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SW KS, near Dodge City | And apparently everybody above either always operates with cash, or they very likely don't understand what they're signing. EDIT: I didn't mean that as a personal attack. It's just that most loan docs have lots of other verbiage that tie everything together. Wanted to clarify that.
As far as equipment, yes, we want people to put a % down in cash, and that's all different depending on different bank's policies. Generally, you can expect a bank to want 20% at least in cash.
Now, having said that, for 90+% of our loans, we tie them to our existing security agreements and UCC filings that generally cover ALL equipment, not just the piece being purchased.
For the borrower's that we provide the bulk of all financing needs (IE, we do the line of credit financing and most of their machinery) we will loan 100% at times, as long as they're not over-leveraged. Why? Well, guess what happens if we have them put 20% down in cash? Our LOC then just goes up by that amount. Generally our equipment notes are at a lower % rate than the LOC, so why not leave more of the debt on the lower rates. Also, we're in an area that has crops growing 12 months of the year, unlike the cornbelt, where you can sell everything and not have a balance on any operating note for several months. Here, there will generally be a balance, either for the wheat crop, the spring crop, or livestock. For the borrowers we do this for, we work with and trust completely, they have no problem with us having the crops, livestock and equipment as collateral, and in return they have tremendous leeway in operating their business as they see fit.
Edited by pknoeber 10/19/2016 20:16
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Sat and bankers values
