Business Beat
l B u s i n e s s B e a t M M By Steve Ehle hopkins@litewire.net There may be a tunnel at the end of the light This is my fi rst written piece for . For those of you who may not know, for the past 23 years I was editor-in-chief of magazine and its sister publication (for about 10 years). But change is a part of life. Speaking of change, I spoke with many exhibitors and attendees at the July AWFS show in Las Vegas. I heard a mixed bag of opinions and perspectives on the state of the economy and the wood industry, specifi cally. Cautiously optimistic a term I don't quite understand the meaning of was the general theme. Relative to the show itself, attendance was down, but there seemed to be good activity for at least a couple days of the four-day event. Kevin Mellon, equipment fi nance manager with SCM Group USA, expressed some frus-tration at the show over not being able to reach new machinery fi nancing agreements with potential customers because of the recent trend where credit card companies are slicing the credit limits they allow their cardholders. Machinery purchase deals were diffi cult to close, Mellon said, because buyers couldn't come up with the required down payment. I inter-viewed Kevin after the show. Here's what he had to say relative to the credit/fi nancing issue: purchasing or leasing equipment? Financing has become much more diffi cult to obtain. For instance, the ap-plication-only criteria have changed from a $350,000 application to only $150,000. There have been numerous banks that have exited the woodworking industry due to high delin-quency and defaults or have gone completely out of business. For instance, the major play-ers in the industry over the last six or seven years have left our industry. [He lists six banks.] The amount of defaults has generated a huge market for used equipment and has really affected the new equipment machinery vendors. : credit card companies have reduced the limits they offer customers. Please explain. : Not only has the credit market tightened, there are fewer lenders to submit deals to. The application-only business represents at least 90 percent of our deals. The credit card companies are arbitrarily cutting credit limits. Let's say a customer has a (certain) credit card and the limit is $50,000 with a balance of $13,000. Then (the credit card company) comes in and cuts the limit to $25,000. The customer still has the same balance of $13,000, which changes the ratio and lowers the customer's credit score. We submit the deal and our credit guys look at the credit score fi rst, then look at the remaining available credit and decline the deal because of the low score and the amount of available credit. It doesn't matter that the customer has always paid on time. It's all about the credit score on application-only deals. www.modernwoodworking.com 18 SEPTEMBER 2009