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By Charles Rathmann
Despite a withering construction economy, construction contractors
are getting loans – without personal guarantees and credit checks.
Their secret? Equipment equity loans.
"We pulled $50,000 out of our four-year-old crane," said Ross Rogers,
president of Gene Rogers Construction Co., Inc., Dalton, Ga.
Rogers used a crane equity loan from Heartland Wisconsin Corp. to
purchase a Dresser TD20 bulldozer.
While Rogers' business is experiencing a slowdown of only about
10%, Rogers avoided the long, difficult process of going to a local bank
for a traditional equipment loan. Rogers, head of the 60-employee
design builder, thought it best to leverage the equity in his four-year-old
24.5-ton boom truck to make his dozer purchase.
"Some of the local banks might finance this purchase – but then you
get into personal guarantees and a lot more paperwork," Rogers said.
"The approval process is longer."
"We are able to help guys like Ross where their local banks can't or
won't," Scott Blair, president of Milwaukee,
Wis.-based Heartland Wisconsin, said. "Some of
our customers call us when they have cash flow
issues. These guys are just floored that when
their balance sheet shows they are losing money
hand over fist, someone is still going to FedEx
them up to $150,000 with just a simple form and
a phone call. I mean – all we care about is the
equipment as an asset. I don't want to see your
bank statements or your tax return. And we
won't require you to give us all your business."
Equity loans could continue to be important
even as the economy recovers. The U.S. Census
Bureau in August reported that private nonresidential construction put-
in-place for June was flat versus the same period in 2002 – which means
that the construction economy is far from recovering from the downturn
of the previous year. Ironically, as the economy improves, contractors
can get caught in a bind if their cash flow does n