5 Questions: Mike Horak on the current health of the equipment market

(Photo courtesy of Mike Horak)

Mike Horak, commercial leader, Wells Fargo Distribution Finance in Hoffmann Estates, Ill.

1. What does your job entail?

I’ve been part of distribution finance — which is a legacy company going back to TransAmerica, GE Capital and now the last five years with Wells Fargo — I’ve been involved with the business for about 30 years. I run a group that lends money to the lawn and garden industry. We work with over 200 OEMs (original equipment manufacturers) and distributor relationships and over 10,000 active independent lawn and garden dealers. We’ve built up a nice portfolio over 40 years. Primarily it’s about getting the equipment to the dealerships to get it to the end user, so the commercial landscaper can use these great products.

2. In your experience have you seen end users change the way they buy product?

Even though they’re online researching the product, end users still want to see the equipment, touch and feel. They want to work with a wonderful independent dealer who shows the product to them and explains the features. Although there are five or six clicks going on before they walk through the door, the experience with the dealer is so important in order to ultimately sell the equipment.

3. What is the current health of the equipment market?

There’s a lot more equipment being sold right now, right? One, this industry revolves around weather patterns. The weather has been favorable the last couple of years with precipitation … It’s not a technical term but there’s something of a COVID-19 bump going on. For the last 18 months, people have been working from home. People are improving their landscapes. That has really increased end-user demand. In aggregate, year over year we’re up about 30 percent in volume. That’s quite a lift for manufacturers to be that much over the prior year’s volume. It hasn’t abated yet either. Usually, it slows down by now but it’s held up really well.

4. There has been talk that some companies are struggling to get the equipment they need for various reasons. What’s your view?

There are some pinch points, but overall, the manufacturers have kept up. Those orders are essentially spoken for, they’re pre-sold orders. We want to get those through the finance pipe quickly. There’s heightened transparency between end users and dealers. Everything is working pretty well in the industry. With the supply chain what it is, there are some additional costs that are being brought to bear. Our biggest concern is dealer health. When you work with 10,000 independent dealers — these can be very sophisticated or mom and pops — we’re seeing overall the channel is extremely healthy. Our bad debts are at historic lows. That will help the industry for years to come.

5. What are some of the equipment segments you’re seeing that are really trending upwards?

We do a lot of compact tractors. That area is very hot. A smaller segment that we’re seeing a lot of traction is battery-powered equipment; now this is on the consumer handheld side. A lot of homeowners, whether it be noise abatement or emissions regulations, a self-awareness of wanting to be more environmentally friendly, those have gone way up, that’s the biggest trend. And I think it will continue; a lot of research and development is going into it. Certain OEMs are getting into partnerships with battery companies. I think it’s the way to go and I think the industry is trying to adapt quickly.