Harry Schneider, president of Allied Financial Solutions, Florence, Ky., talks with RER’s Michael Roth about why rental companies are likely to grow or replace fleet in 2013 and how finance programs can facilitate.
RER: What kind of year was 2012 for your business and what do you expect for 2013?
Schneider: We had a very good year. We expected a little slowdown closer to the election and that is what we saw. Since the election things have picked up considerably. Companies are going to have to “get back to business” in 2013. That means they are going to have to upgrade their fleet to make sure they are putting quality assets to work for their customers. We should see a nice increase in opportunities for providing funding to our customers in 2013.
What is the current environment like for rental companies looking to make equipment purchases? Are credit standards more stringent than ever or is there greater flexibility?
Our portfolio is a mixture of in-house funding and bank partnership financing. All of our partners are very comfortable with the rental industry. Our approval ratio is extremely strong. The major concern is still that the rental companies’ balance sheets have been hurt a bit by high depreciation on present assets and, in a lot of cases, lower profits. Some rental companies cannot borrow on the strength of their financial statements but still have an excellent credit rating. That is why we developed an application-only product up to $150,000. It has worked out pretty well over the past three years.
What are your customers telling you in terms of their expectations for the year ahead?
The answer to this question is two-fold. The customers who are calling us are doing well. They have seen their rental revenues increase and need additional equipment to meet their rental needs. But the customers who are not calling us are telling us a story too. They do not have any needs at this time. The unspoken story there might be that revenues are strong enough to support growth out of cash flow or revenues have not returned to a level that warrants additional inventory at this time. That said, a large percentage of our current customers who have spoken with us have told us that they have business booked for 2013 already and will be making purchases during the trade show season.
Do you expect rental companies in general will be purchasing more in the coming year than in the past year?
I am certain that there is a lot of aging equipment on the lots. Maintenance costs have to reach a point soon where the purchase of new equipment is mandatory. We will see some of that in 2013 and 2014. So, equipment purchases should pick up considerably starting in 2013.
What is your sense of the economy in general?
There are two types of economies. There is the economy that is reported on by the Feds every month. Then there is the economy that affects mom and pop. Although what happens in Washington causes us to have ulcers, it is our local economy that really matters to us. We play a major role in that local economy. Why are some areas doing so much better than others? Simply because the local governments have partnered with the local businesses to create a trust that promotes growth. More communities and states are moving to such cooperative measures. That is very encouraging.
What kinds of issues concern you most looking at the overall picture at things that could affect your business — gridlock in Washington, oil prices, European debt issues, etc.?
We have to ask ourselves again if what is happening in Washington is really any different than what happened last year or the year before. If there is one thing that will hurt a national economy or a business it is politics! Politicians are professional politicians. Their business is politics. And politics gets in the way of proper reasoning. Yes, the results of the negotiations in Washington could hurt my pocketbook. But, they cannot destroy my desire to grow my business and help other people grow theirs.
