It has been nearly 15 years since the last economic recession. Some companies and business owners have not seen an economic uncertainty like this before. How can we share our experience and help them see opportunities that market disruption and business cycles bring?
An array of opportunities arise from fluctuations in the business cycle. When competitors withdraw, new business prospects emerge. However, the complexity of financing these opportunities grows due to changing economic situations. Effective communication with our management and sales team is key to grasp and capitalize on these areas of opportunity. Often, we hear customers say, “I didn’t know you could do that”, referring to the various ways in which we can structure our financing. Our salespeople can proactively tackle some of the financing hurdles and use our expertise to help our customers, but it’s important that our customers bring us into the process sooner rather than later.
In the media, there are many articles focusing on recession and the impact of interest rates. How can businesses make sense of the confusing economy? And how do they prepare for what comes next?
Addressing the unknown can be stressful. The media often focuses on old, outdated information, and people tend to stress over past months’ metrics. My advice for business owners is don’t assume other people know more about your business than you do. It’s important to rely on your own indicators. The best way to prepare is to ask the “What Ifs” well in advance. For example, “What if fuel prices spike?” or “What if spot rates stay low for a long time?” A basic strategy for an economic downturn is to blend a dose of skepticism with an optimistic approach to business. Not a doomsday plan per se.
What types of financing mistakes have you seen companies make during times of higher interest rates?
A common mistake is having your customer base too concentrated, whether that be with a single customer, or within a single industry. While focusing on a specific customer can be good for business in the short run, becoming overly reliant or fixated on serving only a limited group of customers can pose several risks. Customer diversification can help businesses weather economic storms. That’s why we serve four industries – construction, manufacturing, transportation, and waste. All tend to be somewhat cyclical in nature, but their cycles are never all in sync.
Another mistake is not exercising financial discipline, especially in times of economic strength. When the economy is hot it makes it difficult to identify the weak performers. Even a turkey can fly in a strong wind. While positive opportunities can arise in a booming economy, this environment also heightens the risk of errors.
Additionally, businesses should be on the lookout for predatory lending including financial instruments such as MCAs, regardless of economic conditions. These can hurt businesses even in good times but become more prevalent during recessionary times.
How is CCG uniquely positioned to mitigate the effects of economic fluctuations?
We operate independently; devoid of any influence from a larger parent company, allowing us to handle all aspects of our operations – from our own financing to customer acquisition. Also, maintaining modest leverage on our balance sheet keeps us agile. CCG retains full control over our loans, refraining from outsourcing, and allowing us the freedom to service and manage them as we see fit. This focus ensures the best possible performance of our portfolio. We prioritize relationships both in good times and bad, demonstrating our flexibility and steadfast dedication.
Did anything in the equipment finance industry in 2023 surprise you?
What surprised me most has been how long the yield curve has been inverted. With this yield curve, 3-month treasuries have a higher yield than longer-term 10-year treasuries. While this has happened in the past, it’s unusual for it to persist this long. The longer we have an inverted yield curve the greater the chance of negative consequences.
The second surprise for me has been the duration of the trucking downturn.
Reflecting on 2023, what accomplishments would you say CCG should be most proud of?
For every piece of equipment that we finance for our customers, jobs are created. In the long run, this has a substantial multiplier effect on our customers and the economy. We take extreme pride in serving those family businesses and the work they do every day. Internally, we're actively creating opportunities for our employees and without the cutbacks seen in the banking sector. Even in challenging times, we continue to generate profits for our shareholders.
What can customers expect from Commercial Credit Group in 2024?
We’ll continue to look for ways to deliver value to our customers so they can run their businesses more efficiently and effectively. In fact, we’ve just launched the CCG Fuel Card which provides some of the highest fuel discounts available. We are not in the fuel business, so we are passing all the potential savings to our customers.
Customers can expect the same level of unwavering dedication we’ve provided for the last two decades. As we get ready to celebrate our 20th anniversary, our employees will continue to provide the same type of relationship financing on which we built the company, and our customers, employees, and shareholders benefit.