Loans

Discussion in 'Lawn Mowing' started by scott015, May 31, 2001.

  1. scott015

    scott015 LawnSite Member
    Posts: 37

    are business loans a good idea? I dont know much about it. Say I got a $40k business loan (truck + equip) once I got on my feet in about a year...is that hard to qualify? and does it count against MY credit. I know if I am late or neglegence....but I mean as far as if I wanted to go out and buy my own house or car later....does the $40k borrowed affect what I can qualify for myself? you know what I mean? but mainly wondering if it is hard to qualify for...I know if I were a minority and wanted to open a nail salon or donut shop, it would be no problem....
     
  2. Guido

    Guido LawnSite Silver Member
    Posts: 2,085

    But Your not! ;) Yes its extremely hard to get small business loans from banks, especially anything close to the amount your talking and up unless you are established, have a good business plan, and can show all your income that you'll use to pay back the loan.

    Check with the SBA on programs they may offer.

    Good Luck, and again, be careful!
     
  3. ScottH

    ScottH LawnSite Member
    Posts: 60

    I've seen several posts covering various aspects of you effort to start a new business. Most have suggested that you take some time and develop a "Smarter"- more thought out strategy. The same applies to obtaining a loan from a bank.

    I worked for 10+ years with a commercial bank dealing with lending to business' from startups to 15,000,000 annual revenue companies before switching to an outdoor power eqpt dealership.

    I'm sorry to say that obtaining a $40,000 loan the 1st year out of the shoot will be very difficult. And, yes, for awhile it will count against you, even if your never late, in terms of being able to borrow for personal needs like vehicles and houses.

    You will be moving from a stable income to an unstable income stream in a bank's mind. And, if you find one that will work with you, you will have to be able to answer the questions that you've been asking here to the bank's satisfaction.

    A bank looks for documented "profits" from your new venture( which you don't have as yet) to determine how much they will be willing to lend. Even some rather sizeable companies with good histories have problems when they need to borrow amounts which require them to do better profit wise than they have in the past.

    As someone else pointed out. You may have a good opportunity to go part time at your family business and allow you to make a good showing on the lawncare venture. I would keep everything above board, keep good records, and yes pay taxes.( Sorry, but to get a bank interested you will have to show profits) Also, get good advice on the business management side, ie talk to a good accountant. Also, a good attorney. Although, initially the attorney stuff should be very minimal.

    While the rewards of a successful venture can be very great financially and personally fulfilling, the downside is that you're on the hook for everything. And, referring back to keeping your eqpt costs down with used stuff, consider what might happen if you did get a 40000 loan and 3 or 4 months later decided it wasn't working. Expect to sale the eqpt for significantly less than its really worth and probably much less than you owe on it. The bank however will still expect monthly payments to be made or the loan paid off. Worse yet, they would have the right based on their documentation to demand payment in full if you took out a business loan and then didn't continue in the business.

    I could go into many other areas which you should consider like business plans, budgets, etc but i'm afraid this may already have many people comatose out there.

    I will offer some thoughts on where to get money though. You could consider lease/finance programs for eqpt, though that;s usually expensive rate wise.
    Credit cards are another avenue. they have relatively low payments and are very flexible. USE CAUTION WITH BOTH THE ABOVE

    Another method may be to either partner with or borrow from a family member if they are well enough off. Make sure you both discuss it fully and understand who does what. i would personally recommend a loan if you choose that route. that way as long as you make payments as agreed they should be happy and leave you alone.

    Don't think that I'm trying to talk you out of anything. Just know what your getting yourself into: Both the good and the bad.


    Someone once said " if you dont shoot for the sky you may not get off the ground" or something like that.

    Anyhow Good luck
     

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