Major Decision

[Lumberjack]

From my experience, time in business matters more than no credit. One thing lenders look at is comparable loans in the past... my thinking is making good payments on a $30k loan has little bearing on your viability paying a $200k loan.

In the past 2.5 years I've gone from a 70k loan being my biggest loan to $92.5k, $95k, $130k, and $188k (Mek with down payment). I put 10% down on the first loan, $20k on the second, nothing on the 3rd and a good bit over $100k on the 4th... my point being I didn't have wonderfully comparable loans in the Mek price class. The $130k loan was in December, the Mek in March. Also, even though I've been self employed with tree work for the past 14 years, the current company name/EIN was established the earlier in the same month as the $92.5k loan. I'm sure my previous time in business helped, although I paid more interest on the first two loans vs the forth (same lender, third was with Kubota who I've had 3 other loans with starting in 2013).

I don't know your financial situation, but I would think $9k/month payment is untenable. The interest rate stinks, but for comparisons sake you would only pay $10k more interest on that 3 year loan as you would on a 6 year at 6.75%... there is also the possibility of refinancing the loan, although I bet they have an early payoff penalty or it is structured as a lease.

 

[Steve Connally]

All interesting points. I have to look up Dodd-Frank. I own my all my vehicles. My only loan rite now is the house and I have 200k equity in that as it sits. Plenty of cash in the market by my standards. I was thinking a utility truck for gear. 30k or so or maybe a compact lift but that's 100k and can I pay it off in 2 years? I wouldn't be surprised at a early payoff fee either. The lift would make money. The work truck would cost money and not make any money. Difficult to decide what direction to go but 9k is out of the question for sure. I'll wait and see what they have to say.

 

[tc262]

I would lean towards the compact lift. You can start subbing with that, get your name out there, and begin building relationships with other companies now that will benefit you when you get the mec!

 

[tc262]

All at much less financial risk.

 

[Lumberjack]

Unless the down payment was coming from your house, why not combine the equity and down payment and buy outright? If you drag the loan out 30 years you will pay a huge amount of interest, but if you paid it off in 5-6 years (standard loan length) the cost of the loan would be comparable or less than a standard loan.

 

[Steve Connally]

I never considered the equity in the house. I guess I considered that security but I don't plan on moving anytime soon so it makes sense.

 

[Steve Connally]

So I looked into the home equity line. Seems that my assessment doesn't match what the city says and the estimated property value the mortgage company has listed. Going through their calculator and the fact they would only loan 80% of the value of the equity, it doesn't help all that much.

 

[Lumberjack]

You would be transferring equity to a depreciating asset, not giving it up entirely. The rate of depreciation is a variable, but I would expect it to be slower than a passenger vehicle.

 

[Lumberjack]

How long since the last appraisal? 80% LTV is normal.

 

[Steve Connally]

I have to look. I get them every year and must have a previous year in mind. I wonder if the city assessment and the banks assessment jive.

 

[deevo]

I found financing----- that's the good news! The bad news is its 30% down(no problem) and 36mos term at 16%. So they want me to commit to a $9k a month payment. WTF

Holy crap! What Mafia organization would that be?

 

[Steve Connally]

Navitas

 

[southsoundtree]

Seems like a lift will compliment the Mek, unless you can only do Mek-compatible jobs. Seems to have high resale demand.

 

[Magnum783]

I have to look. I get them every year and must have a previous year in mind. I wonder if the city assessment and the banks assessment jive.

They do not the VA appoints there own appraiser and they are independent of all parties. They will many times be tens of thousands of dollars higher than the city's assessed value.

 

[CutHighnLetFly]

Christ Steve you gotta come out here! F it man just move. Your plan would kill it out here.

 

[Steve Connally]

They came back with
A 60mos offer at 16%. 6400 a month. I'm on the fence. That's 4 days work at a full day rate

 

[treehumper]

They do not the VA appoints there own appraiser and they are independent of all parties. They will many times be tens of thousands of dollars higher than the city's assessed value.

Despite being a "Market Value Assessment" its for tax purposes and usually is low compared to a mortgage appraisal. That will better reflect what the market price of your home is. And yes, it's usually higher than the tax assessment value.

As for the loan, don't get hung up on the cost, analyze the revenue potential and productivity gains. Look to determine how long it will take to recoup your investment.

 

[evo]

Don't touch the 16% loan... F-dat

 

[Lumberjack]

$6400/month is with 30% down?

 

[RoyalTree]

If you had an established customer base and a known name in the market I don't think that payment would be that difficult. This should be able to be covered in two or three good work days.

If you could show a year or two of solid revenue and profit you would be able to refinance at a more competitive rate. This would be a very high risk loan for any company. There is nothing to show them regarding your ability to repay a large loan.

The one question is what you are projecting as your revenue, best and worst case scenario.