A Van Purchase That Puts Your Whole Business at Risk
You are a one-person mobile locksmith. A used van you like is priced attractively. The seller wants cash, will hand over the van and a bill of sale, and says the title is 'coming from the bank.' You need the van to take on a commercial contract that starts in three weeks. Separately, a new customer - a property management company - wants a net-30 account and asks you to sign their vendor agreement, which includes an indemnity clause and a requirement that you carry $1M general liability and be licensed and bonded in the state. You currently carry $300K liability, are licensed, and are not bonded. You have about $8,000 in reserves and the van would consume most of it.
1. Evaluate the van purchase as a business decision and identify the risks that a careful operator would refuse to accept.
Read the worked answer
The van is attractive because it unlocks a contract, but the terms concentrate risk:
- No title in hand. 'Coming from the bank' with cash and a bill of sale means you may not be able to register or insure it, and you could lose the money if the title never arrives or there's a lien. Paying cash with no title is a classic way to buy someone else's problem.
- Cash, no title, urgency - the same pattern that should make a locksmith slow down on a key request should make you slow down on a vehicle.
- Reserves. Spending most of $8,000 on a van with unresolved title leaves nothing for insurance, bonding, tools, or the first payroll gap on the new contract. A single breakdown or a slow-paying account could sink you.
A careful operator does not pay cash for a vehicle without a clear title in hand (or a verified lien-release process through the lender). If the deal is real, the seller can produce the title or a lender payoff letter. If not, walk - the contract is not worth an uninsurable, unregisterable van.
2. The property manager's vendor agreement requires $1M liability and bonding you don't have. How do you respond, and what's the business logic?
Read the worked answer
Respond honestly and with a plan, not a bluff:
- Tell them your current coverage ($300K, licensed) and that you are not yet bonded, and ask whether they will accept a phased approach or a higher-limit certificate before the contract starts.
- Price the gap. Get quotes for raising liability to $1M and for a surety bond. If the contract's revenue over its term comfortably exceeds the added premium and bond cost, it's worth doing - and it makes you more competitive for the next account. If not, decline or renegotiate scope.
- Do not sign an indemnity clause you can't back with insurance. An indemnity obligation without matching coverage is an unfunded promise; a single claim could exceed your reserves many times over.
Business logic: contracts that require coverage you don't carry are a signal to fix the coverage or pass - not to sign and hope. Sequence it: secure title and financing for the van only if the numbers work, then buy the coverage the contract requires, then sign. Don't let a start date pressure you into an uninsured indemnity or an unbonded commitment.