Creative, Customized Financing Plans Provide Operators With Cash Flow Flexibility
Posted on: 06 Mar 2019
The construction market has rebounded in recent years, with continued strength projected through 2019 (as highlighted in the 2019 Annual Report & Forecast). Many fleet owners and managers have re-invested in their fleets to make up for previous years of extending life cycles as long as they could. Many others remain in a position today where their fleet requires upgrading/modernization — and we’re at an inflection point with technology where newer/current machines provide significant operational and cost savings advantages over machines that may be five or 10 years older.
On top of having equipment with leading technology, however, is the ability to maintain cash flow that allows for investment and re-investment into other areas of an operation. Whether that’s in people, marketing, or strategy development, those factors have an impact on whether companies thrive.
It’s possible to have the best of both worlds: Access to leading technology, and equipment plus maximized cash flows that allow for thriving operations to invest and re-invest. This dichotomy can be reached through unique financing programs offered by CNH Industrial Capital as a captive lender for CASE Construction that are simple and customized to the buyer’s business.
“To meet growth goals and have a positive impact on the bottom line, it’s imperative that operators are making new equipment purchases with creative financing in mind,” said Dan Spaulding, CNH Industrial Capital Liaison to CASE Construction. “Leveraging customized financing plans that are designed to meet the needs of an individual business can help operators meet their growth goals and maximize cashflows with features like strategic skip payments and payment scheduling, allowing for increased investment into their business.”
Spaulding said that for some customers, this mindset will require something of a shift in thinking. Rather than entering the purchase or lease process looking for the best cash price, customers should be thinking about the best cash flow price.
CNH Industrial Capital works with equipment buyers to develop creative payment schedules that fit with the seasonality and structure of their business model.
For example, the payment schedule for a diverse, non-weather dependent construction firm in Texas or Southern California, which is running year-round with a more consistent cash flow, is going to need a different payment structure than a firm specializing in snow removal in the upper Midwest, Spaulding said.
In that particular case, CNH Industrial Capital would structure payments for the snow removal company in a way that maximizes cash flow in the pre- and post-winter months, when companies are ramping up their operations and investing in people or new equipment. By comparison, the operations in Texas and California face less seasonality, thus wouldn’t likely need as much seasonal flexibility, but may need more flexibility based on the increase of hours on their machines.
“We want to set operators up to succeed,” Spaulding said. “We want to make sure that we’re designing skip payments that fit with when their cash flow is maximized, whether that’s monthly, bi-monthly, quarterly, annually or semi-annually.
“We know that the construction industry is weather-dependent in many cases, so we adjust the finance structures based on what fits their needs.”
That flexibility and creativity is made possible by the financial backing of the CASE brand, a key differentiator between CNH Industrial Capital as a captive lender and a bank or other non-captive financial institution. The access to flexible and also low-interest capital isn’t exclusive to those with the highest credit qualifications. The company’s financing products are designed to help as many people as possible get reliable equipment with good, customized financing.
Simplicity Is Key
With more organizations having a much tighter grasp on their financial analytics and cost-per-hour metrics, it’s critical to develop simple financing that fits into customers’ financial equation, Spaulding said.
“Customers are looking for the best financial product for their specific operation, so it’s a function of term, how long they want to be in the equipment and how many hours they’re putting on it every year,” Spaulding said. From there we’re going to create the best financing opportunity for them, or maybe something like an operating lease is a better option.”
Due to the rapid nature of technology and feature changes with CASE Construction Equipment, Spaulding said, CNH Industrial Capital has seen more customers opt for operating leases.
“Whether it’s from a balance sheet standpoint, or if one of our customers meets with their accountant and they recommend their next purchase be an operating lease, oftentimes that’s what it boils down to,” Spaulding said. “It all comes down to the specific financial details of their operation, and from there we will determine the best fit for them.”