Can service vans count as collateral when I buy a plumbing company?

Start by confirming ownership. A van that is financed, leased or registered to the owner personally may not be available to pledge. Ask the seller for registration papers and for payout statements on any vehicle loan, and have your lawyer check whether another lender already has a claim.

Expect the lender to look at age, mileage, condition and how easily the vans could be sold. Plumbing vans are often fitted with racks and tools, which can add to usefulness but may not add much to what a lender counts. An independent appraisal may be requested, and the lender may value the fleet conservatively.

Bring the rest of the picture. Vans are seldom enough, so lenders may ask for other assets, a personal guarantee or a down payment from you. Be ready to show that the company earns enough to cover its payments after expenses. Compare how different lenders treat vehicles, and ask your accountant what each choice would mean for your business and your own finances. Check whether the vans carry signs or fittings that add to the price of selling them, and mention these to the lender.

Key takeaways

• Confirm that the vans are owned by the company and free of other claims.
• Expect a lender to weigh age and condition, and to ask for more security.
• Show that income can cover payments, because security does not replace that.
• Ask the lender how it treats fittings and racks on the vans.