Capital Solutions
Deal Of The Week
First time owner operator with now cash
The Problem: Customer Wanted To Purchase His First Truck And Had No Cash To Start Out With
A first time buyer is tough enough, but this guy didn't even have the money to put fuel in the tank not to mention other "soft" cost. Here were the issues:
- Cost of the truck was $30,000. With tax the deal came to over $35,000
- He needed an additional $5,000 to cover the down payment on his insurance, misc cost
- He had a credit score of 625 with no comparable credit. Lots of slow pay and just sloppy credit
He did have good connections in the trucking industry having been a driver for eight years. But without cash we were worried the customer could get into a cash flow problem very easily.
The Solution: The Customer Puts Up His Home Worth $125,000 For Additional Collateral
On the surface getting a $125,000 home for collateral seems pretty straight forward. But in this economy pinning down the actual value is more difficult. Plus the trucking industry is still pretty unpredictable. We looked at this very closely. Here's what we did:
- We had the customer get a market analysis on the property (not an appraisal) to verify the value. The real estate market had stabilized so we felt comfortable on the value
- We were very secure on equity but we still wouldn't have done the deal if we thought the guy would fail. We spoke with his potential business prospects and determined he had solid sources of business
- The truck had a warranty so we knew the customer wouldn't get into a cash crunch due to repairs. We delayed his first payment 60 days to give him enough time to start bringing in income
Great collateral doesn't always make a deal happen. We want our clients to succeed. By checking out his contacts and prospects we felt this customer would make his payments and succeed in what he was doing.
We get additional collateral to get around bad credit, start up issues, etc. We are not in the business of taking back collateral. Our success depends on the success of our clients.