Subscriber Login

MDM Premium Content  What's this?
Close
Subscribe today to access MDM's premium content with two issues a month of timely and to-the-point content for the busy wholesale distribution executive. Here's what you get:
  • Analysis of distribution trends
  • Interviews with industry leaders
  • Quarterly Public Distributor Report
  • Quarterly Inflation by Commodity Group Report
  • Market and economic data analysis
  • Access to the best online research tool in distribution

And much more! Learn more

login close
Forgot Your Password?
For more precise results try using quotation marks ("") around your search terms. See more search tips.

 

Home » Blogs » Management & Strategy » George Costanza, Distributors, and the Credit Mess
Julia Klein, C.H. Briggs

George Costanza, Distributors, and the Credit Mess

By  Julia  Klein
August 31, 2009 Comments (3)
More about:  MDM Blog,  Management/Strategy,  Operations
When the lenders stabilize their own companies they will be back in the inventory lending business, and these same, good cash flow-producing distributors will be top prospects. In the meantime, even great distributors look like bad credit risks to bankers who need to put their glasses back on.
Text Size
Email Print

Remember the Seinfeld episode where George gets indignant because a girlfriend breaks up with him saying: “It’s not you, it’s me”? George says something like “I invented that line – you can’t use it on me!” 

I’ve had conversations with distributors all over the country in the past few weeks that remind me of a surreal sitcom episode … distributors have been meeting with their long-term lenders on upcoming loan renewals and have heard comments like “we’re not in the inventory lending business” and “your balance sheet is stronger but your company value is less, so we’re no longer interested in your business.”  The value of nearly every business in America is less than it was three years ago … and this is coming from lenders who have had to merge, sell, and beg TARP funds just to stay alive.
 
Not in the inventory business? Then, obviously, they want to be out of the distribution business, right? Oh no, say these lenders, it’s just that there is immense regulatory scrutiny and all inventory is worth hardly anything in this environment. Huh?
 
Is this belt-and-suspenders, let’s never get burned again thinking from bankers? Or lack of judgment, paint everyone guilty, make no errors in front of the new bank bosses? What’s really happening is that these troubled financial institutions have to scrub through the ugly portfolios they’ve amassed and purchased, and everything is being written down whether it’s saleable inventory from a market-leading company or junk from a fly-by-night seller. Good bankers are in the risk management business; nervous bankers whose own companies are still tenuous are in the risk avoidance business, and that’s bad for our industry and bad for our country.
 
When the lenders stabilize their own companies they will be back in the inventory lending business, and these same, good cash flow-producing distributors will be top prospects. In the meantime, even great distributors look like bad credit risks to bankers who need to put their glasses back on.
 
George Costanza’s love life might be “it’s not you, it’s me”… but for American distributors feeling the credit crunch from their once reliable, but now shaky lender --  “it’s not us, it’s them.”

Julia Klein is CEO of C.H. Briggs, one of the largest independently owned distributors of specialty building materials on the East Coast (www.chbriggs.com).

Print Email
  • David Gordon September 6, 2009 4:33 PM
    Manufacturers also need to be careful about becoming too involved in the distribution inventory management business. While they have always helped finance some distributor inventory (terms and dating), some manufacturers are extending terms to companies that are on shaky ground on the basis of "the manufacturer needs the sales (volume)" and hence it is the credit / finance department's issue. Some manufacturers are adding credit people. A number of smaller distributors are cash flow challenged, so manufacturers should make sure that they do their due diligence.
    Post a Reply   Report as Offensive
  • Scott Benfield September 5, 2009 1:25 AM
    Hogwash. Lending standards were based on faulty assumptions of risk and market valuation. Everyone thought asset values would go up, unimpeded, forever. The greater fool theory of Dutch tulip bulbs surfaces again. Distributors will have to learn to manage better. Some may not make it. Even in normal times, some two thirds don't earn enough profit, at 2% of sales before taxes, to be a viable financial enterprise.
    Post a Reply   Report as Offensive
  • Adam Fein September 1, 2009 9:48 PM
    Great article. I want point out another similarity between George Costanza and a distributor's inventory: shrinkage. http://www.youtube.com/watch?v=pm3F9piwnTU Regards, Adam
    Post a Reply   Report as Offensive
Use the form below to leave a comment

MDM Digital

Executive Briefing: January 2012The Case for Mobile
in Distribution Marketing
John Sonnhalter explains why distributors should include mobile in their marketing plans and how to start. Watch now.
iPad users: click here to view.		 Economic Update January 2012 Economic Update:
The Festering Euro-Crisis
MAPI Economist Kris Bledowski analyzes the outcome of recent meetings about the European banking and debt crisis. Watch now.
Bob DeStefano's #1 Mistake on Company WebsitesOnline Marketing Tips
from Bob DeStefano
Many companies make the same mistake on their company websites. Do you? Find out.		 More Audio and Video Features from MDM:

  • MDM Podcast

Think About It:
When They Google,
Will You Be There?

