Capital Solutions
Deal Of The Week
Customer wants to be pre-approved for financing
The Problem: Customer Wants To Purchase As Many Trucks As He Can Get Approved For - Needs A Pre-Approval
This isn't really a problem but more a specific request. The customer has work for as many trucks as he can get. But he needs to know how much he has to work with. Here's how we approach this:
- First, we need to know how much in additional collateral we have to work with. This will provide the basis of how much we can approve him for
- Second, we need to confirm he does, indeed have the work (and cash flow) to support these trucks
- Third, does he have the management skills required to run multiple trucks. We have seen guys starry eye'ed on the revenue without taking into account the additional management burden required to handle it
With a set pre-approved amount the vendor knows what he can sell the customer. It also allows the customer to plan for the future.
The Solution: Customer Puts Up Real Estate For Additional Collateral
By determining the market value of the real estate we have a basis on how much we can approve him for. We had the customer contact a real estate agent to provide us a market analysis to confirm the value. Here's how we filled in the pieces:
- After speaking with the real estate agent we determined there was $100,000 in usable equity in the property. The vendor had trucks in the $20,000 to $30,000 price range
- The customer had multiple trucks in the past so he had the experience to run a larger organization
- He had a contract with the same company for five years. The relationship was strong and we confirmed there was plenty of work in the future to justify this purchase
We okay'd this customer for $100,000. He expanded his business by four additional trucks and is doing well. The vendor was happy to say the least. This deal originated on only one truck!
We we do more volume, the dealer does more volume. It's this common objective that makes working with Capital Solutions so darn profitable.