The credit market for floor-plan financing in Connecticut is beginning to thaw, a good sign for the state’s auto dealers, which saw that credit lifeline nearly dry up over the past two years as lenders pulled back in fear of a prolonged downturn in auto sales.
Banks in Connecticut that recently pulled out of the market are beginning to get back into the game. And an Ohio-based bank is looking to begin offering floor plan loans in Connecticut for the first time next year, potentially creating new competition in the state where few major players exist.
“Dealers weren’t able to get floor plan financing two years ago. That has by and large gone away,” said James T. Fleming, president of the Connecticut Automotive Retailers Association. “Things are certainly better today.”
Floor-plan financing — also known as an inventory loan — is the lifeblood for auto dealers, allowing them to purchase vehicles from manufacturers and carry them on their lots until they find a buyer.
When the financial crisis hit, many banks pulled back on those loans by refusing to take on new customers or renew terms with existing customers when loans matured.
The problem was especially felt in Connecticut. Nearly 45 dealers in the state, for example, received notice from Sovereign Bank that it was getting out of the floor-planning business, and that dealers had to find an alternative source of financing.
Finding another lender, however, was difficult if not impossible for a lot of Connecticut dealers, which contributed to some business failures. In January 2008, the auto association counted 325 new dealer members; now the number is about 245, Fleming said.
But better days appear to be ahead.
Fleming said Sovereign Bank is trying to get back in the game in Connecticut and has recently made floor plan loans to dealers in the state.
Sovereign spokeswoman Ellen Molle said as a result of its acquisition by Banco Santander in 2009, a decision was made to invest in an Auto Finance Group at Sovereign.
“Following that decision, Sovereign/Santander has reintroduced an indirect automotive lending program throughout the bank’s geographic footprint, alongside the existing dealer floor plan lending,” Molle said.
Other big players in the market that were skittish in recent years — including Bank of America and TD Bank — are also beginning to come back.
And now Ohio-based Huntington Bank recently announced that it is expanding its auto dealer financing business into New England. The bank will begin to offer loans in Massachusetts, Rhode Island, Vermont, New Hampshire, and Maine, and then move into Connecticut potentially by the second quarter of 2011, said Nick Stanutz, Huntington’s senior executive vice president and head of the auto finance and dealer services group.
Stanutz said Huntington Bank is the No. 1 auto dealer lender in Ohio and Kentucky and that the company expects to add 13 jobs in the next six months to support the sales and underwriting functions of the expansion, to be located within the new market areas.
Stanutz said he anticipates the bank will offer financing options to approximately 500 dealers in the northern New England area over the coming year.
That includes indirect auto financing, floor plan loans, and commercial, real estate and equipment loans.
The key to the bank’s growth in Connecticut, Stanutz said, will be finding a sales rep, underwriting expert and/or credit analyst familiar with the local market.
“We feel like this is a very underserved market,” Stanutz said.
Fleming said Huntington’s arrival would be welcomed. Although floor-plan lending has improved, dealers with imperfect credit scores are still having a hard time getting loans.
“Players that were backing away two years ago are coming back to the market, Fleming said. “But that’s not to say it is as good as it was before the recession. So any new player is good news.”
Citizens Adds iPhone App
Citizens Bank is launching a new mobile banking application that will allow its business customers to manage their cash and payment from a mobile device.
The iPhone application, called accessMOBILE, is available free to Citizens’ commercial and business banking customers. It will be made available in the future on Blackberrys and Droids.
The new app allows customers to approve pending transactions, view account history and transaction details, get current-day snapshots, perform intra-company funds transfers and receive alerts and bank mail.
Mobile banking is becoming increasingly popular as banks compete for younger and more tech savvy customers.
Over half of the top 100 financial institutions offer mobile banking services, according to a recently released report from Maryland-based First Annapolis, an industry consulting group.
Surprisingly, the activity is not concentrated among the top 25 or even top 50 banks, with many smaller banks actively utilizing vendor capabilities to offer mobile options.
Greg Bordonaro writes the Financial Sense column every other week. Reach him at gbordonaro@HartfordBusiness.com.
