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Monday, August 25, 2008

Daily Observations - More Collateral Issues

I hope you are beginning to see the trend in these blogs. I am stressing what the lenders are stressing. I am trying to point out the issues that are preventing lenders from issuing "real" LOI's. By real, I mean that the deal has a reasonable chance of funding, and that a good portion of the underwriting has been accomplished.

Tonight I want to continue with the issue of rolling stock as a form of collateral. For those readers that are not familiar with rolling stock, it simply is assets that can be easily moved from one location to the next with minimum effort. Examples of rolling stock would be company's that have primarily vehicles, boats, buses, or any type of asset that can be mobile, hence the term "rolling".

The banks are simply not lending on rolling stock without any other form of collateral for security. Simply stated a "biz op" that is mostly made up of assets that are considered rolling stock will definitely have to have additional collateral, or the buyer must put down a substantial down payment. We heard today of one lender that was willing to finance the rolling stock but the borrower had direct experience, and was putting down over 50% of the purchase price.

I believe this again is a new trend that we all need to be aware of. If you have a client that is looking to fund rolling stock through the SBA program, you may want to look to an equipment financing company or leasing company rather than to a SBA Lender.

For more on SBA owner user financing programs visit loanforbiz.com today.

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