For lumberyards, the credit crunch has been like a storm where lightning and thunder can be felt far and wide, but only a few areas get drenched, a new ProSales survey suggests.

STRAINED: A ProSales survey finds builders aren't the only ones having trouble with their banks (see above). Roughly 22.9% of dealers, 26.7% of wholesalers, 35.3% of manufacturers, and 22.9% of shortline dealers hear from their bankers more frequently. Dealers in the Midwest find themselves contacted by their banks 21/2 times more often than dealers in the Northeast. For the most part, it's only those dealers that borrow from banks regularly that are experiencing trouble, and most lumber dealers borrow from banks sparingly. At the same time, dealers of all stripes indicate they are feeling an indirect strain as a result of the problems their builder customers are having in originating, getting, and paying off loans.

The online poll of 234 LBM dealers, distributors, and manufacturers was conducted Oct. 7-14. Among its findings:

One out of 10 dealers says at least one of its banks has reduced or cut off its credit line since Aug. 1. But 40% of the dealers with credit lines don't owe any money on them.

Only 56% of dealers have a term loan with any bank.

Roughly 12% of dealers go to the bank for money at least once a month, but 60% haven't borrowed a single time this year.

Nearly a quarter of the dealers surveyed say their financial lenders have taken a more active role in their business activities, principally by requesting reports more frequently than the usual quarterly numbers. Some banks want daily reports.

One out of six dealers says it's on the board of trustees of a financial institution with which it does business.

In order for them to speak freely, respondents weren't required to give personal information.

"Thus far, the credit crisis has not affected us, as we are currently flush with cash," says one dealer. "Because we lost a little money last year [due to write-offs], the bank lowered our line of credit and bumped our rate. Our borrowing has been at zero on the line. The crisis has affected our customers more severely and is causing a real constriction in our business."

Another dealer complains that its main bank not only turned down its request for an increased line of credit, but it treats the company like a new client. "We're switching to a new bank because our old bank doesn't want to loan money," the dealer says.

The biggest impact of the credit crunch, the numbers suggest, is from the problems that builders are having acquiring new construction loans, receiving draws on existing loans, and then paying dealers from the proceeds. A bit more than 42% of dealers say their contractor customers are having slight difficulty obtaining loans, while another 36% say their customers are having significant difficulty.

"Our builders are finding it very difficult to get their draws from the lenders, and this has increased our days outstanding by about two weeks," says one dealer. An earlier ProSales survey (see "Slow Flow," November issue) found that the typical dealer's average days of receivables outstanding had, by August, increased about 31/2 days from the average for all of 2007.

"We had two builders go out of business," another dealer reports. "Of the two, one has paid two-thirds of his balance, and the other is totally broke. We seem to be fortunate. We will bad debt that one, but it could have been a lot worse."

Roughly one-eighth of respondents say that, in general, they are paying their distributors and manufacturers more slowly than in 2007–a response in part to stricter payment terms imposed on them. But 33% of the manufacturers and 71.4% of the wholesalers surveyed say dealers are paying more slowly.

"The bottom line is there isn't enough work to go around right now," one dealer concludes. "Some competitors are running scared and bidding jobs way too low. The ones that survive this time in our industry will come out strong, but I believe there will be quite a few that fail. We have had to trim down staff immensely over the last year, and may have to trim more."

–Craig Webb