First and foremost, we at Hitachi Capital America are wishing you and your families comfort, security, and safety as we as a nation navigate these uncharted waters during the COVID-19 pandemic.
Throughout the course of the coronavirus pandemic, many theories have been cast regarding the COVID 19 impact on manufacturing and the industries that thrive and are so reliant on it. As a national independent finance provider for manufacturers across many different industries, our focus at Hitachi Business Finance largely remains on the small, middle-enterprise enterprises (SME).
Whether the business owner or corporate board command a $5 million or $5 billion company, these individuals will always have one thing on their mind: the constant need and ability to access working capital, liquidity, and financing. Without a doubt, traditional banks in this country have come to the aid of businesses across this great land of ours in the past 120 days. Working 24/7, bankers were guaranteeing that business owners had PPP proceeds wired to their operating accounts to keep their lights on and their workforce employed. As the pandemic continues without an end in sight, the thread and future success of every SME will lie in the balance and will always be reliant and dependent on one sector of our economy: manufacturing.
Back to School Everybody (socially distant or virtual, that is):
Let’s quickly review the history of manufacturing by highlighting some moments and inventions that have changed the way of life:
- 1820s: The US Industrial Revolution begins with the invention of coal power & machine production
- 1908: First car is mass produced, and the Model T rolls off the assembly line
- 1930s: Lean manufacturing is created, and “just in time” manufacturing and automation is adopted
- 1958: The groundwork for industrial automation is set with the development of integrated circuit chips
- 1986: Motorola develops Six Sigma. This strategy become famous in 1995 when Jack Welch implements it at GE.
- 2007: Apple releases the first iPhone, which lays the foundation and groundwork for manufacturing to go digital
I could continue, but the dates above set the historical tone for where we are as a nation and more importantly, how the SME is impacted and reliant on the manufacturing sector. The economic downturn that COVID-19 has created and the growing recognition that there will be no “back to normal” anytime soon underscores the challenges smaller companies will face in order to emerge stronger. As a whole, manufacturers are now responding to COVID-19 industry surveys and communicating the following results to the general public:
- More than 78% of manufactures are anticipating some type of financial impact
- 41% of manufacturers are experiencing production and product shortages
- 58% of manufacturers are experiencing and or making changes to their supply chains
- 20% of manufacturers are or will be closing plants in some locations
Although these are grim statistics and could be operational hurdles that close a company’s doors, the small business owner who is so reliant and dependent on these larger manufacturing operations will bear the burden and will always need access to working capital, constant liquidity sources, and the financing solutions many of us lenders provide.
What’s the Future Marty McFly?
Being a true and committed capital provider to the small business owner and manufacturer, the ever-so- delicate balance and resilience depends on successful access to and utilization of capital. As I opened with in this blog, our banking comrades have done their job with the PPP monies and are now waiting for financial reports and financial results to cross their desks.
As providers of working capital, we ABL lenders must now step to the plate and assist our brothers in financing arms picking up where they left off. The ability of a true asset-based lender or provider of invoice financing will see through the grim statistics and the negativity and do the thing they know very well: provide the capital to the small business owner who can keep the large manufacturers from closing their doors.
For the small business owner, our ability to look beyond the profit and loss, the health crisis, and to take the managed credit risk in financing companies in restructuring or growth situations will aid in keeping the lights on, families fed, and the economy supported while our larger partners in manufacturing look to them for support.