Credit Crunch Survey

By Steve Noe
Outdoor Power Equipment recently asked representatives from several of the industry’s leading finance companies about the current credit crisis.
Specifically, we asked the following questions:
1. How are the requirements for customers applying for credit going to be different in 2009 versus 2008?
2. What can OPE dealers do to better qualify customers for credit before taking them through the selling process?
3. Once a customer has been denied credit, what is the best way for an OPE dealer to handle the situation without potentially losing a sale and that person as a customer?
4. If the customer is just on the bubble of not getting credit from the finance company, what can a dealer tell that customer to do over the next 60 to 90 days to get credit?
OPE received the following written responses, in order, Jan. 30-Feb. 13, 2009:

JACK SNOW
PRESIDENT AND CEO
SHEFFIELD FINANCIAL
A DIVISION OF
BB&T FINANCIAL, FSB
(CLEMMONS, N.C.)
1. How are the requirements for customers applying for credit going to be different in 2009 versus 2008?
Here at Sheffield, there will be no differences. Customers will still apply, and the requirements are the same as they have been since 1992. We have, however, developed and enhanced much of our software, making it easier for the end user to apply for a loan before visiting his favorite dealer. He can get pre-qualified by going to our Web site: www.sheffieldfinanical.com.
2. What can OPE dealers do to better qualify customers for credit before taking them through the selling process?
OPE dealers have greater advantages for qualifying applicants simply by knowing our processes, procedures and promotions for the products they sell. It is a huge advantage for our OPE dealers to be registered as Sheffield dealers and to have the knowledge of the process of applying, the process of the paperwork and the funding process. It is very important that the OPE dealer knows how to communicate with our loan processors (underwriters) and managers. Finally, it would be a big advantage to the dealer to assist the customer in completing the application, making sure that we have enough information on the application to make an educated decision.
3. Once a customer has been denied credit, what is the best way for an OPE dealer to handle the situation without potentially losing a sale and that person as a customer?
Different finance companies score applicants in many different ways. For example, some finance companies use software to make their decision based solely on the applicant’s Beacon or FICO score. At Sheffield, we only use the score bands for interest rate pricing. Stability of the applicant (number of years in business, number of years at present address) and the customer’s ability to repay the loan are our main focal points. Therefore, a good dealer should have at least three alternate sources of financing.
4. If the customer is just on the bubble of not getting credit from the finance company, what can a dealer tell that customer to do over the next 60 to 90 days to get credit?
If a customer has bad credit (past dues, collections, judgments), then there is very little that can be done in that short of a period of time. However, if a customer has good credit, but not a lot of credit history, then there are options. Ask the finance company if a down payment and/or a co-applicant would swing the deal. In that case, if the deal is done, the original applicant will establish credit with the finance company for their next purchase.
In closing, we at Sheffield Financial, even though we acknowledge that this is not the best of economic times, know that spring and rain are coming and grass is going to grow and customers are going to want to purchase outdoor power equipment to handle it. Sheffield will be here to assist them in their purchases as we have been since 1992. We are stable and strong. 

TONY POLITO
CLP
1ST PRIORITY ACCEPTANCE LLC
(TALLMADGE, OHIO)
1. How are the requirements for customers applying for credit going to be different in 2009 versus 2008?
The first major difference is that what was easy in ‘08 will be not so easy in ’09. One reason is that there are fewer lenders in ’09. Many have stopped lending; the ones that have continued in the market have raised the criteria to be approved in ’08. Personal credit scores in the low 600s were very approvable. Today, some lenders have raised that score to 725 as a minimum with three years time in business to be considered. Today, as an independent non-bank-owned finance/leasing company, we have access to capital sources that will still look at start-up contractors with less-than-perfect credit, but there are fewer of these sources.
2. What can OPE dealers do to better qualify customers for credit before taking them through the selling process?
OPE dealers can better qualify their customers by asking pre-qualifying credit questions such as: How long have you been in business? Do you know what your credit score is? Have you financed equipment in the past and through whom? Have you been declined for financing in the past, and, if so, by whom? If a customer has credit with a lender and has paid them as agreed, this could be the best place to start.
3. Once a customer has been denied credit, what is the best way for an OPE dealer to handle the situation without potentially losing a sale and that person as a customer?
When a customer is denied credit, it should not be the end of a sale. The best way is to have an open dialogue with the customer during the pre-qualifying questions (see answer to question 1). Since you have already spoken with your customer about credit, this should make this conversation much easier. Also, because one lender says “no,” the next one may say “yes.” When working with a leasing/finance company like 1st Priority Acceptance that uses multiple funding partners, it increases your chances of finding acceptable financing.
4. If the customer is just on the bubble of not getting credit from the finance company, what can a dealer tell that customer to do over the next 60 to 90 days to get credit?
When a customer is on the bubble, the best advice would be to have them review his or her credit report and dispute any inaccuracies that they may find. Ask them to pay down their credit cards if they can and stay current on their payments, especially their mortgage payment. Do not open any new credit cards. These simple things could make a difference in as little as 90 days.

