The annual local fair, to many, is as pure a piece of traditional Americana as fireworks on the 4th of July. The smell of fried dough, the familiar setup of mobile roller-coasters, the sugar high and sticky hands from cotton candy – these things have been childhood rites of passage for generations.
But while the whole thing materializes seamlessly for the average carnival-goer, lots of work, and considerable amounts of cash, go into making the scene possible.
A major cog in that cash machine sits in Newton, and is celebrating its 45 anniversary this year. Firestone Financial provides financing for the people who operate a carnival’s games, food carts and rides, and CEO David Cohen is familiar with ride names like the Sizzler or the Dizzy Dragon.
Beyond the town fair, the company also provides financing for various types of coin-operated amusement machines, including jukeboxes, video games and slot gambling machines.
“Unless you’re in our little world, you wouldn’t know who Firestone is,” said Rick Kirby, Canton-based executive vice president of coin-operated game distributor Betson Enterprises, a Firestone customer headquartered in New Jersey.
But, according to Kirby, in the largely self-contained universe of game and amusement equipment, Firestone is a big name indeed.
Understanding The Business
The firm makes loans in all 50 states and Canada for a vast array of machinery, and underwrites those loans based on knowledge of both the equipment and the vendor using it, checking the vendor’s other debts and work calendar to see that cash flow is in order. “We understand the ride, the food trailer. We make sure, if we go into the industry, we have to understand it,” Cohen said. “When someone says, ‘I want to finance a 1999 Wisdom Sizzler’ – Wisdom is the manufacturer, Sizzler is the ride – we know what that’s worth on the marketplace.”
Firestone’s business came into being largely because traditional banks are nervous about making loans on equipment and industries they aren’t familiar with, he said. The company has a $125 million line of credit with a collective of four banks: Bank of America, TD Bank, Citizens and Brookline Bank. The four of them contribute to what is essentially a pool. Firestone draws off this line of credit – it had $89 million outstanding as of the end of June, Cohen said – and the banks’ representatives review Firestone’s portfolio regularly.
TD, Citizens and Brookline Bank did not return calls seeking comment. Representatives from Bank of America chose not to comment for this story.
These banks don’t lend directly to Firestone’s borrowers because of the unusual nature of their businesses. Such borrowers deal with highly specialized equipment that is foreign to most lenders. Carnival operators, Cohen added, work long hours and are constantly on the road, which can make it difficult to keep up a routine of direct contact in the way that traditional banks prefer.
What’s more, they require flexibility that banks just can’t give them. If a carnival gets rained out, for example, the operator has employees and fees to pay, but no revenue, Cohen said.
“When you’re past due with a bank, they aren’t too flexible,” he said. Firestone, however, sets up seasonally adjusted payments for loans and can work with borrowers who have to delay payments because of weather events.
Loans usually run from $5,000 for a jukebox to $750,000 for a large carnival ride, although Firestone has lent $1 million to a customer who wanted to buy an entire carnival.
As a private company, Firestone’s financials are not public. But Cohen said the company has always turned a profit, even in recent years when the economy has hurt many vendors’ businesses.
Creating A Partnership
The company estimates it has lent equipment financing worth $700 million since it went private in 2001, though the company has been in existence since 1965. In its first iteration, it financed equipment for restaurants and beauty parlors, but jumped into the coin-operated machine industry shortly before the video arcade boom hit in the 1980s, and has kept much of its business there ever since.
Firestone has been in the business so long because they make it a point to know everything about their customers and their new industries, according to Betson Enterprise’s Kirby.
Betson is an equipment manufacturer – when a vendor approaches Betson about buying a piece of machinery, Kirby and the vendor go to Firestone. The finance company then reviews both the loan and the borrower.
Sometimes, Firestone says yes – and sometimes they say the vendor just isn’t a good credit risk.
“At the end of the day, they’re my partner,” Kirby said. “They’re helping me make good business decisions.”
Betson is currently working with Firestone to supply slot gambling machines in the state of Illinois, which just recently allowed slots in drinking establishments. Firestone will be a major source of funding, Kirby said, while Betson is cranking out the machines themselves.
The boom in slot business also illustrates the changing nature of the coin-operated machine industry. Game arcades, while still in existence, aren’t nearly as commonplace as they were in the days before the explosion of sophisticated, at-home gaming systems. Many carnivals and family centers make use of the same equipment for years. But where one stream dries up, another starts flowing.
The biggest stream at the moment: digital jukeboxes. Instead of the old CD-changer jukebox, the present-day iteration comes with an Internet connection that can play thousands of songs instead of the few hundred previously available. These machines are immensely popular, Cohen said, and bars all over America have been installing and updating them over the past decade.
And while family fun centers – think Chuck E. Cheese – include many familiar games, they do have to continually update to attract repeat business, he added, and Firestone continues to finance those deals.
