Interview: Andy Hopkins, Mower Finance
To get a handle on the current state of equipment financing, OPE+ interviewed Andy Hopkins, owner of Mower Finance, which is an arm of the larger Terrace Finance organization. Mower Finance provides loans, lease programs and other finance agreements for landscape industry professionals, as well as homeowners and municipal buyers. Hopkins ran a landscape construction business with his brother for about 20 years before devoting his time to equipment financing.
OPE+
Where are we today with access to financing? Compared to a year or 18 months ago.
Andy Hopkins
I would say it is getting a little bit tighter. The economy has put pressure on lenders for performance. So you can see it, with people talking about credit card defaults or auto loan defaults, this industry follows it too. What people don’t know is that most of that publicity is around the Tier 1 lenders and what they’re doing. [Note: Tier 1 marks borrowers with the best credit, those who are the lowest risk to a lender. and it drops from there.] Are those lenders moving into a more aggressive stance where they’re trying to get a bigger customer share? Or are they moving more conservatively for performance?
But there are hundreds, if not thousands, of other lenders that provide services. And there’s probably a few dozen that focus very heavily on the OPE space, and they provide solutions when those top tier lenders are not the right fit. Startup businesses, people with FICO scores that don’t meet the criteria, people who don’t have the income requirements, and some of the hurdles. I think that the interesting part about this business, there is usually a solution.
Some of it gets bad name because people say, ‘Oh, that rate is so expensive. I can’t believe they’re charging that much. But credit is a reflection of the payment habits of the applicant. The lenders are taking a risk and they’re trying to balance that risk.
OPE+
For a smaller or new business looking at financing for the first time, where do they start?
Hopkins
Part of it is education, right? Finding articles like this. Read everything while thinking critically about why this information exists.
Second, find companies like ours where there is no cost and no obligation to go through the process. We use a soft credit check so there’s no hit to their credit and they can see where they are. I don’t mind people trying before they buy with us because I know that if we can provide a great experience, they’ll come back.
Another thing I tell people, like any industry, you feel like the landscaper down the street is your competitor. In reality, as a landscape business owner with my brother where I ran more the office side, we were friends with just about every business that we also competed with. It was very common that we’d have a coffee or a lunch or a run into each other at the supply stores. And we would chat about challenges and problems.
You’d be shocked how many people who’ve done the hard work of getting their business up and running are willing to share tips and tricks with people who want to enter the industry. And in this landscape industry, if you put in the effort, there are plenty of customers, right? You know, the population is not headed toward, ‘Hey, I really love doing lawn work.’ So learn from others in the industry.
OPE+
For established landscape businesses, what is changing today with equipment financing?
Hopkins
There are so many more providers for businesses than there are for consumers. You might have a great relationship on one exchange and you think that’s where you should go back to. The problem is that every need is unique.
If you want to buy one of your competitors, you can use SBA loans, or you can use acquisition financing.
If you want to get all your equipment, there’s equipment financing and we specialize in that. If you want to manage your supplies, there’s financing that specializes in managing supplies and consumables that go through the season. They all have different costs of capital and different complexities.
As your business grows, try to learn a little more about what your options are instead of thinking it’s always the same personal line of credit, which is one of the most expensive forms of credit you can do and that you need to personally guarantee. There are so many more options.
We still are in an economic time where defaults are a little high so personal guarantees are still popular. But what does that mean? I don’t think a lot of people know what a personal guarantee means. Or they ask, ‘What’s a lien?’ And everyone views liens as terrible. I’m like, a lien is nothing. Every car that is financed has a lien on it. So what’s the difference if your mower does? Make all the payments and they release the lien and it’s yours. This education is still missing. Our charter this year is to put more effort into education to help us grow.
OPE+
How do you work with power equipment dealers?
Hopkins
We have about 2,500 dealers in our network. This is the time of year we grow a lot as new dealers find us through referral word of mouth or we call out to them with our salespeople. They don’t need to make any commitments to us. We basically say, ‘Look, we have financing solutions for your customers. It’s going to be through a variety of different lenders and payment solution providers. And it’s going to be for all credit profiles and both the consumer and the commercial side.’
There are some outstanding financing solutions in this space at the tier one level with Synchrony and with Sheffield. Unfortunately, with TD pulling out of the business, it’s going to be big news this year. I was a Sheffield customer forever and had a wonderful experience and it helped my business grow.
My team and I tell them, we always try, if people want advice and need help, to provide them the right tools and background. That takes a lot of time. We spend a lot of time working on our relationships with our manufacturers and our dealer networks.
That investment pays off in our deep relationships. I go to the Equip Expo trade show and it’s awesome to have all our dealers walk up and say, ‘Hey, thanks so much.’ And they tell you this story like, ‘We helped Mr. Smith and we got him this and without you, we couldn’t have done that.’ That’s a success story.
We have a whole series of lenders and payment solution providers that can help them bridge the gap for their customers. That’s our specialty, bringing those parties together. That makes it simple for the dealer because they don’t have to learn 10 different systems of all the lenders.
OPE+
How does having experience in this industry help you as a lender, as opposed to the local bank who might serve community businesses like the dealer and landscaper?
Hopkins
It comes in a variety of forms. Our communications team can put together information that’s relevant and not just generic. It might talk about specific things that are in the industry and opportunities.
We understand the cycles that these businesses go through in the year, and in different parts of the country, right? We have the South that can mow all year long, this grass goes all year long. We have the North that goes through multi seasons. We have snow plowing. We know that and have a passion for it.
And when you call and say you’re looking at a Bad Boy model or you have a Toro model a Cub Cadet model, or whatever that model might be, and we have a little knowledge and history of it.
We see the evolution in both the cost of the equipment and in complexity. And we understand the people running these businesses and their costs and their revenue streams. And so whether it’s a person doing it on the side and trying to mow and make some money, I call the gig economy type worker, or whether it’s a full-fledged landscape firm that’s trying to do it.
And we understand the stress, and that’s something that we try to help educate people to relieve stress and teach them how to use lending in a creative to take that stress off. And that’s the part I love about the business is educating businesses on that. It’s a hard business. People work extremely hard to make the money they make.
And so, like I said, I find it fun to find solutions for them. I’m not naive to the cost of capital that some of the people have to pay because of their situation. So, we just try to teach them, be stewards of your life and use these as tools, but don’t become beholden to them.
