Digging for Loan Gold

here is a silent salesman that marine business owners can take with them when they visit lenders and are looking for loans for customers, floorplanning or capital improvements. It’s the annual report of the National Marine Bankers Association, which contains detailed, historical statistics of marine lending practices. Its size and depth make it both authoritative and ponderous. To make its contents more vibrant, readers need to focus on highlights that gain the attention of prospective lending partners instead of overwhelming them with statistics.
In a nutshell, the NMBA reports illustrate marine lending as a safe and profitable endeavor serving an upscale consumer audience and an industry that performs generally in sway with the overall economy. Here are a few highlights:
• Marine loan delinquencies (0.83 percent) are running about 30 percent below all installment loan delinquencies (1.25 percent).
• Marine loan charge-offs (0.50 percent) are about 40 percent below all loan charge-offs (0.80 percent).
• The largest group of marine loan customers (79.2 percent) comprise those in the highest earning age demographic of 45-to-54 years old.
• Close to 50 percent of marine loan customers have household incomes of $100,000 to $199,000 annually; 62 percent of all have working spouses; and 90 percent own their homes.
This information alone will gain the attention of lenders since it reflects the premiere target market they seek to do business with. Low delinquencies mean the borrowers have good payment records; low charge-offs indicate very few walk away from loan obligations; their age and income equates to stability of earnings and home ownership means they have assets, something lenders highly value.
While these numbers will be quite persuasive to retail lenders that make consumer loans, they should also carry weight with commercial lenders. They can provide comfort to those considering extending inventory or capital loans to dealers and manufacturers because they underscore a clientele less affected by bumps in the economy. In researching their potential markets it’s also not uncommon for lenders to discover they have commercial relationships with business owners who are already boat loan clients.
There are two additional lending performance details hidden among the statistics that illustrate significant differences between marine and other forms of installment loans:
• Marine loan terms have historically ranged between 10 and 15 years on average. Some lenders will go to 20 years for larger loan amounts, and smaller amounts are typically written for less than 10 years. This is a longer time frame than that afforded most other non-real estate loans, notably autos.
• Marine loan turnover has historically averaged 40 to 42 months, regardless of the size of the boat loan or length of the term.
If there are “magic bullets” of boat lending, the two numbers above are it. Briefly, they mean lenders can put loans on the street based on intermediate rates — which are very competitive — and will receive the payoff in short term-rate time. It’s like buying a 10-year bond and getting the face value back plus interest in less than half the time expected. We should do so well with our investments.
Too good to be true? Yes and no. The data in the NMBA reports is provided by seasoned marine lenders with generally savvy operational management staff. If the marine portfolio, retail or inventory, is managed by pros — including those who can help when consumer or commercial borrowers run into trouble — the numbers are accurate. This level of marine expertise can be learned over time or it can be acquired by raiding another lender’s talent pool. So, the caution to new lenders interested in serving the field is to either start slow or hire the people who know the ropes. The best advice a marine executive can give a potential marine lender is to provide information on both the industry and the existing lenders that serve it on a local, regional or national basis depending on market coverage intent. Provide a copy of NMBA’s Annual Report that can be ordered by visiting www.marinebankers.org. There may be too much information, but those highlights are attention-grabbers.

Greg Proteau writes about boating and marine finance industry trends, companies, people and ideas. He served as director of communications and PR for the NMMA and was the founding executive director of the National Marine Bankers Association. Currently he is a consultant to manufacturers, marketing agencies, service providers and organizations within and outside the marine sector and serves as executive director of Boating Writers International.