Wednesday, March 25, 2015

Financing Your Fire Truck - What to Expect #2

If you're about to finance a new fire truck - whether by lease purchase, loan, or bond - it helps to know what to expect.


It can be daunting to wade into a world you don't know.  We'll help you be prepared for the financing experience.

Here's what to expect #2 - You should understand your financial information

When a bank reviews your financial information, they will try to determine what is normal.  So, they'll try to back out any unusual or non-recurring revenues or expenses.

So, be prepared to explain what is normal and recurring and unusual and non-recurring.

These types of items are generally non-recurring.  

Grants, loans, large unusual donations, and insurance claims are examples of non-recurring revenues.  These are revenues you won't receive each year.

Grant expenses, large one-time purchases or repairs, and payments on repaid loans are examples of non-recurring expenses.  These expenses are not typically incurred each year.

Summary

It's important to have someone who understands what is normal and what is unique financially with your department's recent history.  It will help a bank perform a quality repayment analysis when they are confident in your knowledge of your department's financial statements.

Stay safe!
John R. Hill
President
First Bankers

Wednesday, March 18, 2015

Financing Your Fire Truck - What to Expect #1

If you're about to finance a new fire truck - whether by lease purchase, loan, or bond - it helps to know what to expect.


It can be daunting to wade into a world you don't know.  We'll help you be prepared for the financing experience.

Here's what to expect #1 - You'll be asked to share financial information


A financial institution will analyze your creditworthiness.  Which is a fancy way to say you won't borrow more than you can comfortably afford to repay.

To do a thorough and accurate analysis, a bank will review information about how much revenue you receive every year, how much you pay to run the department, what savings or rainy day funds you keep on hand, and what debts you owe.

It's important to have accurate information in a accepted format.  If you are unable to provide this information, the bank will have more uncertainty in their analysis.  This uncertainty can lead to an increased likelihood of your department not being approved for the new truck.


Summary


Unsurprisingly, the financing process will involve sharing financial information.  Be prepared to provide financial statements such as audits, state annual reports, or IRS form 990.


Stay safe!
John R. Hill
President
First Bankers

Wednesday, March 11, 2015

Fire Department Fund Raising

All I do every day is talk with people from fire departments about money and their financial situation.

And I have a pretty controversial statement from talking to thousands of departments over the past 20 years


Stop thinking like a beggar and start thinking you are valuable.

I talk every day with people who must run their department on handouts and gifts.  They want a new truck or equipment but the community won't pay for it so the department must beg for donations and grants.

Or, if they are a private, volunteer department, they must beg some money from their council to run a modern and safe department.  Every budget conversation turns into a battle over every last dollar.

Why you shouldn't be thinking like this

 

A fire department is a valuable resource and gift to a community.  It keeps them safe and is a vital part of any new economic development.  Any business investing in a community wants to know their people and stuff will be safe.

So, hitch up your pants and don't be so timid about the financial resources you need to run a safe and modern fire department.

And educating your council and community about the costs will help offset the long run tradition of department funding (begging) model.

Summary

 

To get different results, think differently.  Don't be shy about the value your department provides to the community.  It will take time to overturn traditions but education will be a vital part of having a funded modern department.

Stay safe!
John R. Hill
President
First Bankers

Wednesday, March 4, 2015

Fire Truck Leasing bad questions -#5

I get asked the same questions almost every day and I thought I'd share the bad questions and why they don't help you.


Bad question #5- What's the longest term we can finance?

When this question is asked, the underlying concern is to have the smallest payment possible.  While that is important, it's two dimensional.

The real question is to balance the needs for the smallest payment with paying the lowest possible total borrowing cost.  That means fine tuning how long you finance your truck with how much you pay to borrow the money.

Here's some facts about this question

To finance a $300,000 truck, you would pay about $58,000 in borrowing cost for 10 years.  By extending to the longest term of 15 years, your borrowing cost almost doubles!  And the difference in payments is less than $10,000.

Summary

Selecting a financing term is a balancing act between your payment budget and borrowing cost.  Just choosing the longest term can cost a lot of money.

Stay safe!
John R. Hill
President
First Bankers