ForConstructionPros.com

I just finished sponsoring a construction equipment dealer CFO conference, as well as working on the Associated Equipment Distributors' (AED) Executive Forum, which will take place in September in Chicago. Working on both events has provided an up-to-date look at the construction industry.

At the CFO conference, we had a banking panel representing bankers working in our industry, financing equipment for both dealers and contractors; a banker who primarily represents the construction industry; and a banker who supplies WBE/MBE credits to contractors through financing arrangements. We also enjoyed an in-depth construction and equipment review provided by Eli Lustgarten, senior research analyst, Longbow Research.

Between these presentations, there wasn't much good news to pass around. If I had to summarize the first six months of 2009, I would not have anything good to say. And if I had to estimate the latter half of 2009 and provide a soft estimate for 2010, it is not much better. As we've said before in this column, how your business is doing is very much dependent upon where you're located and what niche you cover.

Credit based on risk factors
Sure there are banks still financing contractor equipment purchases or leases. However, the borrowers need to be top-tier credits with strong balance sheets and profitability. And even if you pass this first test, the cost of the "risk" factor plays a much more important role in the credit decision.

In other words, the banks are going to get paid for the risk they are taking. This same thinking applies to captives, because they have also incurred an increase in the cost of capital. So the financing is out there, but the cost to finance equipment will be higher and surrounded by tighter covenants.