Financing Older Vehicles & Equipment: Your Roadmap to Success

Welcome to the latest episode of the Smarter Business Finance podcast, where Daryn and Kevin are here to talk about financing older vehicles and equipment.

If you're a business owner or looking to invest in an older car or machinery, this podcast episode is a must-listen for you.

Financing older equipment and vehicles can be a challenging process, and there are various factors to consider before making a decision.

 Bobby and Kevin will be discussing the pros and cons of financing older equipment, the available financing options, and how to make the most informed decision based on your needs and budget.

So, sit back, relax and get ready to learn some valuable insights about financing older vehicles and equipment...

Click here to read more about financing older vehicles and equipment 

Transcript

Kevin 00:00:06:26 - 00:00:15:03

Hey, everybody. Thank you for tuning in to the Smarter Business Finance podcast. This is episode nine about financing used equipment. My name is Kevin O'Boyle.

Daryn 00:00:15:19 - 00:00:16:15

And I'm Daryn King.

Kevin 00:00:16:22 - 00:00:19:05

Daryn used to work in the nightclubs in Las Vegas, right?

Daryn 00:00:19:29 - 00:00:20:15

That's correct.

Kevin 00:00:20:22 - 00:00:23:04

That must be a fun time. You probably got a ton of stories.

Daryn 00:00:23:18 - 00:00:27:01

Indeed I do. Definitely more stories than we have time for today.

Kevin 00:00:27:24 - 00:00:39:29

Some that may be not suitable for camera, but that that's neither here or there. So tell me a little bit about like working in that industry, how that kind of reminds you of finance that uses equipment.

Daryn 00:00:40:05 - 00:00:55:16

Yeah, we get this younger clientele that would always come in and kind of feel like they're going to get themselves a silver fox or a cougar. And I always recommend is take them for a test drive, see how they move on the dance floor. You never know. They may break a hip later on. You want to kind of make sure and just gauge how they move out there.

Daryn 00:00:55:16 - 00:01:11:13

So. All right. So I kind of start off the podcast. We're working with used equipment today. We kind of want to figure out like what the lenders can and can't do. So as far as like age and mileage on equipment or hours on equipment, if you're buying construction equipment, like what is acceptable in your eyes?

Kevin 00:01:11:26 - 00:01:36:07

So we deal with over 30 different lenders here at Smarter Finance, and everybody has different stipulations as far as like mileage, years, our meter, things like that. But since we are talking about older equipment and upper and age, I should say, we do deal with a few that don't have any restrictions on mileage year. Our meter, you know, nothing like that.

Kevin 00:01:36:16 - 00:01:56:13

So you mentioned being at the club, testing something out as far as like somebody maybe breaking a hip. You know, I recommend the same thing with use equipment, you know, go out, touch the equipment, drive it, turn it on, make sure it works, get an inspection on it, because you want to know that what you're buying is something that is going to be reliable and dependable for you.

Kevin 00:01:56:13 - 00:02:01:08

You don't want to buy it. And then a week later, it shuts down on you and then you're pissed as all hell.

Daryn 00:02:01:21 - 00:02:08:14

Okay, good deal. And so in the eyes of the lender, like, what seems to be the most important thing if they are trying to buy older equipment.

Kevin 00:02:09:05 - 00:02:22:08

The one of the most important things are to have is experience. Like they want to know that you have experience of the industry. They don't want somebody who just came up on Bitcoin money or something and they just all want to buy a dump truck now.

Daryn 00:02:22:08 - 00:02:23:08

Kind of like mattress money.

Kevin 00:02:23:08 - 00:02:41:20

Exactly right. Like they don't want to that people who have never done it before and they're just like, oh, I want to go and start that because the majority of startup businesses tend to fail, right? So our lenders don't like to take risk on on somebody that's never done something before. They want to see somebody who's tenured and have has experience in that industry.

Daryn 00:02:41:22 - 00:02:58:05

Yeah, that's good. Good to know. I know they judge like each industry a little bit different. Like they're going to definitely judge a piece of construction equipment, a little bit different than an over the road truck that you actually sleep in on a daily basis. So in your eyes, what is the easiest equipment to get done that is used?

