SALES consultants have been known to say, “Nothing happens until you make the sale.”
Well, maybe. But the financial crisis we have endured the past few years has shown us that sometimes nothing happens even after you make the sale.
Manufacturers, dealers, and distributors have all experienced the sinking feeling of having a customer who wants to buy, only to encounter a lender who doesn't want to lend. The customer is convinced that your product is a good fit for his application, but no one wants to finance the deal.
In far too many cases, completing a sale is like starting your car. Your key may be a perfect fit for the ignition switch, but unless there's a charge in the battery, you aren't going anywhere.
It's no coincidence that the height of the financial crisis coincided with the bottom of our industry's downturn. With the buyers of trailers and commercial trucks already struggling to keep their balance, financial companies yanked out the rug and carried it away as they left the market. One day banks were loaning money to almost everyone. Almost overnight seemingly, they loaned to no one.
Of course, it's understandable that lenders get wary after their assets are called “toxic.” But it looks like much of the toxins have been purged from America's financial system. That faint drip you hear is bankers slowly turning the faucets back on.
The ability to obtain financing is critical to our industry. We need loans in order to sell product, and we need loans in order to manufacture it. The difficulty in securing working capital as well as floor-plan money has been a real handicap as our industry tries to put the downturn in our rearview mirror.
We were encouraged recently by two announcements from two unrelated sources, both made June 24. One was Wabash National's announcement that the company plans to enter into a new $150 million revolving credit facility with a group of lenders led by Wells Fargo Capital Finance. Under the new credit facility, the trailer manufacturer will enjoy lower rates and the option of doubling its previous borrowing capacity. Working capital, of course is critical for any manufacturer.
On the dealer side, cash isn't always king — sometimes the floor plan is royalty. The same day that our website (www.trailer-bodybuilders.com) ran the Wabash announcement on the company's new source for working capital, Felling Trailers said it had reached an agreement with GE Capital's Commercial Distribution Finance (CDF) operation to provide floor-plan financing options for the light- and medium-duty trailer manufacturer's dealers in the United States and Canada.
For Felling, a manufacturer primarily of light- and medium-duty trailers, the search for financing had been lengthy. The options that the company had three years ago no longer existed. Some companies that previously financed inventories officially withdrew. The folks who remained in the business set standards that were virtually unattainable for the average manufacturer.
While the financing options aren't nearly what our industry was used to, Pat Jennissen, marketing and sales director for Felling, describes the finance market as “thawing.” So does Travis Eby, a former president of the National Association of Trailer Manufacturers. He points out that a large percentage of NATM members rely on such financing and is encouraged to see finance companies — and local banks — making deals again.
Financing also is becoming more available to truck equipment distributors.
“It is, now that you mention it,” a distributor told us recently. “You know, here lately we have had banks calling us and telling us they want our business. That hasn't happened in years.”
Local banks are beginning to lend, even to smaller companies.
“We have a network of subdistributors who sell snowplows for us,” a distributor said to us in early July. “We give them a discount if they buy 12. In recent years, they may have only bought a couple because they didn't have the money to buy 12. This year, they are buying a dozen and getting the discount because they are able to get the financing.”
Our industry still has a long way to go to get back to pre-disaster levels. But little by little, we seem to be getting out of the hole. And it certainly helps when banks and finance companies come along to offer a stepladder.