Help with finding a consolidation/refinancing loan

Hey all,
Here is the back story… my original C.C.s were at a great rate of 7.9% but when they all found out that I had so much debt from buying so much equipment on them, they all started jumping up their interest 1 by 1 until it they were all on average 25%apr.

Well Discover sent me some personal loan paperwork and I applied and received a $25k loan from them to consolidate and reduce the %, the it’s at a fixed 15.9% for 7 years… which is still way to high but I didn’t have a choice.

Since it’s been a year I want to find a lender that I could refinance and maybe get a bit extra for working capital seeing as though it’s so slow right now.

I attempted to go to my bank… again… like I did the first time a year ago. And they just brushed me off… AGAIN because I do not have any Real Estate as collateral and they do not take Equipment as collateral which is BS because I’ve got $50k worth of equipment.

So, the only other place I found in the area was Bank Of America which offers a “Premium Credit Line” loan in which I can pay Interest Only or 1-3% Principal payments
But it also comes with a .5% annual fee with a minimum of $150 plus a $200 startup fee. And the total interest rate will be Variable and will start in-between 4.95% to 8.37%
I see the rate as being fine but the fact that it’s Variable scares me.

I also want to point out that I looked all through the SBA loans any you can’t use any of them to payoff other debt. You have to have proof you bought equipment or something with their money.


The bottom line is that you are in a very tough spot. You were not in a position to start a business and you went and did it anyway.

It is not BS for the bank to refuse to loan on your equipment. You may have paid 50K for it, but if they were to have to re-possess it and dispose of it, the used value standing in place is about 5K less costs to excercise their rights… in other words, zilch. Why 5K? because they would need to sell it to a restaurant equipment broker who would have to come un-install it, transport it, clean it up, market it and sell it for a profit all for less than 50% of the “new” value. I don’t blame banks at all for taking this approach.

Is there a cap on the variable rate loan that you mention? If that cap is less than 15% it looks to me like you come out ahead no matter what.

Do you have a family member that would loan you 25K at 10%? That would be better than the 15% you are paying now…

the Cap on that loan is 30% i believe. What I do not understand is how one place will give you a loan without even asking if you have any type of colateral, and the other place wont even discuss it with you.

I belive BOA’s % is locked at whatever % between 1.75% and 5.17%, it’s the Prime Rate that will fluxuate and raise the overall %

And in this economy I have no idea what the Prime Rate will spike to, when i talked with them a few days ago it was at 3.25%

Plus I can’t find any decent information on the web on how high the prime rates have spiked in the past… all they give is what the current rates are around the country.

i also wanted to throw a note on this comment. My original restaurant was making money hand over fist and paid itself off in the first 9 months.
It’s on the 10th month that my neibors decided to go bellyup and we rented their space and added a bar. And because I’ve never owned a bar and had no idea how much my insurance and bills would raise, is when everything started to go ary.
Point in note, ignorence is NOT bliss :mrgreen:

You’re in a tuff spot and I don’t know an easy solution.

  1. You’ve only been in business a year?
  2. You accumulated credit card debt to finance the business.
  3. You have no lease (did you ever reconcile that with your landlord?).
  4. You’re trying to sell (to get out of the jam).

Courses of action:

  1. You can just run -> {default on the personal debt or get a great job to pay it off}

  2. Wait month to month for the landlord to dump you or run you off.

  3. Stay operational and attempt to sell the business to an idiot {only while you’re able to keep up on rent & etc…}.

You’re not in a good situation and apparently, neither is the business. Start planning an exit strategy: sell the equipment and leave at mid-night.

  1. Win the lottery.

Can you speak to the landlord about closing up the bar and going back to the original setup?
If you speak about default, maybe they will listen.

Don’t have a clue if it would apply in your situation, but I know at least in our area we have the opportunity to apply for a “Community Economic Development Program” loan. I have just the minimal information on it but equipment IS used as the security, we’d be eligible to borrow up to $15K for each full-time employee we have (35hrs or more), and the rate is an amazing 3% fixed. I’d have more detailed info if I could only find where I stuck it!! I know it’s coordinated by area banks and is a government guaranteed program. Ask your bank about a (sounds like) “See-Dap” loan.

I strongly urge you to listen to dave ramsey or at least visit his site and read some of his material.

Your problem is your debt. It is not the interest rate or anything else. You somehow have gotten the idea that you are going to borrow your way out of this. Regardless of what “loan” you take you need to get a serious plan together to get this debt paid off. And QUIT BORROWING.

We had the same brilliant idea to borrow on our credit cards to buy the equipment. We thought it would be a great idea to borrow the money for the real estate and borrow the money to remodel and open. It was by pure chance I listened to dave ramsey and that is when the light bulb went on and I decided NEVER to borrow money again…for anything. The amount of risk we take by borrowing is crazy. It is the monkey on our back. It is what americans have come to think is the way to aquire all our “needs”. We are slaves to the lender.

We have been on his plan since April 2007 and I know for sure it will be possible to become completely debt free. If my business is not making money it is an expensive hobby.

Good luck to ya. Please take this how I meant it…

Excellent Post Kris.

It reminds me of my friend who bought a $300,000 house in 2004. Since then he refinanced twice, and now owes $400,000. His ARM Rate has adjusted and the payment skyrocketed. Since the house is worth $300,000, he can’t refinance unless he comes up with the $100,000 difference.
When i ask him where the $150,000 he paid the last 6 years went, he got a dazed look on his face.

I totally agree with you about being debt-free Kris - everywhere except the mortgage. If you make a solid down payment (20%) and get a traditional mortgage (read: fixed) it doesn’t make sense to pay off a mortgage. You can get a 30-year fixed mortgage for under 5.5% right now - that’s not a hard rate of return to beat with conservative investment. Heck, you can almost beat it buying a 30-year government bond even in today’s horrendous interest rate environment.

Those bond yields could be much higher in the next couple of years, and you’d still be sitting on a 5.5% mortgage.

I’d jump all over the BoA deal if I were you. Prime rate should remain low for at least the next two years. You can pay down quicker on the principle and then give the local bank a little bit more comfort in your staying power and refi it into something else if you like by then.