Kevin 00:02:59:15 - 00:03:13:18

The easiest equipment to get done is non-title. The equipment. Right. And the reason why is because you mentioned the sleeper truck. If somebody is thousands of miles away from their house and this is the second or third time their truck is breaking down, they may just leave it on the side of the road and never see it again.

Kevin 00:03:14:07 - 00:03:23:13

So that's that's why it is a lot harder to get finance for a sleeper truck opposed to non-title the construction equipment or just anything local, really.

Daryn 00:03:23:14 - 00:03:32:05

Now, if we're dealing with a startup business, what is the actual like number you would put on the mileage on a, say, a commercial sleeper truck.

Kevin 00:03:32:20 - 00:03:38:18

On a sleeper truck? You know, the highest one that our lenders would go to for a startup is about 700,000 miles.

Daryn 00:03:38:27 - 00:03:43:05

Okay. And as far as years, what would you say on a startup business?

Kevin 00:03:43:13 - 00:03:56:14

I would say try to keep it within eight years. You know, there's one of the underwriters in my head that wall that I typically send my startup businesses to or startup over the road drivers to in their six years.

Daryn 00:03:56:21 - 00:04:15:22

Yeah, that's typically what I'm seeing. They never really want to go older than six years for some reason. You got to remember this the people making these decisions for the lenders, they're not necessarily some of those ever been behind the wheel of a truck. What they have is a list of qualifications that they have to abide by because everything in their eyes is risk mitigation.

Daryn 00:04:16:08 - 00:04:32:29

They base everything on risk assessment factors, and that's how they make their decision on your approval. So pivoting to construction equipment or non titled equipment. What would you say is the average year that a startup business can actually get done? As far as the oldest equipment possible.

Kevin 00:04:33:05 - 00:04:40:29

For for non-title stuff, they're a little more lenient than a sleeper truck. I would say the range that they like is around 10 to 15 years old.

Daryn 00:04:41:01 - 00:04:44:27

Tell me a little bit about the qualifications of the individual on a startup business.

Kevin 00:04:45:02 - 00:05:12:04

So on a startup business, again, the the underwriters like to see experience at least 3 to 5 years of experience in the field. If it is a CDL requirement, again, some underwriters like to see at least 3 to 5 years of CDL experience as well. A minimum credit score on a sleeper's about 650 that we can work with if we're talking a day cab or local.

Kevin 00:05:12:17 - 00:05:15:13

You're looking at like a 620 to 630 score for a startup.

Daryn 00:05:16:02 - 00:05:25:18

Good to know. All right. So as far as the financials is, would you say there's a like a golden number that a customer needs to have in his bank account to get approved for a loan?

Kevin 00:05:27:00 - 00:05:53:23

If if our underwriters are requiring to see banks, I would say to have at least 30% of what you're looking to purchase. Only because the underwriters are going to ask you for 10 to 20% down and they don't want to deplete your bank account. Right? They want to know that you have money. In addition to that, if your car were or if your piece of equipment were to break down, they want to know that you can you can keep yourself afloat while you're going through repairs.

Daryn 00:05:54:04 - 00:05:58:28

So basically, if there's a unforeseen speed bump in the road, you have the ability to overcome it.

Kevin 00:05:59:04 - 00:06:19:20

And to kind of go off that we do deal with underwriters that don't even need to see banks. You know, it's called app only submission. So that's the one we we obviously like. It's easier for us to get an approval unless that we request from the client. So yes, we do have options where banks may be needed and some that we don't need them.

Daryn 00:06:20:07 - 00:06:27:23

Gotcha. So from my understanding, those are the ones that you're typically going to just make a first or maybe even the last payment upfront instead of a large down payment.

Kevin 00:06:27:23 - 00:06:51:08

So, yeah, that's a big thing with us, right? In lieu of a 10 to 20% down, we've got underwriters who will do the first two payments or two upfront payments to save you a ton of money rather than putting 20% down on, let's say, a $100,000 machine, you know, instead of coming $20,000 out of pocket, we may come out 6 to $7000 in total and you can drive off with your equipment.

