Each week, we’ll interview one of our experienced Finance Officers for a brief question and answer session about something interesting from the week, along with tips and tricks to make your finance process easier, and their unique perspective on the industries and customers we work with.
This week, we caught up with Brian Kirlin in our Sioux Falls office who helped get an approval for an older trailer with a customer who had a lighter credit history with the help of some trucks put up as collateral.
Q: Hi Brian, thanks for speaking with me today. Can you tell me a little bit about this customer? What specifically made this one a little more difficult?
A: So, what we had was a customer that has been in business for about 4 years. He’s in the transportation business, and his banks of late were a little bit light, and he was looking to purchase an old trailer. Like 13-year-old trailer, and so, that falls outside of the scope of a lot of lenders, but others can help. But then you start adding in his bank, and the fact that his credit, while having a reasonable score, was actually very light with only 4 tradelines, and the largest of those tradelines was a mortgage, which was closed and had started the foreclosure process at one point. So outside of that, he had one small auto loan, and two credit cards that made up his entire credit bureau.
Q: Where was he sitting at with his credit score, even with his light tradelines?
A: Well the score was 687 – which, again, is reasonable, but anyone that looks at it is not going to look at it as a typical 687, obviously. And so, when you combine all the facets of the transaction – the light credit, the trouble on the past foreclosure on the last line that he had, looking at an old trailer, there weren’t a lot of people that were willing to consider that type of transaction. What he did have to bring to the table was a couple of trucks that he owned free and clear. However, they were also aged assets. One being a 10-year-old truck, and the other being about 13 years old. And so, once again, that’s another stopping point for many lenders that we’re familiar with even. Because of this he had run into some declines because the assets were too old to be used as collateral, or the asset that he was looking to purchase was too old. So combined with the credit profile, banks, etc. it just became a very difficult transaction. However, we were able to approve him taking those two trucks as collateral to get his trailer done.
Q: So, for those trucks, were those that he had purchased with cash, since they didn’t show up on his credit report?
A: I believe those were cash purchases. They were not recent purchases. He had been in business, as I said, 4 years, and I think they were purchased a few years back.
Q: Was he able to lean on cash reserves in this case, since he had done so previously for the purchase of those other trucks?
A: No, he was coming out of a slow season especially, in this case, and he’s looking to expand the type of hauling options that he has for his customers, he had been mainly doing dry van, you know dry goods hauling at this point, and he was adding a low boy to his offerings to haul heavy equipment, and coming out of the slow season, his bank balances were very light, and he didn’t have the cash to move forward with something like this at this time.
Q: So, the main thing that really helped in this instance was the collateral?
A: That is correct.
Q: Was there some convincing that you had to do with that collateral, or was that something that he was aware of at the beginning since he didn’t have significant credit history? How did those conversations come together, because obviously that was an important factor to get this done?
A: It was part of the interview process for us, and as we go through and interview the customer and obtain all the information on his overall credit profile, to see what his credit looks like, what his bank statements looks like, yeah, we determined that we needed some extra strength, and I already had the information in my back pocket knowing that he had additional trucks free and clear. When I approached him about offering those, it was not something that he was opposed to.
Q: So, if anyone has a similar profile, if they have a weaker history, or not as much of a built-up history of credit, collateral may be a significant thing to lean on if they are looking to apply for financing for any other piece of equipment?
A: Absolutely.
Next week we will check in with another one of our finance officers. Stay up to date and learn more from our valuable resources at www.AmericanEFS.com/The-Bottom-Line