GARY SLAGLE
VP AND GENERAL MANAGER
GE MONEY
(ST. PAUL, MINN.)
1-5. The economic conditions of 2008 continue to linger into 2009, affecting nearly everyone in the business chain: consumers, dealers, manufacturers and lenders. Because the environment remains unpredictable, banks continue to be scrupulous when assessing credit applications. As a result, it’s likely that OPE dealers will continue to see 10-20 percent fewer approvals than in past years.
To be successful in this economic environment, now is the time for OPE dealers to focus on the fundamentals — sales training, promotions, marketing and sales analysis. It’s all about attracting qualified customers and closing more sales. These are business basics that always pay off when properly executed.
With perhaps fewer opportunities to sell, now is the time to equip your staff with additional sales training and ongoing coaching, including the proper use of financing. Last year, GE Money provided sales training to more than 800 OPE dealers. These dealers are now better prepared to survive during a slow economy, and they’re ready to sprint ahead when the economy recovers.  They know that financing can be a valuable money-management tool for consumers, how to use financing to close the sale, how to process applications effectively, and how to help consumers make more informed financing choices. It may seem like a small detail, but even the small things like making sure an application is completed correctly and all income sources are listed can make a difference in whether an application is approved. Often, reinforcing the basics can optimize your opportunities and fortify your relationships with your customers.
Promotions and marketing go hand-in-hand. Consumers will continue to need power equipment even in a sluggish economy, but they may be more reluctant to shop and buy. That’s why it is crucial to continue to offer flexible payment options and to motivate your customers with promotions. Work with manufacturers and lenders to provide incentives for consumers, then aggressively go after these potential customers with a comprehensive marketing effort. It’s important to advertise during a weak economy, so that you keep customer traffic high and gain market share. Some of your competitors may be in hibernation during these uncertain times. Maintaining consistency with your efforts will keep your business top-of-mind and create additional opportunities for you.
Sales analysis will help you determine which promotions and marketing efforts are most effective. Look to your lender for data that you can use to target your message more effectively and efficiently. GE Money provides sales partners with valuable data that helps them pinpoint their programs for maximum effectiveness.
GE Money has experienced many different business cycles during our 75 years in business, so we take a long-term approach to success. In tough times, it’s important to get back to basics. We’re committed to the outdoor power equipment industry, investing in programs, tools and technology to support our business partners. Together, we can manage through this dynamic climate and be prepared for a robust rebound.

ART COUCH
DIRECTOR-VP
MERCHANT RELATIONS
TD RETAIL CARD SERVICES
(MAHWAH, N.J.)
[NOTE: TD Retail Card Services is a private-label credit card company that administers the Yard Card programs within the lawn & garden industry for 21 manufacturers, with the card available at more than 8,000 participating dealers in the United States and Canada.]
1. How are the requirements for customers applying for credit going to be different in 2009 versus 2008?
We don’t discuss our underwriting standards in detail. We can tell you that we routinely review our underwriting standards in response to a number of factors, as is common practice, and we are still targeting the same kind of borrower.
2.  What can OPE dealers do to better qualify customers for credit before taking them through the selling process?
Dealers should ask pending buyers how their credit is in general and whether there are any current credit issues they may know of that may prohibit them from being approved.
3. Once a customer has been denied credit, what is the best way for an OPE dealer to handle the situation without potentially losing a sale and that person as a customer?
On all declined applications we process at TD Retail Card Services, our practice is to provide the consumer a toll-free 800 number to contact us directly to discuss the results of the processed application. In addition, the federal government passed legislation that enables the majority of Americans to receive a free annual credit report, although some states do require a minimal fee for this service. Details are available at https://www.annualcreditreport.com/cra/index.jsp. One of the most important things a dealer can teach a consumer is to know their credit score. This process will enable them to do just that.
4. If the customer is just on the bubble of not getting credit from the finance company, what can a dealer tell that customer to do over the next 60 to 90 days to get credit?
The dealer should advise the consumer to continue to pay all accounts on time. Additionally, if they have balances that are above the assigned credit limit, it is important that they make payments to create open to buy, as this is a key indicator for credit lending.