32
ACT
DECEMBER 2014
FINANCE
ROUND TABLE
debt service coverage ratios. Thishas
createda favorable environment forbanks
andbank-owned leasing companies to
underwritenewbusiness. The current
low-interest rate environment and the
signalswe aregetting from theFederal
Reserve alsopoint toa spurof refinancing
activitywhere companies are able to lower
their rates andpaymentsbymoving to
higherqualityor largerbankswith lower
funding costs. SMFL intends to support
that trend.
HOWDO YOUCHARACTERIZE THEMARKET FOR
USEDCRANESANDACCESS TO FINANCING?
Buechler:
As longas a customer that is
interested inaused crane is creditworthy
andhas reasonable expectationsofwhat
financing structure theywould find
acceptable, financing forusedManitowoc
equipment is readilyavailable. When
financingusedManitowoc equipment,
the customerwill need to expect shorter
length termson thedeal, and inmost
cases, adownpaymentwill be required
tomake sure that collateral coverage is
acceptable. It alsohelps that valueson
used equipment havemovedbackup
as theoverall volumeof availableused
equipment has shrunk.
Fry:
Customers are still very interested in
purchasinggoodused cranes, however,
the supplyof used craneshasbecome
somewhat limited.Most companies sold
off under-utilized cranesduring the
economicdownturnandwithbusiness
pickingup, arekeeping the cranes they
have left in their fleet.As for financing for
used cranes–again, Iwould emphasize
that our company is verydifferent –we
are financingmanyolder cranes forour
customers. It isnot unusual for abuyer to
come touswitha20-year-old crane and
we are able to find the right financing for
that purchase for them.
Whitcomb:
Themarket forused cranes
is strong in some segments andweak in
others.We continue to see strength in
prices for certain segmentsof the crawler
cranemarket.We see strengthening in
tower cranes asmore cities likeChicago
andNewYorkhave startedor re-started
high-riseprojects. The rental industry
continues tobe strongbutwe see a flat
market for rough terrain cranesbecause
of a slowing in the energy sectordue to
deflationarypricing foroil andnatural gas.
We see strongdemand for the all-terrain
cranemarket – inparticular for the larger
capacitymachines. SMFL looks favorably
upon financing forused cranepurchases.
Craneshavehistorically retained their
valuebetter thanall other asset classes
in constructionand that isnot going to
change. Because these craneshave already
seen their largest collateral value “fall”
when theywerepurchasednew, it is easier
for SMFL to consider a small tomedium
sized company that is tight on their cash
flowbecausewe are inan equityposition
on the asset (or the company is anoverall
strong equityposition for their fleet).
WHAT ARE THEBIGGEST CHALLENGES FOR
YOURCOMPANY IN FINANCINGCRANESAND
RELATED EQUIPMENT?
Buechler:
Probably themost significant
challengewe face ismaking sure
potential borrowershave their financial
statements andother financial information
(receivables agings, backlog reports,
etc.)up-to-date and inorder. Borrowers
alsohave tobe able to show lenders a
goodbusiness case to justifyadditionsof
equipment to their fleets.
Another challenge is tomake sureour
financingpartnershave enough credit
availability for repeat customers toallow
for the financingof those customers’
additional cranepurchases.However,
through long term relationshipswith these
repeat customers, adeepunderstanding
of theirbusinesses and themarkets they
compete in, and thewell-establishedpay
histories theyhavedemonstratedover
time,wehavebeenable to successfully
complete funding for additional cranes for
manyof our customers.
Fry:
Rate is very important in everydeal
but structure shouldneverbeoverlooked.
Consider thebest termor structure that
can fit your cash-flowneedsduring the
best of timeswithan eye towards less
robust times. Everythingwedo inbusiness
and life isplanning for the future so
why shouldn’twedo the same for your
equipment finance/leasepayments?
Whitcomb:
Thebiggest challenges forour
company in financing cranes and related
equipment is thehighly competitive
market for financing. We are looking
tobuild long-term relationshipswith
certain customers andmight not fight
for everydeal ina race to thebottomon
interest rates.At somepoint our company
has topassonadeal that doesn’tmake
sense and sets thewrong expectations
for the customerover the long term.Our
strongpreference is to seekout seasoned
management teamswhohaveweathered
multiple economic cycles andprefers to
have a relationshipbankwithpeople that
theyknowunderstand their industryand
havebeenactive in it as longas theyhave.
This iswhywe aremembersof SC&RA
andparticipate in the industry inavariety
ofways.
■
”
‘‘
Cranes
hav
e
his
torical
l
y
retained
their
v
al
ue b
etter than al
l
other as
s
et cl
as
s
es
in
cons
truction and
that is
not going to change.
JEFFREYWHITCOMB,
senior vice president/
executive director,
Construction and
Transportation Finance
Group, SumitomoMitsui
Finance & Leasing
”
‘‘
Cons
id
er the b
es
t term or s
tructure that can
fit y
our cas
h-
fl
ow need
s
d
uring the b
es
t of times
with
an ey
e toward
s
l
es
s
rob
us
t times
.
Ev
ery
thingwe
d
o in b
us
ines
s
and
l
ife is
p
l
anning for the future s
o
why
s
houl
d
n’
t we d
o the s
ame for y
our
eq
uip
ment finance/
l
eas
e p
ay
ments
?
HARRY FRY, president,
Harry Fry and Associates
