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Financing for business owners and complex tax return?

Discussion in 'General Yachting Discussion' started by Punisherzx12r, Mar 14, 2021.

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  1. Punisherzx12r

    Punisherzx12r Member

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    Looking for a finance company that can digest a complicated return. By the time my accountants did their thing with section 179...building depreciation etc I do well in terms of tax liability in the past 2 years...aka...not much income on the return.
    Net worth over 10 times debt...enough cash in the bank to pay for the boat but naturally I don't want to do that.

    Loan is 400k on a 600k 2008 sport fishing boat that appraises well higher than purchase price....800 plus credit

    Can anyone point me to a bank that doesn't require me to fit in their perfect box? But still has decent rates
  2. NYCAP123

    NYCAP123 Senior Member

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    I'd like that kind of recommendation to come from my own accountants whose opinion I already know I can trust.
  3. SeaEric

    SeaEric YF Historian

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    A good marine lender will know how to properly present this scenario to a bank. Try Harris Marine Finance, Sterling Acceptance, or Ocean Point Marine. All of these have local offices in Md. BTW a $350K max loan makes it little easier in my recent experience.
  4. olderboater

    olderboater Senior Member

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    As Eric wrote. Marine lenders have seen every situation imaginable and taxable income is not what lenders look at. If you want to assist lenders you could provide financials for your business showing EBITDA.
    SeaEric likes this.
  5. KoffeeCruising

    KoffeeCruising Member

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    ......or it could be the “perfect box” the finance company wants is for you to have more skin in the game on a $600k boat than $200k (that appraises well higher than the purchase price...800 plus credit)

    I’m misquoting Shakira’s song, but in my experience

    “EBITDA don’t lie”
  6. Punisherzx12r

    Punisherzx12r Member

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    Ebitda numbers are strong...i did provide tax returns...I think they were trying to place me with BB and T for the rate they quoted of 3.75 percent. Finance amount and down payment were never raised as issues and I am flexible on that.

    Thank you Eric for the names
  7. Danvilletim

    Danvilletim Senior Member

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    If you have equities in a brokerage, many have a pledge asset line product that Is around 2.5% tied to Libor.
    CaboFly likes this.
  8. MYTraveler

    MYTraveler Member

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    Perhaps don't limit yourself to a boat loan. You ought to be able to get an unsecured line in that amount without too much difficulty (and lenders offering unsecured lines are very good at understanding tax returns and credit risks). Either way, it will be a full recourse loan. Have you talked with your primary banker yet? Or better still the business's primary banker?
  9. Punisherzx12r

    Punisherzx12r Member

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    my business accounts are in a bank that doesn't do boat loans...i am not in the market, its all in real estate
  10. Fishtigua

    Fishtigua Senior Member

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    My Tax office sent me a letter. Just Don't Bother.

    No, seriously, they just find my income so insignificant to not bother Taxing me.
    Kinda nice living on a offshore Island where the Tax threshold starts in the millions.
  11. AnotherKen

    AnotherKen Member

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    Maybe look into Credit Unions?
  12. Alzira II

    Alzira II Member

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    essex may look at it? thats Bank of West retail face. They tend to focus on score on sub 200k boat loans and they underwrite a good % of them nationally.
  13. Punisherzx12r

    Punisherzx12r Member

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    The big lenders want taxable income...the number u pay the IRS on and that's it. They say the market is so busy that they have no time for anything other than the easy clients.

    So if u get a w2 for 400k...you're good but if u own a business and actually tax plan, you are sidelined right now
  14. NYCAP123

    NYCAP123 Senior Member

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    You can't claim it when convenient and not when it's not. Seems to me there's a case going on about just that in NY these days.
  15. olderboater

    olderboater Senior Member

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    Sounds to me like you're just making excuses of why they won't loan you money and excluding a lot of critical information. They don't look favorably today on those avoiding taxes and claiming they're really making a lot of money. However, they're not in the business of turning away credit worthy customers. $400k is a substantial loan to someone not reporting income. Depreciation isn't a get out of debt free card as depreciable assets require renewing and replacing. Lenders are not stupid. They know how to evaluate all aspects. If your net worth is so great then it would seem to me your own bank would make you a personal loan large enough for the boat. If you have so much depreciation then they may consider your assets less than desirable, at least not easily converted to cash or risky in one way or another. The bank or banks you regularly do business with should be the ones least likely to require the perfect box. The fact they won't loan you the money needed also says a lot to other lenders.

