September 7, 2004
2001 Adrian Bulman Looks at our Industry
Adrian Bulman passed away at the age of 53 on January 13,2001. He is survived by his wife Beth and sons Aaron (17) and Evan (14).
He was young, in the prime of his life, and perhaps one of the best liked “super brokers” of his time. Adrian was a contributor to Leasing News, writing articles and keeping us “abreast” of what was happening in the “field.”
His viewpoint back at the end of the start of this century remains profound, and definitely worth reading:
From our Archives, December 27,2000:
A few weeks ago I asked what was happening in the market and got some interesting results. Here is some of the information I have come across from our leasing industry.
First, the small ticket leasing industry deals in perception. Our customer is the small business looking for equipment to do something better within his/her company probably replacing existing equipment. He is approved and has our contract in his hands. That evening he goes home and watches Peter Jennings while he is eating his dinner. He hears Coke has laid of an additional 2000 people. Housing starts are down. Consumer confidence is declining and the merchants are not expecting big Christmas sales. And last, Mr. Greenspan is cool to the idea or President elect Bush's tax cut and may or may not lower prime after the first of the year. All that negative news causes doubt and our lessee decides to wait. He says to himself, "I think I will wait 90 days before doing this and see what happens." For those of you who can remember it is '89 and '90 all over again.
2) For the first time I can remember we are competing with banks for small ticket deals. Local banks are hungry and desperate for revenue. Whether we like it or not they will also have more control over the customer than we do.
3) Cash! So many small businesses have done so well over the last five years they just pay cash. About this time last year a friend at Textron told me their business was dead because so many contractors were paying cash for their yellow iron. That left them picking over the credits who couldn't afford to pay cash. Sound familiar? Does anyone else perceive a decline in credit in 2000?
4) As 50 something lenders have gone away or "changed the way they do business" the survivors have raised rates and credit standards. This also has a direct impact on our competing with local banks. The "B" credit story deals are not getting done as they were a year ago. Many of those "B" credits have gotten shopped and have used credit cards to borrow and now can't be done.
5) Fraud! Don't kind yourself. As the economy cools the bad guys and girls find very innovative ways to steal from our industry. If something is just too good to be true then we all know it probably is. And, whether we like it or not, as the economy cools and there aren't as many deals out there some brokers and savvy vendors will polish beyond the realm of reality and in the words of Charles Randall, "Slide into complete male bovine excrement."
6) Inexperience. Many of the newer, younger brokers have gotten used to this terrific economy and have never gone through a downturn or watched their favorite lender disappear. Some fail to grasp the fact there was, possibly, too much money chasing deals and the ones receiving those huge dollars had to put that money on the street and fairly quickly. Historically, the quickest way to do that is to lower credit standards. But, when that happens those chicks come home to roost in about a year and a half. The younger brokers also need to realize the days of submitting a deal to three lenders with the first approval getting it are over. You do that now and you are probably going to end up with three turn downs and three very unhappy lenders. Lenders do talk with each other!!!!!
7) Transportation industry. Oh dear, if you are in this industry then fasten you seat belt because you are in for a rough ride. The big truck industry is hurting. Freightliner may not survive. They are rumored to be taking back 600 trucks per month. Small truckers are not making much money and first quarter of 01 they have five major expenses coming up -tags; highway use tax; ad valorum tax; Income tax; and down payment on their insurance premiums. An old friend and ex-Associates Commercial employee says there will be 80,000 additional large truck repos by 4/30/01. Most of us know Associates has raised their credit standards on trucks and almost no one will do owner operators. The truck dealers are desperate to place paper and have lost some of their arrogance. However, they are smart enough not to recourse any lease paper. Truck orders are way off. One of the biggest concerns is Freightliner owns a company that makes truck engines. I hear the very best truck engines. If Freightliner goes under and this engine manufacturer goes too it will cause huge problems for trucking.
Okay, so what is going to happen in 01? Who the heck knows??? However, the major lenders in small ticket should continue to do well. They will continue to cherry pick credits and even if we see a slight prime decrease I don't think it will be passed along. Collections will probably go up slightly.
The broker end could be a problem. I calculate over 100 brokers have closed up since September. More are going away after the first of the year. I think the first quarter of 01 is going to be a tough market for brokers. Their vendors are being solicited by some of the largest financial institutions in the US and now they are forced to compete directly with their lessee's bank. Even "B" story credits are difficult to get done. The broker survivors will be leaner and meaner. We all know there is business out there and we are a resourceful lot in finding it. Many brokers are focusing on specific industries. Others figure "twice the calls for half the volume" and I think everyone's profits have dropped this year. As a whole I think the brokers are frightened. Most are not doing this work between job openings. They are making house payments, buying groceries, and putting their kids through college. The changes in the last year are scary. There has not been a great deal of positive news from the leasing industry in 2000. Many I hear from are thinking more of controlling their own money and for the first time I hear some of the guys with a little more white hair than me talk about getting out.
On the whole, most people think 01 will be more of 00 with fewer lenders, tighter credit and more competition. In the many years I have been in this industry there has always been a 500 pound gorilla. No more! Denrich is long gone. Colonial is now owned by GECC. Manifest has been sold twice. Dwight and Charles have announced Republic is for sale and we hear Advanta is on the market. Being the eternal optimist, there certainly is lots of room for new lenders to emerge and become a "player" quickly.
But, as ole Mark Speros is fond of saying, "If it was easy everyone would be doing it!"
- Adrian F. Bulman