FleetWatch - 42-The in-house Deal

TRUCK FINANCE

Roger Hutton... Financial Manager, Scania Finance - offering a more conservative approach but not a closed shop

While local banks may be cold-shouldering truck finance applicants, there are truck suppliers who have their own finance and credit facilities, making it possible for them to offer finance to customers independently of conventional finance houses. One such company is Scania southern Africa, which, through Scania Finance, offers a full service package of finance, repair and maintenance as well as vehicle insurance to both new and existing customers. FleetWatch asked Roger Hutton, financial manager, Scania Finance Southern Africa, for an update on the slowdown.

Q: What is Scania Finance’s view of the current credit crunch in local trucking circles? What caused the shut-down on available loan finance?

A: The dramatic and sudden slowdown in the global economy resulted in a marked slump in goods transferred across both South Africa and Africa. This slump is most visible in the South African mining industry as well as the container transport sector, where these sectors all but came to a standstill in the first six months of 2009. Secondly, the large credit losses the banks are incurring in both retail and commercial markets are also negatively affecting the trucking sector. These combined trends have had a negative impact on transport rates and thus the profitability of road hauliage operations, which has led certain banks to withdraw from the truck market.

Q: How is Scania Finance able to bring 100% in-house financing of vehicles to market (independently of banks, both local and offshore)?

A: All Scania Finance companies are 100% owned by our parent company in Sweden. As a result, we are able to raise funds via various channels both locally and through our in-house treasury department. As a result, we are not bound by joint-venture agreements with banks in South Africa.

Q: What are Scania Finance’s lending criteria as far as trucks and trailers are concerned?

A: Scania Finance mainly supports its own brand, i.e. Scania products, and will on a case-by-case basis consider the financing of trailer and truck combinations. Our criteria fall within the ambit of the National Credit Act with similar requirements to other vehicle financiers.

Q: Does Scania finance start-ups?

A: We do consider financing start-up transport operations on a case-bycase basis, based on the information supplied by the client and how this meets our criteria.

Q: What form of deposit/percentage is necessary on truck/trailer financing?

A: The deposit and structure of a transaction depends on various factors, i.e. the client’s financial information provided, type of vehicle application (long haul or construction, for example), and additional securities offered. We do not have set criteria as laid down by the local banks.

Q: What does Scania Finance look for as far as business acumen/track record is concerned when financing heavy vehicles?

A: A healthy track record with other financial institutions and diligent account conduct do have a positive impact on the credit decision. Other factors that influence the decision include the client’s operations, how they conduct business, contracts they hold and the payment terms thereof.

Q: What do prospective truck/trailer buyers need to do to secure financing from Scania Finance?

A: The client needs to complete an application form, providing the necessary information and then sign an offer to purchase a Scania product. The financial representative at that specific branch will present the client with a package which includes an ‘Indicative Offer’. If the client is interested in the offer, the financial representative will present the application to the Credit Committee for final decision making. Once the deal is approved, the client will receive a Facility Letter stating the conditions of approval.

Q: How many trucks and trailers has Scania financed this year?

In our operations across Southern Africa, we have financed 264 new Scania trucks and 137 trailers.

Q: What is the heavy vehicle repossession rate like right now?

A: At Scania Finance, we have seen the number of repossessions increase over the last six months due to the slow-down in the market and a number of customers struggling with cash flow and business levels.

Q: Has Scania Finance’s approach to granting loans changed over the last six months?

A: In light of tougher trading conditions in the market, Scania Finance has had to tighten controls and does apply a more conservative approach towards vehicle financing but has not ‘closed shop’ for business. We operate in a specialised market and take pride in knowing and understanding our market which makes it possible for us to offer a premium service to the southern African trucking industry.

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