A: This was a repeat customer that came my way who had challenged credit… Probably not your typical C-Credit – strong cash flow and tax returns. 561 and 577 for credit scores. Not only that, but they operate in the logging industry. The logging industry can be tough. Essentially, a lot of places don’t like to work with logging as much. With a low FICO score along with working in the logging industry, we knew we would have some trouble.
A: Our funding sources don’t always want to fund that industry. We do have places that will, but if it’s outside their credit guidelines, they will be more hesitant to take that on. You have to find the sources that will look at someone where the credit is poor, not terrible, and in a restrictive industry… We really have to look at a more limited list of people that will work with all of these factors, and that are more cash-flow based. The equipment was also non-titled, which some of these specific funding sources prefer. Strong cash flows and non-titled equipment made this a good look for a couple of these more niche sources.
A: Putting together the financials was a hurdle we had to get over. They didn’t really have an accountant that dealt with some of the specific items that we usually grab in these cases, so I had to get together with someone over there who wasn’t as versed in finance, and walk her through what a balance sheet is and an income statement. She was able to do those on QuickBooks and send them my way, and they were pretty strong – they looked good. When it comes down to say, challenged credits… Credit can be one thing, but financials can be another. Some businesses are more cash-based rather than credit-based.
A: That’s a good question. I think it’s because it holds it value better. You’re talking about, say, trucks, on the other end of the spectrum. You put a lot of miles on them and the equipment’s value seems to depreciate a lot faster than, say, a 1996 John Deere Skidder, which will hold it’s value a lot better than a truck would, or a trailer. That’s why we had a little bit more wiggle room with someone that’s a C-Credit, or D-Credit.
A: They had to put down a more significant security deposit – maybe $16,000 or $19,000 down on a $42,000 piece of equipment. You have to be upfront with the customer on why some of these initial costs may be higher than average, but that we’re doing everything we can on our end to get it done.
A: Yeah, that’s a good way to put it. It was taking around a week or a week and a half to find an approval on this one, and the customer was starting to get nervous. I just had to assure them that we were working hard and weren’t giving up until we knew for sure what we were able to do on this deal.
A: Yeah, we were able to get her the equipment, and she left us a pretty good review when it was all said and done. With situations like this, when you can overcome a lot of the obstacles, it can feel like a great relief when it closes out in a positive way.
Next week we will check in with another one of our finance officers to continue to give prospective on how we are able to help customers just like you! Stay up to date and learn more from our valuable resources at www.AmericanEFS.com/The-Bottom-Line