February 2015

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>> FINANCE WILLIAM ATKINSON T he credit and financing land- scape has certainly changed for the better compared to five and six years ago, and, according to the people who keep their eye on this for the equipment distribution industry, this trend is expected to continue, at least into the near future. When it comes to financing their own businesses, dealers seem to be experiencing few if any problems. "Conditions have improved greatly since 2010," said Gayle Humphries, CFO for JCB of Georgia (Pooler, Ga.). "Interest rates are competitive, and the banks want our business back." George Kapitzky, CFO for Patten Industries (Elmhurst, Ill.) is finding the same thing. "We have an established line of credit with our bank and just renewed it about a year ago," he said. "ey know a lot about us, so it was very easy to renew. In addition, even though we have a fairly sizeable line of credit, they felt they could go it alone with us." "We have no problem getting financing," said Paul Cunningham, CFO for Highway Equipment Compa- ny (Zelienople, Pa.). "In fact, we have had a number of new banks knock- ing on our doors." Lenders are on board with these observations. "For dealers, the situation is pretty favorable these days," said Michael Linley, senior vice president, Chase Middle Market Banking, for JPMorgan Chase (Milwaukee, Wis.). "It's a cyclical industry, and it reached its trough around 2009. Right now, although it varies from state to state, dealers in general are getting back to the perfor- mance levels they had pre-recession – around 2006." As a result, according to Linley, there is no shortage of lenders in this space willing to pursue relationships with the industry. Larry Shute, president, Construc- tion Equipment Finance at 1st Source Bank (South Bend, Ind.), agrees. "As a group, most dealers have strength in their balance sheets because of the favorable economic environment that has been in place for the last couple of years," he said. "ey are making a good bottom line and retaining it in their busi- ness, which is strengthening their balance sheets. As such, most of the credits we're looking at are very good." Strength in balance sheets helps borrowers and lenders not only in good times, but also when the downtime comes, which it inevitably will, according to Shute. "at is, when times are good, dealers are able to build equity," he said. "As such, we expect to see strong balance sheets going forward." In 1st Source Bank 's portfolio, and likely in the portfolios of other lend- ers, according to Shute, delinquencies are nominal and very controlled, or even nonexistent. "I don't think lenders are taking losses," he said. "In sum, we are in terrific shape with our customer base." Your Customers What are the credit conditions for the contractors and other customers who purchase that equipment? According to Patten Industries' Kapitzky, a lot of this dealer's customers use the finance company set up by the manufacturer. "Our customers are finding it pretty easy to get credit," he said. "In fact, there have been very few instances of our customers being rejected." Some customers are experiencing challenges, though, according to Humphries in the South. "e equip- ment finance companies want 'A' customers only, and those who have been in business for three years or longer," she said. "Many customers Put Up Your Sails – Credit's Got a Good Breeze While it may not be all smooth-sailing for non-A customers, more and more deals are going through – dealer and finance experts talk about 2015 conditions. 24 | www.cedmag.com | Construction Equipment Distribution | February 2015 Gayle Humphries George Kapitzky Paul Cunningham Michael Linley Larry Shute

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