SBA loan
 

Good day, I am looking into starting my own transportation company. I will have the opportunity to purchase a 4 dump truck outfit and warehouse/garage. The building is currently used for truck storage and repair and also rental parking on the remainder of the land. The dump business is quite seasonal however the other areas are constant. Well the asking price is only between 175-200 K. I am also looking to purchase my own rig and trailer(s) to offset slow times. This is all in the very early stages of planning. My real question is has anyone ever had experience with a SBA loan? I am thinking maybe a loan of about 500K would give me enough to purchase everything and give me a cushion for all the legal fees and safty net. Any ideas would be great. THX mc

Forget SBA, they are the last people that will give you a loan unless you have a house worth that much that you can put up as collateral or a savings account with maybe $400,000 in it.

I tried SBA years ago and they pretty much said to go pound sand. I did get a loan for $600,000 but between myself and another person we put up $360,000 in collateral and that was a good sized local bank. Never took the loan though. It was for a car wash but the EPA would not give us a permit for the place so we never did it. Too close to a river and run off from the salt on the cars would go in the river.

We also had to write a business plan to present to the SBA and bank and you would have to do the same. Doesn't have to be very complicated but you do have to put in writing how you plan to be profitable. They will not give you money as a buffer either. You have to show considerable risk also.

Also, the money would probably come in stages and not all at once. The bank will break down your request and want to see you start small and prove you can do it. Unless you can make a case that you need all of it, your not going to get it.

sorry to digress, but what a business that carwashing. I sat for a 1/2 hour today during working hours to get a wash. I always figured that was a good business to buy into. I was talking to some Sikhs out in California at a truck wash and that doesn't seem to be too bad of a business either.

It can be good if your on the right street. You can almost be guaranteed a certain percentage of the traffic if the car wash is parallel to the street. It's an impulse thing, pull in, pull out. My buddy and I wanted to invest in a business that we could have someone else run while we still worked. You really rake it in on the extras like wax, wheels, rust inhibitor and all the other stuff that costs you nothing and you charge a lot more.

Maybe if my partners name wasn't Jim Morrison the plan wouldn't have died. You newbies won't get the joke.

It is difficult to get an SBA loan without a lot of collateral. They don't finance big trucks, but you may work something out on the land. Unlike what you hear, they like to be heavy collateralized. If you have enough collateral as they want, you can usually get a loan from a lender without having to jump through so many hoops. I looked at SBA loans several years ago. That is what I was told.

Get your financial house in order and make sure you know what you're talking about and you can get an SBA loan. I had one on the table for a one-truck operation with no collateral other than the truck. I didn't take it because I got a better deal, but it can be done. You've got some homework to do though.

The collateral was your truck, that's why they were going to give you the loan. My guess is that the truck was probably worth close to what the loan was to be for.

His problem is that he needs money to buy the equipment and start up which is not going to happen no matter how prepared he is.

I suppose that depends on what your definition of "close" is. The initial app was for $200,000 and their counter was for $175,000, which was significantly more than the truck cost. I was initially told, like GMAN said, they don't get involved with trucks. I'm just saying that's not necessarily the case.

He's got quite a bit of collateral in the deal. I agree that they're going to expect him to accept quite a bit of risk. But I assume he's not going in expecting to finance everything. SBA likes to see a decent down-payment in most cases. Don't shrug off the business plan. The more detailed and precise you can be, especially if you can back it up with the previous owner's numbers, the more attractive the deal looks.

Having said all this, if the deal is worth doing, you're better off going to a bank. The SBA is set up to be a lender of last resort. That means they're not there to give you a good deal, just to give you an avenue if you have nowhere else to go.

Thank you all so much!!! I have smoke pouring out of my ears. Now I am just thinking on staging one before the other. That is get into a truck and build my numbers then pursue the other buisness. If I can show profit from my own truck then the chances of getting into the other would be greater. Now only to flease it or some how try to independantly purchase any ideas on that? Thanx mc

SBA=HEADACHE
 

It is best to come up with your own capital. When we started our trucking comapny here in Jacksonville, we had a SCORE Representative and he told us that getting financing for trucks and trailers would be difficult. The SBA was unable to hep us even with excellent credit. They consider trucks and trailers uncontrollable investments meaning that the trucks can easily cross borders and the banks do not have the resources and time to repo big trucks, if needed. With that being said, it is difficult to obtain decent leases and financing from companies for your truck. Initially be prepared to pay high payments because of high interest until you get your feet wet in the business.

Good Luck!

That's what I call confidence in your risk assessment :lol: but so true. I went to my bank, the one that had approved the SBA loan, earlier this year to get a line of credit. They said they don't approve lines for companies in that industry. Guess they're getting smarter.

They are getting smarter. A dealer told me once that a driver came in and purchased a brand new Volvo. He drove the trucks for 6 months, didn't make one payment. Of course, the bank couldn't catch him in one spot to repo it. On the 7th month he brings the truck back to the lot and says, "I don't want this truck anymore, I found somthing more affordable" lolz He had no intent on paying for it. He just wanted to make some capital to get moving.

He made his money, probably enough to go buy himself a cash truck, and said screw paying a payment. It's stories like that which makes financing for trucking companies difficult.

I was told SBA didn't make loans on trucks because other financing is available. If you are buying a running business, that may be another story. I looked at SBA and talked to others who have gotten loans through them. You need to jump through a lot of hoops and there is a ton of paperwork. If you have decent credit you are much better off going to a bank. As a second resort you could go to a finance company or third party lender. Those will charge a higher interest rate, but may get the job done for you. Navistar, Mercedes or Chrysler Credit and Paccar will finance trucks other than their own brand if you meet their requirements. I had one of then tell me you need a credit score of at least 650 along with other requirements to qualify.

Since you are wanting to buy an existing company with real estate that is probably the reason SBA will consider making you the loan. It is my understanding that SBA guarantee's the loan through a local bank. As far as I recall, they don't make direct loans. As Steve noted, they like real estate to secure their interests. Unless you have strong assets and good credit, it may be difficult to work your way through the maze of paperwork. I would consider going to your bank or a bank who specializes in commercial lending. You may qualify for a line of credit and get a loan on the value of the real estate. They may even be able to make a wrap around loan to include the equipment. Lenders don't like taking risks. Trucking is a high risk industry. Banks have taken a bath from those who could not make it work. They will look at your background and experience in the industry in which you are asking them to risk their money. Sometimes having a good relationship with your banker will sway their decision in your favor. Business can be volatile. You will need resources to make payroll and pay overhead for several months should business not meet your expectations. A business plan is critical to their decision making, whether it is a bank or the SBA. You may also consider bringing in a partner who has money and will be willing to take some risk along with you. An existing business will have a track record you can use to talk to your bank. You will also likely need to include pro forma's in your business plan for 3-5 years. Pro forma's is estimated figures you think you can achieve. They usually need to be done by a CPA. It is like a profit and loss for future earnings. It is what you feel the business will look like during those future years.

You can lease your equipment, but will pay higher interest rates than if you buy outright. It may preserve some capital, but you can buy less expensive equipment and keep your monthly overhead costs lower.

One other note. Whether you go to a bank or the SBA, you will probably need to tie up all your assets to make a loan of this size work. You will need sufficient capital or assets to more than cover the loss should you default. Banks always look at the down side when it comes to making loans.

We have an SBA line of credit. It's not linked in any way to my house- I double, triple, quadruple checked on that... No way was I putting my house up as collateral for a business loan!

It's there as a safety net- but it's SBA. It's a large line- not just a coupla thousand. But I suppose that's still different from financing a truck, though.