    And just why not pay cash? I think the answer to that may tell you why they aren't quick to make the loan.

    If you've put the effort you describe into getting financing, there's a reason and it's not just your Taxable Income on your 1040. I assume also your income is flowing through disregarded entities on K-1's. Well, that tells a lender nothing when that's low and they are not going to evaluate those entities, separate legal entities, in making a decision on loaning you money.

    There are other issues as a lender I would see also. You're avoiding taxes through accelerated depreciation in a low tax rate time. Now, not having those expenses will lead to greater income in the future in perhaps higher tax rate years.

    Sorry to be making these statements but you're the one who brought this topic to the forum. I don't buy your complaint. It's flawed on the surface. Lenders want to loan money.
    KoffeeCruising likes this.
  16. CaboFly

    CaboFly Member

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    Screenshot_20210327-075340_Chrome.jpg
  17. Slimshady

    Slimshady Senior Member

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    OB nailed it. Banks know the economy will do fine for next 12 to 24 months but after that it's all up in the air. They want that loan staying current even when things crash. Construction is booming now but that equipment gets real expensive sitting in your yard.
  18. Punisherzx12r

    Punisherzx12r Member

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    you historically have such negative comments, why? like there is some grand conspiracy when someone asks a question. I do big commercial real estate loans ...not boat loans. So i ask some questions of people that have more experience in this world but then i get you attacking me.

    Why not pay cash? because that's stupid...i haven't had trouble getting any loan in over 15 years so i am rightfully confused.

    Some banks have filled their portfolio of boat loans with the coronavirus surge and in fact do not want to lend more.

    You try to be such a know it all on here when you really just act like any other internet troll.
  19. olderboater

    olderboater Senior Member

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    You come to a public forum and ask for opinions and information which we provide. You don't like it, that's your choice. You can try to turn it on me and that's fine, but others agreed with what I expressed. I don't know why you can't get a boat loan, but I know plenty of people are getting them. Some banks may have all they want, but plenty of other banks making them. Perhaps I'm in internet troll but I report income and pay taxes, just don't want a loan.

    I guess I'm stupid too because I do pay cash. I know the arguments you're likely to make and base your stupid on regarding low interest rates and ability to earn more elsewhere, but I can make as many arguments in favor of paying cash on a rapidly depreciating asset.

    I offered the guess your tax returns don't show the income due to flow through entities. Well, translated, that means you don't have the income or even the EBITDA since it's in other entities. That also makes it subject to other pressures and less valuable to a lender on a personal boat. Typically, they don't want to look beyond the taxable entity, which is you personally.

    I also suggested a personal loan of some sort since you said you had the cash and it would seem then your normal banks would loan it to you if that's the case. One other option would be if you have the strong financials in the business instead then letting the business buy the boat and get a loan for it.

    I would add one other thing. Seeing as how your occupation is land development, I do believe many banks are concerned about potential drops in real estate values. Now, if there's one asset a bank wants less to own than real estate it's a boat. Boat loans are collateralized by the boat, but the lender is really making them based on income and other assets. I know some developers of office buildings have recently found the attitudes of banks to turn away from financing them. Meanwhile, surprisingly, retail and malls are getting a lot of financing. However, you mentioned 3.75%. and much of that business is at higher rates. Perhaps some of the problem is banks reserving money to loan at higher rates. You mentioned BB&T and Suntrust (Now jointly Trust) is financing boats in your price range at 4.74-5.74%. However, a 2008 is getting very close to their maximum age which is 15 years.

    I'd suggest checking with Suntrust, with Sterling, with Essex (4.99% to 5.19%) in the amount you're looking, with Bank of America Private Bank (they've been begging for yacht business), with Seacoast Bank and with Sterling and any other banks with whom you have relationships, even those that "don't do boat loans." Many banks will do loans to purchase yachts, even though they don't do boat loans, for favored customers.
  20. Punisherzx12r

    Punisherzx12r Member

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    Just be happy man...and happy for other people, after all, we are just talking about boats here