In this digital age, the first stop a potential customer makes is the internet. If you're not there, you're not part of the decision-making process.

Listen now.

Learn more or subscribe to the Think About It podcast.

  • Training

Upcoming Programs

Feb. 9: Operating for Profit: The Coming Revolution in Supply Chain Finance with Jonathan Byrnes. This program is part of the quarterly Islands of Profit Webcast Series.

Did you miss MDM's recent webcasts? Order the DVDs and share with your team today:

* Leading for Profit: How to Lead a Profitability Turnaround

* Inventory Management Best Practices in 2012

  • Featured

USAbrasives-100-for-trifecta

U.S. Abrasives Market Demand Report

This report provides a three-dimensional view into estimated market size, customer segment potential and customer size demographics for the U.S. Abrasives Market.

These three data slices give you deep insight into total market potential and your market share by both customer type and size.

Learn more about the U.S. Abrasives Market Demand Report

Training Resources

Current Issue   Management Tips 2011   Inventory Management   Benchmarks and Best Practices

Featured Article - MDM-Baird Benchmarking Survey: Distributor Optimism Returns

$34.95

Buy now >>

Management Tips from Modern Distribution Management

$49.95

Buy now >>

Inventory Management Best Practices with Jon Schreibfeder: DVD + Book

$119.00

Buy now >>

Benchmarks & Best Practices: The Answer Book for Growth-Minded CFOs & Controllers

$249.00

Buy now >>
Job Board
Title Company Location
Marketing/Sales - Advanced Supply Chain Business Intelligence Systems - Big Data Analytics Scientel Information Technology, Inc. Southeast Michigan
Marketing/Sales - Advanced Supply Chain Business Intelligence Systems - Big Data Analytics Scientel Information Technology, Inc. Southeast Michigan
Marketing/Sales of Advanced Supply Chain Business Intelligence Systems & Big Data Analytics Scientel Information Technology, Inc. Southeast Michigan
Credit/Collections Manager APR Supply Co. Lebanon, PA
Management Trainee APR Supply Co. Lebanon, PA
INDUSTRY SPECIALIST - Rubber Products KAMAN Industrial Technologies North East Area - CT, MA, ME, NY, RI, VT
Sales Account Manager - Energy Market Segment TESSCO Baltimore, MD
View ALL Wholesale Distribution Job Listings

MDM Premium

January 25, 2012  

4202 cover image

MDM/Baird Survey: Optimism Returns

Rexel's U.S. CEO on Service & Alternative Energy

Global Markets Not Just for Large Companies

December 2011 Industrial Inflation Index

subscribe now View Table of Contents >>
Subscribers: Log-in
View Previous Issues


Featured Products

answer book for CFOs and Controllers

Benchmarks & Best Practices: The Answer Book for Growth-Minded CFOs & Controllers

Reviews (0)
 
Price: $249.00
An ultra practical idea-guide that gives an inside look at how leading companies are dealing with some of today's toughest financial and business management challenges.
Distribution Landscape Report - 2011

2011 MDM Market Leaders and Distribution Landscape Report

Reviews (0)
 
Price: $295.00
The ideal resource for anyone that wants to get a quick overview of the distribution landscape and the top players in major sectors! Includes the 2011 Distribution M&A Special Report.
B-to-B Online Marketing Toolkit Cover

The B-to-B Online Marketing Toolkit:
A Step-by-Step Plan for Distributors and Manufacturers to Leverage Online Marketing for Bottom Line Results

Reviews (0)
 
Price: $249.00
The 2011 Edition of this valuable marketing tool provides a step-by-step plan for leveraging Online Marketing to produce Bottom-Line Results. Bulk pricing available.


tech directory: start your search here



Sponsored Links