News: General News

NACM North Central Members Adjust for the New Credit Landscape

Tuesday, April 28, 2020  
Share |

The COVID-19 pandemic is affecting every company doing business in the U.S. in countless ways. Supply chains have experienced delays and disruptions. Businesses have temporarily shuttered. Companies that long resisted employees working from home are now relying on it to ensure continuity. Over the course of a few weeks, the business landscape shifted and the economy tanked.

NACM North Central members are responding to these sudden changes by evaluating and refining their credit practice and considering the long-term lessons of these new challenges.

Tennant Company, a manufacturer and distributor of cleaning equipment and products, has begun taking a more conservative approach to credit.

“For credit decisions where we were on the fence before, we’re taking a deeper look and are perhaps making a different choice than we would have previously,” said Kristin Caswell, senior credit manager for Tennant Company. “We’re also having more conversations with customers. Past payment history isn’t going to help us make decisions right now because it doesn’t predict future behavior under these conditions.”

Judy Perttula, market service area credit manager for Lyman Lumber, also views increased customer outreach as an essential response to changing conditions.

“We’ve had people within our organization contacting all of our customers to learn what they’re experiencing and seeing,” she said. “Moving forward, we can be confident in the direction things are going rather than guessing. This increase in customer contact gives us information from our sources and helps us gain insight from their sources, so we’re twice as educated.”

Because Lyman Lumber works primarily in new home construction, major effects of business disruptions are expected 30 to 60 days out. Changes in how banks manage construction loans and delays in the home inspection and title processes are all pieces of the current domino effect. One delay impacts everyone down the chain.

Brett Wegner, shared services manager for Flagstone Foods, anticipates the sudden credit environment disruption leading to a greater dependence on relationships.

“As recently as 20 years ago, credit management was built on relationships,” he said. “If I wanted to get paid, the business was going to pay a person not a process. AR and AP worked together and they knew each other. We moved away from that to the highest number of transactions with the fewest possible people and the greatest speed of technology. We created service centers and became centralized, but we lost relationships. Credit became transactional. Now we find ourselves in the spot where transactional isn’t going to work, so we’ll have get back to developing relationships.”

Members are also looking to NACM North Central resources as they seek more information and additional insights to help them continue making smart credit decisions.

“Industry trade groups are invaluable right now,” Perttula said. “We generally do our own secured transactions and liens in house, but I’ve done more research into NACM’s Securities and Liens Service in case we need that support. We also rely on credit reporting services, and our builder supply group has been a huge resource.”

Caswell agreed, “Chris Kuehl’s recent member webinar was very helpful, and there are some other upcoming NACM educational events from that should be useful as well.”  

Wegner finds the connections through NACM, especially the Shared Services Group, vital right now.

“What’s the common theme with NACM? People connecting people,” Wegner said. “They provide useful services and education that help us learn about the business, but developing relationships is the biggest benefit. When I have a bankruptcy, I have the education to deal with it but I also have a connection to people who have gone through the same thing. I can call on them to find out how they went through it. That’s where the value really comes in.”