Hello Everyone -
Name is Jason and I'm new to the Forum - although I've been browsing for some time. Got a question I haven't found in previous threads...
I'm looking to purchase my first VMC in the next few months and will be financing it. Most likely in the $15K-$25K range. All machine lendors I've found or been referred to require a Fed Tax ID #, and therefore a formal business license. At this point I will be leasing an area inside of another shop, which doesn't have a business license and doesn't want one due to the attention it would bring from the city. Not that they're doing anything wrong just don't want to deal with it. So therefore I cannot use this address for a license address. An option would be to use my home address but in my city you need the owners permission and signature to be using the address. I'm not the owner and am confident my landlord would not want to deal with it. My question is this...does anyone know of a lendor(s) that will finance without an actual business license?
Why not use your personal Tax ID?
If you are legally allowed to work in the US then you have a tax ID number.
Either way, personal or business, you are going to need to show that you can reliably pay off the note. If you don't have a legal business then you won't be able to use that income on your loan application.
The more "unconventional" you are, the higher perceived (or actual) risk you are to the lender - and thus they will require a higher interest rate (if they will even loan to you at all). It may actually make more sense to lease your own small space, spend a small amount of money on legalzoom.com to create an LLC and you'll look much more professional! However, banks will likely want to see 12 - 24 months of operating history before they consider your business "stable".
I know a lot of this may sound like bad news, but the more informed you are, the better you'll be able to negotiate with the seller & lender!
Tormach PCNC 1100, SprutCAM, Alibre CAD
No, not "bad news", just information! I agree in the fact that leasing my own space would be most desirable in regards to the licensing. But at $1.20/sq. ft. in SoCal it's not always the most feasible thing - especially when it's less than a part time gig. I was also told that by not doing it, legitimizing it under a business, that I of course won't get any of the tax breaks and I'll be extending my personal line of credit and possibly jeapordizing my personal credit history. I was also told, by a lendor this morning, that regardless of my credit, which is good/great, or my personal financial situation, which is good, as a start-up business I can expect to pay 15-20% for this first lease.
Listen, there's no reason not to do this venture correctly by getting an LLC/S-Corp, business license, tax ID, and the whole nine yards.
This is to make money, yes? You'll need to pay taxes on that money and you just as well get the benefits from paying those taxes including depreciation and other deductions. The down side is the paperwork but it's worth the hassle to hire a CPA to deal with your paperwork for you if he can get you a fat return, which he WILL (and legally) if he's worth his salt. Initially, this thing is going to be a loss. And as every good business man knows, a loss in the business is actually a gain for you on your tax return. Do yourself a favor and hire a CPA for an hour consultation to see if he/she can help get you some perspective on this venture.
Oh, and as long as you're going to the trouble of starting an actual business, you'll probably want a business plan. Lenders like those types of things.
Just my 2 cents.
Back to the original thread topic - I am also looking to buy a decent-sized CNC vertical mill for PERSONAL use (absolutely ZERO interest or reason for forming a business just to buy it) and am also trying to find a lender that will fund an equipment purchase... Does anyone know of one or how to approach conventional equipment lenders to do so?
15 - 20% is amazingly high. You'd be MUCH better trying to get family, friends, etc to help loan you money (which has serious issues that need to be considered and handled in a mature manner). Do you have any way of borrowing against something? Home equity line?
While leverage (loans) can be a great thing, paying 15 - 20% is crazy. At 20%, you'll end up paying for the machine TWICE in four years.
Tormach PCNC 1100, SprutCAM, Alibre CAD