Inventory Finance Firms See Business Conditions Improving

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NEW YORK — Electronics and appliance dealers are beginning to find their financial footing as the recession and attendant credit crunch continue to ease.

That’s the word from the industry’s two leading floor-planning firms, Capital Solutions and TCF, which have a unique, insider’s view of retailer and vendor finances and operations.

Their take on marketplace conditions follows:


How’s business been for you?

Jeffrey Malehorn, president/CEO, Capital Solutions for the Home Product Industry (CSHPI), formerly GE Capital Solutions:

Business has been steadily increasing of late. We did see a decline in inventory financing through 2008 to 2009 as dealers worked to control their inventories. Manufacturers and distributors look to us to establish predictable cash flows and reduce costs related to administering open accounts.

Jim Hentz, corporate development executive VP, TCF Inventory Finance:

Our business is doing very well. We bought a couple of more portfolios, including a joint venture with Toro. We closed 2009 with $500 million in assets, and our lawn and garden acquisitions have propelled that to $750 million in assets in the first quarter of 2010. Our electronics and appliance business is up between 15 percent and 20 percent, as our dealer count expands and existing dealers grow with us.

The good news for us is that we’re improving our share. Retailers don’t want to put all their eggs in one basket.


How are CE and majap dealers faring? Have they found their financial footing?


In general, our customers are faring very well. The independent dealer channel is proving to be nimble and able to adapt to economic changes. Manufacturers are supporting extended financing terms and dealers are doing a better job of stocking the right products to support their businesses in a recovery.


Sales were generally down about 20 percent last year, and the retail markets are still sluggish. It’s important for retailers to take out enough cost to off set the declines, but you can’t reduce your obligations on certain fixed expenses.

The larger, regional retailers have had the most difficulty in 2009 through 2010, while the smaller dealers are more agile — they can react quickly to market trends and take out variable expenses.

The buying groups are also seeing some comeback. Sales are up about 10 percent in 2010, representing a 50 percent recovery. They help even the playing field for smaller dealers, and business for them is getting back on track. I’m cautiously optimistic that dealers are getting stronger financially. Their business plans look sounder, and we saw improvement in the first quarter over 2009.


Has the credit crunch eased, and is inventory financing more readily available for retailers?


While the market has seen a consolidation of financing sources, we are now hearing from dealers that there’s adequate liquidity for their inventory needs. From CSHPI’s point of view, we have consistently provided inventory financing support to the dealer channel throughout all economic cycles. To manage liquidity, we are working closely with dealers to take advantage of vendor program support and longer payment terms.


Manufacturers have been extending terms out a little longer to encourage retailers to buy more. Currently we’re seeing 180-days-free floor plans, although in general the trend has been to discourage long-term buys, and to not try to load up dealers on inventory, by shortening up terms. This helps retailers get faster turns. Seeing a cement floor in a dealer’s warehouse is exciting.


How would you describe retailers’ and distributors’ inventory positions? Bloated? Lean?


Higher-end products are turning slower in many areas of the country. We are seeing more interest in inventory finance programs from manufacturers who want to support their retailers, help level set stocking levels and build account loyalty.

We will continue to work with our manufacturer customers to develop innovative financing programs that allow smart growth for their distributors and dealers.


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