they do but who knows. Also, when you accelerate the depreciation to get your net closer to zero the banks should be adding the depreciation back in and not count that against you.
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Old 03-13-2014, 07:22 PM
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The OP is asking about a loan and taxes. Not a debate on buying a new or used truck
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Old 03-14-2014, 10:55 PM
shane-pa shane-pa is offline
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Is this your only job? If it is, then it won't really matter if the loan is in your name or your business. It's still your money. Corporation is a little different. The bank will also want to see a balance sheet and possibly a statement of cash flow.
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Old 03-16-2014, 05:55 PM
ryan41 ryan41 is offline
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Thank you all for all the input!
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Old 03-16-2014, 05:57 PM
ryan41 ryan41 is offline
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Originally Posted by shane-pa View Post
Is this your only job? If it is, then it won't really matter if the loan is in your name or your business. It's still your money. Corporation is a little different. The bank will also want to see a balance sheet and possibly a statement of cash flow.
I have been working a full time job during the winter. My hours will go down to 20 or less during spring (evening job).
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