September 2013

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Page 21 of 59

Money Credit Aplenty Sources say the lending market is stronger now, but a posture of partnering combined with evidence of a well-managed business are still the materials for cycle-proof credit approvals. By Tina Grady Barbaccia Getting equipment financing can be like getting a job: It's about who you know. This doesn't mean qualified applicants can't get credit, but it does mean know your banker, and make sure your banker knows your business. A relationship needs to be established on both sides. Credit lending may seem to have tightened its rules with the housing crash and meltdown on Wall Street, but what has really tightened during the financial crisis is lender relationships Larry Shute with customers, says Larry Shute, president of construction equipment finance for South Bend, Ind.-based 1st Source Bank. "Some people are going to perceive that you have tightened up," he said. "I do not believe rules are easing, nor do I believe they are tightening. As lenders become more sophisticated based on experience and knowledge, the questions they ask may appear as a 'tightening,' but frankly, it is based solely on better understanding a customer's business and strategy…not just doing a transaction." Asking more questions about an operation and how the money will be used is not tightening credit, Shute says. "It's tightening the relationship with your customers – not saying you are getting tougher on credit. We're not trying to be a big lender or grow for the sake of growing. We're doing business with the same type of customers we always have and just trying to understand their business and future as much as we possibly can. "We're a relationship lender," he added, "so understanding our customer's operation and strategic plan makes us an added-value partner." Credit-worthy customers are not having any problems finding capital. When the lending/leasing arena expands – for example, when big-box banks get aggressive, commercial finance companies appear again, and finance brokers are active again – it is a good indicator that business is brisk, Shute says. "Investors continue to look for ways to increase their return rather than just let capital sit and earn virtually nothing," he added. Troubleshooting Turmoil If a lender understands its clients' business well, it allows the lender to problem-solve – sometimes even before an issue arises. "I want them [customers] to know as much about our bank as we do about them," Shute noted. "It's not just walking in and (continued on page 22) 20 | www.cedmag.com | Construction Equipment Distribution | September 2013 20_Credit_Feature_Index_KP.indd 20 8/28/13 12:36 PM

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