Last week we published a quick interview with Mac Nehring of Civista Leasing & Finance. That story gave readers a 101-level overview of equipment financing for fleet expansion going into 2024. Consider this story the 202-level course, where we get into much more detail.

To remind readers, Nehring’s three headlines were:

• Everything’s changing.
• It’s important right now to not do what you’ve always done.
• Get with your CPA and tax advisors now.

Read on to get detail on each of these points, then consult with your own financial experts and get growing.

Q. Let’s take a little bit of a deep dive into some of these items. Let’s talk first about your first item, the change. What are the changes that you’re seeing in the market and what do you expect to see that maybe our audience should be prepared for going into 2024?

A. Always the caveat of, no one has a crystal ball. That’s the one lesson I’ve learned over the last 3, 4, 5 years. Who could have predicted COVID, right? No one, no one could have. So expect change.

But I think we’re seeing a continued trend of prices moving upward. Granted, it slowed down a little bit from what it was, but I certainly think things just cost more. That’s just the new normal, the new reality. That’s something everyone that we’re talking to is saying. I get every story: “I remember when we could have bought this for this amount” I get told that constantly. When you’re in that kind of environment, more long-term planning is crucial. You can’t just say, “Oh we need something; we’re gonna go buy it.” It’s really got to be something that you see down the road. When are you going to buy it? When will you need it? Is that now? Is that six months from now? Is that a year from now? So that’s one thing, is just the price of things.

Also [to consider] is the rate environment. Granted it’s gone up a lot in the last year or so. We’re starting to see it level out. Hopefully — again, no one has a crystal ball. I could say that and then it could go crazy again tomorrow —it seems like — big asterisk — it’s leveling out and steadying off a little bit, which is a good thing. I think people need to be very aware of that if they’re working with a lender. Ask those questions. What are rates? Where are they going? What where do you expect them to go? And then when they get those answers, take them with a grain of salt because no one knows for sure. But to not just take things on face value, that this is where rates are. Ask some questions. Why do you expect them to come down? Do you expect them to go up? A lot of people in the groundwater industry buy a lot of used stuff. Is that affecting my rate? Is buying something newer going to give me a lower rate? Kind of having those conversations, I think will help a lot of people.

Q. To set the parameters for people, what are the finance brackets that you’re addressing? Are you like $100-grand-plus? $250 grand? Is there a lower threshold? What part of the market are you serving?

A. Our strike zone, if you will, most deals are right around $200 and $300 grand. So a couple deals a year we’ll do that are over a million dollars, kind of the bigger deals. We also do a lot of deals that are $50,000, $40,000, even as low as $30,000. So, we’ll do smaller stuff, we’ll do the larger stuff. Obviously, a new drill right now is a $1 million. … Personally most things I do are right around $200 and $300 grand. That’s most of what I do.

Q. Let’s move on to a little detail on your second point, not doing things maybe the way that you’ve always done. Go into a little detail of what you’re looking for out of the contractors. How do you suggest they do things differently to get the attention of a lending or leasing partner?

A. I talk to a lot of people, and they kind of do things their way. My job is never to tell anyone how to run their company. They know what they need better than I do. My job is to help. What I’ve noticed is a lot of people, maybe something worked for 10, 20 years but now just the environment is different. Costs are different. Margins are different. Their customer base is grown. They’re scaling up. Their trouble with labor, you know, whatever it is. There’s just a lot of things in the business that are much different than it was 10 years ago. But yeah, they’re still kind of operating and just making decisions as they always have.

It’s kind of one thing I’ve just encouraged a lot of my customers to just take a step back, be very intentional and say, “Why am I doing this? If I’m going to get a loan or I want to do a lease, why am I doing that? What am I looking to solve?” If the answer is, “It’s just what we’ve always done,” take a step back and say, “Well, what is our goal? Are we trying to get easier cash flow, ease that burden and we want the lowest payment possible? Is that our goal? Or are we trying to save the most money total?” Those are two different goals, right? You can have a lower monthly payment and pay more money over the course of a deal, or you can have a higher monthly payment but save money over the long term. So there’s certain things I think not everyone’s consciously thinking about.

