Issue link: http://read.dmtmag.com/i/165243
Money ("Credit Aplenty" continued from page 20) saying, 'I have a checkbook. Give me a deal.'" It's about much more than making a single transaction. "We are in there for multiple transactions based on business relationships," he said. "When there are problems, and people do have them, if I have been out talking to customers, there are no surprises. I can work with the customers and help come up with a resolution." Lenders, for the most part, are doing a good job of knowing their customers and for what the money is being used, says John Crum, national construction sales manager/senior vice president of equipment finance for Wells Fargo Equipment Finance. "There is a basic set of criteria John Crum to which all lenders adhere," he said. "With certainty, we believe we should know our customers well and should have a dialogue to understand what they do, who they are and the general state of their business." As a secured lender, Shute says his financial institution is looking for a favorable collateral position, but ultimately it's about doing business with people. "Everyone can manage a business when times are good," he said. "Most companies had exposure to or have had to take some losses. If you loan money, you'll lose some from time to time. But it's when management doesn't have the skills to manage the business during a downturn that causes problems with being able to qualify for source funding." Even lenders have problems, Shute points out, so "we aren't going to sit in a glass house and start throwing stones." However, the survivors of the recession have strengthened their balance sheets, making it "more palatable for lenders to see them through. [The survivors] have saved money for a rainy day instead of making money and pulling it out." Crum adds that dealers and contractors should continue to watch their mix of obligations and operate in better financial times similarly to how they operate in a downturn. "Pay attention to the expenses in your business in both good times and bad," he said. "Do the things that you did in the recession. Make sure you are managing every expense. Just because we are out of the recession doesn't mean you can be more lax. You can still continue to try to grow your business, but make good sound judgments." Shute attributes a strong balance sheet to relationships within the business itself and to dealers that have the right people in the right positions. This is part of the relationship building – how a company has built a team – which Shute says he works to understand when considering credit applications. Is the lending landscape in good shape today? Overall, "we are sitting in a positive position," Shute pointed out. "It's not like growth is off the face of the earth, but things are fairly stable right now with a comfortable amount of growth." However, he says, no one seems to have any long-term good feeling about where the economy will be in the future. Shute attributes the caution and uncertainty about the economy to politics. "I believe part of the uncertainty is because of the political status we are in right now," he said. "I think everyone would agree that D.C. is broke financially and in the way it operates. I also believe this is a major component of people's uncertainty about the future." Uncertainty Remains But With Plenty of Credit Despite the uncertainty, there is still adequate lending on the commercial side, Shute says. In fact, his division is doing the same business (if not more than) it was doing four to five years ago when the market was going south. Wells Fargo's Crum notes that "for the most part, the credit landscape is really good." Shute also points out that there is "plenty of available credit now – and more credit availability than in the past." He also notes that the number of participants – in terms of those willing to lend money – has increased from 2010 to now." William G. Sutton, CAE, Equipment Lending and Financing Association (ELFA) president and CEO, says that the latest data (as of July) suggest that the equipment finance sector is on the verge of a breakout performance. Sutton notes that while recent key indicators show an overall improvement in lending to the small business sector, the May numbers "provide concrete evidence of growing demand for productive assets by a cross section of the business community." At the same time, Sutton says, the "historic lows in delinquencies and charge-offs" mean American businesses are better able to meet their financial obligations. This creates a "favorable environment for additional capital investment and job creation. We hope that these trends will continue…" Robert Rinaldi, senior vice president of CSI Leasing, says it is encouraging that all the metrics are going in the right direction. "Many lessors have seen these ups in new business volume (NBV) followed by subsequent down months, evidenced in the 'saw-tooth' pattern of the NBV chart" Rinaldi said. "But, and this is a good news 'but,' if you run a six-month rolling average on the NBV data over the past six years to smooth out the 'saw-tooth,' a clearer picture of definitive growth appears." Recovery Modest But Continuous Leading indicators suggest that yearover-year growth will remain relatively strong, but will slow somewhat, relative to the rapid growth experienced in 2011. M. Kevin McGee, Ph.D., professor of economics at the University of Wisconsin Oshkosh in Oshkosh, Wis., says U.S. credit markets are, for the most part, back to normal, "after several years of extremely tight credit." Banks are generally feeling fairly solvent – which was decidedly not the case four years ago – and are willing to offer credit to creditworthy businesses. 22 | www.cedmag.com | Construction Equipment Distribution | September 2013 20_Credit_Feature_Index_KP.indd 22 8/28/13 12:37 PM