Before purchasing a new coach, it is a good idea to map out how it will be utilized, making sure that its use at least matches its financing term.
Even with the somewhat stricter eye, many in the financing industry stress that, if an operator can qualify, now is a great time for financing a vehicle.
"Interest rates are at near historical lows and, the recently signed Small Business Act of 2010 brought back bonus depreciation and increased Section 179 expensing limits, so it's a great time to buy especially if you're in a taxpaying position," says Mike Denny VP/GM for MCI Financial Services Inc., which has also created two Webinars to help operators, available at its Website (www.mcicoach.com/service-support/webinars.htm), that focus on how to present your company to the financial community and bonus depreciation, respectively.
With the motorcoach industry beginning to slowly bounce back, it's possible, says Dave Johnson, regional sales manager at Key Equipment Finance, that a new replacement cycle is on the horizon for many operators, who he believes are taking a wait-and-see attitude to see if their bookings remain strong before investing in additional equipment. If that is the case, what can an operator do to make sure they get their coach purchase financed?
1. Sell yourself. Purchasing a new motorcoach is a big investment...are you sure you need it? Many of the lending experts we spoke with say the single most important step to take before seeking financing to purchase a new vehicle is selling yourself first.
"Just because you can get financing for a new motorcoach doesn't mean it's the best thing for our business," says Denny. "It's a long-term commitment, and we come across cases way too often where an operator bites off more than they can chew."
Before purchasing a new coach, it is a good idea to map out how it will be utilized, making sure that its use at least matches its financing term. In other words, if you are planning on using the new vehicle to simply fill a temporary void or service a short-term contract, think again.
"If an operator is picking up a unit because they are trying to accommodate a contract that lasts a month or two, it sounds foolish to a lender because, after that short-term contract is over, what are you going to do with the vehicle?" explains Eric Coolbaugh, vice president of Advantage Funding. "We just want to know that it's a sound, well thought out business move."
Ultimately, a motorcoach operations' ability to sell itself on the idea that purchasing a new vehicle is necessary will help in its goal to sell itself to the financial institution.
"You are asking the lender to make a sizeable investment in your company," says Peter King, vice president at TCF Equipment Finance. "You want to make sure the lender has a good feeling about the investment and your ability to pay back the loan."
Also, Johnson says it should be mentioned that you are not always just selling your operation financially.
"What I like to tell the operators is 'help me sell you.' We not only want to know how the vehicle will be used, but we like to know about the history of the company," he says. "Oftentimes, the operation was started by their grandparents and is now in its third generation, so it's nice to hear that story."
2. Understand what is needed. Be prepared to provide as much information as you can, including complete credit application, history of your business/business focus, business plan to include coach purchase justification, up to date business financial statements/tax returns, current fleet list and debt schedule, and personal financial statement and tax returns, Denny says.
King adds that interim financial statements with comparable statements from the same period for the previous year could be necessary as well.
In short, whether you are an old industry stalwart or just opening your doors be prepared to supply whatever is necessary, says Coolbaugh.
"We want to know where the company has been for the last three years and, if it hasn't been in business for three years, we want to know what they did previously," he explains. "If it's a start-up carrier, we want to know what type of delivery background they have and how they think they can support revenue for the asset they're looking to obtain. Also, if a company is in the business for a period of time, we want to know if this is an additional piece of equipment or if it is replacing an older piece they are getting rid of."