So I say, you know, what are your goals? What are you trying to achieve here? That way you make decisions that, hopefully, help you with those goals rather than just kind of, “This is what we’ve done. This is how we do it.” … While that may have been the absolute best thing to do 10 years ago, it may be a little different now.

Q. I’m not trying to, you know, impugn the business skills of any of our lovely readers here but folks come at drilling and contracting from a lot of different angles. Do you recommend getting a business coach to help people get the sharpness —dot the I’s and cross the T’s — that will meet your demands when you’re looking to do financing for deal?

A. I do. … It doesn’t even have to be a formal thing. Something I found, a lot of people in the groundwater industry … often they just have a good network of friends and peers. They’re going to dinner with people. They’re talking shop. They’re asking questions. They’re calling another drilling contractor they know on another side of the country and saying, “Hey, what did you do? Tell me about this or that.” The cool thing about the groundwater industry, truly, is people really help each other. I’ve worked in other industries where that’s not the case. People are not friends. It’s a cool industry, in that when you go to Groundwater Week (NGWA) you see all your friends. People want to help each other. They want to share knowledge.

So that’s even just on a very simple, informal level — just having conversations with other business owners, things like that. Obviously, the internet’s full of resources. I get on Investopedia almost every day to Google a term I don’t know, and that’s someone that’s spent almost 9 years now lending money. Every now and then, I hear a word and I go, “Well, what is that?” I pull up Investopedia, I read a little 200 word article, and I go, “Okay, now I kind of understand that better than I did before.” That’s just something simple that costs no money and takes 10 minutes out of your day, but the knowledge you gain is exponential.

Q. You presented at Groundwater Week this year, right?

A. Correct. We’re very lucky they allowed us to present. It’s educational, kind of zooming back on financing groundwater equipment, the pros and cons of paying cash versus financing, when you might do each, when it might be wise to finance, when it might be wise to pay cash. Then kind of a brief description of the different types of lenders that are out there: There’s banks, there’s independents, there’s captives, there’s brokers. So kind of breaking that down. It’s very high level, not in the weeds, but trying to answer questions that we get from people in the groundwater industry, be out there and be a value to the contractors out in this market.

Q. Now, let’s touch a little bit on your third point here, meeting the CPA, as we’re talking about your presentation at Groundwater Week. Now, obviously, you’re not everyone’s CPA, so, you know, it’ll work different, but what does a financial team for a contractor look like going into 2024?

A. So most everyone now has a CPA and a good accountant. I’m not seeing as many people where they say, “Oh, I’m filing my own taxes. You know, we do it.” Most people now have a good accountant they work with. What I notice or what I see often is a breakdown in communication. They’re not always meeting with the CPA. They kind of send a few emails and say, “My tax is ready,” and they don’t always have a sit-down, plan, strategize, get counsel on how their decisions are affecting their taxes.

Q. So one email in late November every year is not enough?

A. Correct, correct. ... Accountants certain times of year are hard to get a hold of … but there are times of year where they will gladly go out to lunch. … People, generally — in my belief, maybe I’m overly optimistic — they’re passionate about their job. If someone has a CPA, they want to help you. They want to work with you. So different times throughout the year, whenever that is where people’s schedules line up, I highly encourage them to sit down in person, have those meetings, and kind of try to plan for the future, and just ask those questions. “Hey, I’m looking to get a new pump truck. If I get a loan or if I get a lease, how will that affect my taxes? What can we depreciate? You know, how will this help or hurt me, other than just the obvious of, I need this equipment to do my job?” So that’s crucial … pretty much everyone I talk to, I encourage them to do.

Q. That comes back to your second point too, the intention, putting some planning in getting ahead of your fleet and equipment expansion, and really just putting the planning you really need to into it.

A. 100%, 100%. In today’s world, I think the days of kind of firing from the hip … I think it has to be more intentional now. There’s just too many things that have changed. The environment’s so different from what it was. And look, the contractors I talk with are great business owners. They’re phenomenal. They’re highly successful. What I’ve just encouraged is just instead of using that natural talent and the natural business acumen and just kind of being on an autopilot, just to add a little level of intentionality is what I’ve been encouraging people to do.