Daryn 00:06:52:01 - 00:07:08:25

And like a common question I always get is a lot of these customers, they realize the quality of a rebuild or a platinum overhaul. So we start to get these customers looking for pre admission trucks are pre log in your experience how easy is that to get done to for an actual startup company.

Kevin 00:07:10:10 - 00:07:30:14

For a startup company? To be honest, it's almost impossible. Those trucks, again, are typically older and age higher in mileage, you know, things like that. And the main thing that I've seen with our underwriters is you have to have at least 1 to 2 trucks in your fleet to even be considered for an older age truck like that.

Daryn 00:07:30:20 - 00:07:47:28

Yeah, that's what I noticed. Like once you've actually established yourself with two years time in business and you have at least two trucks and you're buying your third, they call the established fleet, that's when the lender starts to actually trust your judgment on the equipment you're looking to purchase. And they don't really care so much about checking the boxes for their standards or their qualifications.

Daryn 00:07:47:28 - 00:07:51:28

So they're more going to lean on your experience and your judgment at that point. Yeah.

Kevin 00:07:51:28 - 00:08:10:24

And and you have to kind of set the real expectation for clients, you know, some startup businesses are looking to finance, Oh, I want to get $150,000 truck for their first truck, right. Like, why why would a bank risk their money on you? Who you know, you're a brand new start up business again. We mentioned the majority of startup businesses fail.

Kevin 00:08:10:29 - 00:08:26:26

Why would they shoot you $150,000? Right. It just doesn't make sense. So most of the lenders will cap you for, you know, trucks like that at 50000 to 75000, just depending on, you know, your your credit history and other factors.

Daryn 00:08:27:04 - 00:08:49:14

All right. And I know there is a possibility of actually getting approved for some of these, like higher priced vehicles, especially with higher mileage. Once you actually establish yourself in the industry and have financed in the past. One of the main things they're looking for is previous borrowing history. On average, they want to see that you finance something at least half the equipment cost previously and paid on it perfectly for 24 months.

Daryn 00:08:49:14 - 00:09:02:02

That's called a comparable trade line. That's only if you're actually a homeowner. A lot of the times, if you're not a homeowner, they're going to demand that you've actually financed something for 70% of the equipment costs and paid on it perfectly for 24 months. So just something to keep in mind.

Kevin 00:09:02:09 - 00:09:21:00

You know, the good thing about that is to some of our underwriters don't even need 24 months. You know, a lot of them would consider a 12 month as a comp, 12 month pay history. So that that's helped us open a lot of doors for start up businesses and, you know, tenured business owners as well. Okay.

Daryn 00:09:21:09 - 00:09:31:23

And do the lenders really consider like financing a personal vehicle or actually financing a commercial vehicle and having to report to your pay net which one kind of shows a little bit more weight.

Kevin 00:09:32:29 - 00:09:56:21

If you have an established business and you have a pay net, which is you have commercial credit in there and you've pay it again over 12 to 24 months on something. All the underwriters love that. They will kind of hold that more into weight than a personal one, I should say. But yeah, if somebody does have a strong payment, I think that definitely helps out a little more.

Daryn 00:09:57:02 - 00:10:00:15

So what you're saying is business credit goes a little bit farther than just consumer credit?

Kevin 00:10:00:16 - 00:10:20:14

Absolutely. And that's what we're trying to do. We're trying to help people build their business credit. Right. Get away from that personal guarantee where it's showing up on somebody's actual personal credit. We want to help people actually be business owners. Right. If let's say for whatever reason, something goes south, like we don't want your personal credit to be affected by that.

Kevin 00:10:20:23 - 00:10:30:26

We want you to go be able to buy that house you want for your wife. We want you to be able to go buy that car you want so you don't have a $75,000 commercial loan showing up on your personal credit.

Daryn 00:10:31:12 - 00:10:36:01

So what you're saying is it doesn't really affect your debt to income ratio whatsoever. This is just strictly a business loan.

Kevin 00:10:36:07 - 00:10:55:02

Yeah. Strictly business loan. Now that that's structured, you know, we do personal guarantor. But the only way that's going to reflect on your credit is if you default on the loan. So so Derek, we're talking about used equipment and financing it for your business and things like that. What's the oldest piece of equipment that you finance for a client?

