The biggest obstacle for most people thinking of buying used equipment for resale is: “Where will I get money?”
In my book, the secret of buying and selling used equipment, I talked about several ways to get financing, but the purpose of each dealer must have a large credit line at a friendly bank. This is the cheapest money available.
Taking investors or borrowing money from high interest financing companies is almost always the only way to start, but to maximize profits, we need a bank. The good news is that banks need us! We don’t often talk about the problems owned by the bankers. But the bankers who looked so cold and fast with money really were under a lot of pressure from their boss to write a better loan.
It took years to understand the fact that loan officers had to come out and “sell” loans. This is the secret: if you seem to need money, they will never agree to lend you. So how does someone convince bankers to give a good fat loan with a low interest rate? We get a loan by meeting the banker’s needs. When we do this, he will come to us, offering loans to us.
1. The banker must feel that you know what you are doing.
Loan officers need to understand your business. He wants to know if you are a good operator and worth the risk. Can you run your business so you get regular profits?
2. Loan officers love plans.
The well-written plan is something he can show, and they can all sign it. This spread their risk (other needs) among groups.
3. The bank requires a track record.
There is nothing better than a series of operations that are well executed that lead to a stable profit. The big word here is “note”. You must have a written record. Telling your track record to loan officers is better than not at all, but the agreement that is well documented that shows details and expenses cannot be rejected.
Make an appointment with loan officers. Go to the banker office with an action plan including a projected cash requirement and timeline. Has a written plan about how you will find equipment, how you will negotiate to buy it and under what internal guidelines. And then you have to show how you will sell pieces. Including projected profits.
Leave a copy of your plan and leave. Don’t ask for a loan. Every week gives a loan call and let him know how your agreement is progressing.
After you sell the pieces and complete all accounts, return to the loan officer and give him a written summary. Rest assured that later he will compare it with your plan. Tell him how you overcome obstacles; How you modify your plan because of circumstances, and let him know what you plan to do next. Don’t ask for a loan. This is important. He must think that you don’t really need it.
The best is if you do this in more than one bank. Some banks do not lend to used equipment, some may have a full portfolio. Don’t put all your money on one horse.
Just like shampoo, soap, rinse, repeat. After your third or fourth success agreement, the loan officer will begin to encourage you to open the credit path in the bank. Guaranteed.
Remember, having a well-written plan, step by step for each agreement, and presents it to Him before the action occurs so that you know that you are not cheating and writing “after the action report”.