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What can you do to make financing your new fire truck as easy as possible? Follow these 4 ideas to save you time, trouble, and money.
It's exciting when you order your new truck. Don't get dragged down when you figure out how to finance it. Here are 4 ideas to help you.
Idea #1: Get your financial information organized
You'll save time and money if you present organized financial information to your bank. The bank will request at least 3 years of financial information to review your trends and ability to afford the new payment. The information should show how much money you earn every year from all your revenue sources such as taxes, contracts, donations, fund raisers, or grants. It should also show how you spent your money each year.
By having clear, concise, and organized financial information, you should be able to negotiate a lower interest rate from your bank.
Note: If your plans to repay the loan depend on some new revenues such as an increased tax or contract, include that information to help the bank with their review.
Idea #2: Set a realistic budget
Most fire departments error when estimating how much payment they can afford or even how much the payment will be. Some overestimate and then have to scramble to afford the payment each year. Or worse yet, find out they can't get approved for the loan they need to buy their new truck. Other departments are too conservative and and have to skimp on essential options because they don't think they can afford a higher payment.
There are a lot of payment estimators out on the internet. Use these valuable tools to ballpark an accurate payment.
Or, get some professional help. Ask someone to look over your financial information and get their opinion. They should be able to answer the following questions for you:
- Is the information useful and organized so a bank will accept it?
- Can we afford the estimated ball park payment?
- Can they offer some sort of pre-qualification that is non-binding?
There is nothing more disheartening than killing the excitement of a new truck with the realization that you can't afford the truck.
Idea #3: Don't depend on projected revenues to make payments
If your plan to make the payments on your new loan are based on some new untested fundraiser such as more bingo nights or a second pancake breakfast, you will have a hard time finding anyone to give you a loan. Banks will require a documented source of repayment before they can provide a loan. If you are planning on using a new fundraiser to make payments, start the new fundraiser first to show the bank that it's effective at raising enough money to pay your payment.
Exception to this rule: If your new projected revenues are from a documented source such as a new tax levy or a certified contract with your local government, this will be acceptable to most banks. Be sure to include this information with your organized financial information.
Idea #4: Understand that there is a process to be followed
Take the time to ask the bank exactly how they handle the analysis, the documentation, and the manufacturer payment. Learn what will be expected from you and what information you will need to provide at each step. It's not a good deal if you have to incur extra fees or costs when complying the the irs rules, for example. Or, if the bank has monumental paperwork requirements to release funds while your sales rep is screaming for their money.
The irs has several rules to follow to qualify for tax-exempt financing. Miss any or even one of these steps and you run a big chance that your loan will be dis-allowed and you'll have to pay penalties, fines, and higher interest because the rules weren't followed. The bank should help you to comply with all the rules without a major hassle for you. Ask exactly how they will help you be 100% sure you will comply.
Summary
With these 4 steps, you can make financing your new truck as easy as possible. It won't be as much fun as taking delivery of your new truck but it shouldn't be a drag either.
Stay safe! John Hill, Apparatus Budgeting Consultant
Envizion Financial
Toll-free (877) 368-4946
Go to http://www.envizionfire.com/RR.php to see me in action.
Go to http://firefinanceexpert.blogspot.com/ for stories about fire department finances