Daryn 00:10:55:21 - 00:11:17:06

Well, honestly, we've been able to do some pretty remarkable deals. I think the oldest piece of equipment for me would be a 1970s medical trailer. So. Wow. We don't just do trucks and construction. We do medical as well. So we were able to get a newer MRI machine retrofitted into a 1970 medical trailer. So we're able to get some pretty old pieces of equipment done.

Daryn 00:11:17:12 - 00:11:20:21

However, the customer is highly qualified and had time in business.

Kevin 00:11:20:23 - 00:11:22:29

It's amazing that that equipment's older than both of us.

Daryn 00:11:23:00 - 00:11:25:22

It really is. She's old enough to fight in Vietnam.

Kevin 00:11:26:00 - 00:11:31:23

Do you do you remember what like term did you get a six month term for that or do you remember what it was?

Daryn 00:11:31:28 - 00:11:34:02

Yeah, they actually stretch it out to a 60 month term.

Kevin 00:11:34:03 - 00:11:37:12

Wow. 60 months For 1976, you said.

Daryn 00:11:37:24 - 00:11:39:05

It was a 1970 medical.

Kevin 00:11:39:05 - 00:11:52:02

Trailer. 19. Wow. That's amazing. Yeah. Yeah. So that just shows you, you know, the underwriters that we deal with. You're getting five years, the pay off a thing that's over 40 to 50 years old. In that time span. That's amazing.

Daryn 00:11:52:02 - 00:12:00:09

And there are some lenders that even allow us to defer the payments. You won't have another payment for 90 days. And that always helps out, especially when you're getting started trying to make some money with some new equipment.

Kevin 00:12:00:21 - 00:12:05:15

Now, as far as like in the transportation industry, what would you say is the oldest piece of equipment that you've got done?

Daryn 00:12:05:28 - 00:12:22:23

Well, for an established customer that had multiple years time of business and established fleet, I was able to do a mid 1980s cab over. And so those are those cool trucks kind of look like the original Optimus Prime, so. Oh, nice. Yeah, those are fun. So as far as trucks, that's one of the older ones that I've done, I'm pretty sure was in 1986.

Kevin 00:12:23:07 - 00:12:28:14

That's amazing. The the things that we can do for our clients just surprises me every day, man.

Daryn 00:12:28:23 - 00:12:45:04

Yeah, definitely. And I've seen as far as like when it comes to like, non-title with equipment, I've been able to do some like early 1970s equipment. As long as they're able to show ownership, we were able to get it done from a private party seller. So that's the main thing when purchasing some more equipment like that.

Kevin 00:12:45:08 - 00:13:03:12

Yeah, And one thing I would add on or I guess to to kind of maybe wrap this up, what I've noticed working here at Smarter Finance, we kind of go the extra mile to get these older pieces of equipment done. You know, we're asking things that other underwriters may not be asking or other lending options may not be asking.

Kevin 00:13:03:12 - 00:13:19:09

Right. Like we're asking how long they've done things for what they're expecting and says we may be asking for banks or not. We may be asking for tax returns. You know, other lending options aren't really going that extra mile for their clients. Do you have anything like that that that a story that you could tell?

Daryn 00:13:19:25 - 00:13:39:17

Yeah, we were actually looking at this piece of non titled equipment. It was so old that the actual silver serial number plate was worn off. The other lenders, they just wouldn't do it because they couldn't prove ownership because they had no way to actually do a basically a search to find out who the original owner was. So what we did is we had them contact the manufacturer and order a new serial number plate.

Daryn 00:13:39:17 - 00:13:44:14

So we were able to get that install, get pictures of it, get the equipment approved. It all worked out pretty well.

Kevin 00:13:44:21 - 00:13:58:15

And that's that's going the extra mile. That's awesome. Daryn man, thanks for sitting and chatting with me. I appreciate your time. Again, thank you for tuning into the Smarter Business Finance Podcast. Episode nine. Again, my name is Kevin O'Boyle.

Daryn 00:13:58:23 - 00:13:59:19

And I'm Daryn King.

Kevin 00:14:00:06 - 00:14:01:11

Thanks for tuning in with those guys.

Daryn 00:14:01:22 - 00:14:03:24

Thank you.