The biggest obstacle for most people thinking about buying used equipment for resale is: "Where am I going to get the money?"

In my book, Secrets of Buying and Selling Used Equipment, I talk about several ways to get financing, but the goal of every dealer should be to have a large revolving line of credit at a friendly bank. This is the cheapest money available.

Taking in investors or borrowing money from high interest finance companies is almost always the only way to start, but in order to maximize profit, we need banks. The good news is that banks need us! We don't often talk about the problems that the bankers have. But those bankers who seem so cold and tight with money are really under a lot of pressure from their bosses to write more good loans.

It took me many years to understand the fact that loan officers must go out and "sell" loans. This is the secret: If you appear to need money, they will never agree to loan you any. So how does one convince the banker to grant a nice fat loan at a low interest rate? We get that loan by fulfilling the banker's needs. When we do this, he will come to us, offering us a loan.

The Banker's Needs

1. The banker must feel that you know what you are doing.
The loan officer needs to understand your business. He wants to know if you are a good operator and worth the risk. Can you run your business so that you earn a regular profit?

2. Loan officers love plans.
A well written plan is something that he can show his board, and they can all sign off on it. This spreads their risk (another need) among the group.

3. The bank needs a track record.
Nothing is better than a series of well executed operations leading to a steady profit. The big word here is "record". You must have a written record. Telling your track record to the loan officer is better than nothing, but a well documented deal showing the details and expenses is irresistible.

A Plan of Action

Make an appointment with a loan officer. Go to the banker's office with a plan of action including projected cash needs and time lines. Have a written plan of how you will find a piece of equipment, how you will negotiate to buy it and under what internal guidelines. And then you must show how you will sell the piece. Include projected profit.

Leave him a copy of your plan and go away. Do not ask for a loan. Every week give the loan officer a call and let him know how your deal is progressing.

After you have sold the piece and settled all accounts, go back to the loan officer and give him a written summary. Be assured that later he will compare it to your plan. Tell him how you overcame obstacles; how you modified your plan due to circumstances, and let him know what you plan to do next. Do not ask him for a loan. This is important. He must think that you don't really need him.

It is best if you do this at more than one bank. Some banks just don't loan on used equipment, some might have a full portfolio. Don't place all your money on one horse.

Just like shampoo, soap, rinse, repeat. After your third or fourth successful deal, the loan officer will start prodding you to open a line of credit at his bank. Guaranteed.

Remember, have a well written, step by step plan for each deal, and present it to him before the action takes place so that he knows that you are not cheating and writing an "after action report".

This sounds like a lot of work, and it is. But after you have given thousands of dollars in profit away to investors, you will see that banker seduction is worth the trouble.

D. Alan Johnson
Author of Secrets of Buying and Selling Used Equipment