| Imagine this. The year is 2008. The U.S. is in the | | | | a credit crunch, that's amazing and you'd be hard |
| midst of one of the worst housing crises in ages. | | | | pressed to find a deal like this at the bank. The |
| There are more foreclosures than ever and it's | | | | key is to select off lease equipment and you |
| expected to get worse. Two hundred and sixty | | | | generally need only one or two payments paid up |
| or more major mortgage lenders have gone out | | | | front. |
| of business. The mortgage companies that are still | | | | A second option might appeal to business owners |
| in business are suffering at the hand of major | | | | with really damaged credit (scores from 0-620), |
| monetary losses. Mortgage lending is very | | | | but have an equipment need that will generate |
| challenging to say the least. Home values have | | | | considerable income for their company. No matter |
| declined significantly. Millions of people owe more | | | | what credit score a business owner might have, |
| on their home than what a sale would yield. The | | | | he/she can get the equipment they need if they |
| credit crunch started in the home loan market, | | | | have secondary collateral available. In every |
| but has trickled down to numerous other credit | | | | equipment lease or loan transaction (meaning-good |
| markets including auto loans, personal loans, | | | | or bad credit), the piece of equipment being |
| business loans, and equipment loans. The banks | | | | purchased is always part of the collateral and this |
| have tightened up big time. Wait, wait just a | | | | is the same for the type of financing we're talking |
| second. I'm not imagining this. It's reality. So, | | | | about here. The secondary collateral above and |
| you're in the market for some new construction | | | | beyond the new equipment is simply to mitigate |
| equipment, but you have lower credit scores and | | | | the risk of lending to a business owner that has a |
| the bank has turned you down. You say to | | | | credit file that suggests they've had trouble |
| yourself, "what do I do now"? | | | | paying some of their obligations. In the event of a |
| Just because the bank said no, that does not | | | | repossession, lenders fork out a lot of money in |
| mean you don't have options when it comes to | | | | legal fees and losses due to selling the equipment |
| leasing your construction equipment. The first | | | | at discounted prices at auctions. Here is how the |
| option is to buy repossessed equipment or to buy | | | | secondary collateral can help you get your new |
| equipment that was turned in at the end of a | | | | equipment (opposed to just telling you NO |
| lease term (off lease equipment). The first thing | | | | because your credit is poor). Generally, one would |
| that many people might think is-"hey, I can get a | | | | need a little more than a two to one ratio |
| great deal (price) on repossessed equipment". This | | | | (collateral to new equipment). For example, If |
| is partially true. You get an awesome deal, but it's | | | | you're buying an excavator for $50,000., you'd |
| not necessarily the price. There is still decent | | | | need to furnish secondary collateral of about |
| demand for heavy equipment, so generally the | | | | $58,000. The additional collateral can be equipment |
| prices are not slashed like one might imagine. Here | | | | you own outright, real estate, land, c.d.'s, mutual |
| is the sweet part of buying off lease equipment. | | | | funds, and any other non tax advantage accounts. |
| There are one or two lenders that hold on to | | | | It doesn't even have to be your collateral, it can |
| their off lease equipment rather than selling it at | | | | belong to a co-signer. |
| an auction. The beautiful thing in this case is that | | | | If your credit has taken some hits in the midst of |
| they have dramatically relaxed their credit criteria | | | | the current credit crunch and you need to buy |
| for their off lease equipment. At this point, one | | | | business equipment, don't dismay, there are |
| can get a new piece of equipment up to | | | | options. Remember that you won't get A rates |
| $250,000 with just a simple application (no tax | | | | and payments. The most important thing to |
| returns, no bank statements, no time in business | | | | consider is how much money will this piece of |
| requirement, no down payment requirements, | | | | equipment generate for your company. If it |
| & eased bankruptcy requirements) and a | | | | exceeds the cost, go for it. |
| 575 or higher Trans Union score. In the middle of | | | | |