The matching rule
A term loan hands you a lump sum and sets a repayment schedule. If the asset you buy earns for years, a schedule over years makes sense. If the money pays for something that will be gone in months, such as a seasonal stock build, a longer schedule leaves you paying for something you no longer have. That mismatch is the most common way a sensible loan becomes a problem.
San Bernardino has businesses with long-lived assets: warehouse and yard operations around the airport and the BNSF intermodal yard, repair garages, restaurants and clinics. Wikipedia describes the city as an intermodal logistics hub, so projects like racking, loading docks or yard improvements are natural candidates.
Asset life versus use
| Purchase | How long it earns | Fit with a term loan |
|---|---|---|
| Warehouse racking or dock equipment | Many years | Good match |
| Garage lift or diagnostic bench | Many years | Good match |
| Restaurant remodel | Several years, but fashion changes | Match carefully |
| Stock for a one-time rush | Months | Poor match; working capital fits better |
| Covering a payroll gap | None | Not a term loan problem |
A worked test, for illustration
A yard operator plans an $80,000 improvement that the owner expects to add $6,500 a month of gross margin. The monthly payment on the loan is, say, $3,000. The improvement covers the payment with room to spare, so long as the extra volume appears. If the margin depends on a customer who has not committed, the room shrinks. Run the number again with the new revenue at 60% of the plan, and make sure the business still survives that case. Round numbers to show the test, not our terms.
Mistakes that turn a good project sour
- Borrowing for the whole wish list when the first phase would prove the payoff.
- Sizing the payment against a good month, not a bad one.
- Forgetting installation, permits and downtime, which can consume cash before the asset starts earning.
A short written plan, one page, with the cost, the expected monthly gain, and the payment is enough. If the plan only works when everything goes right, it is not yet a plan.
Before you sign a schedule
- Find the total repayment, including fees, not only the monthly figure.
- Check the payment against your weakest month.
- Ask when the first payment is due compared with when the project begins earning.
- Ask about early repayment.
We fund $25,000 to $5,000,000, with funding in as little as 24 hours once approved. We consider FICO scores of 500 and up, ask for about three months of business bank statements and do not require tax returns. The application takes about five minutes and uses a soft credit pull. Sole proprietors can apply. For a machine specifically, see equipment financing. Owners in Ontario, Fontana, Rancho Cucamonga and Upland can apply too.