Your lender just left the industry … now what?

You’ve been reading about the turmoil in the U.S. and global credit markets and wondering how it might affect you. Then, a major lender’s representative with whom you’ve worked for years in a mutually beneficial way calls to say her institution is exiting the marine business. Do you:
A: Hit the ceiling saying loss of this special arrangement is going to torpedo your year’s business plan?
B: Tell her to jump ship ASAP and land a job with another lender so you can reconnect?
C: Wish her well and ask her to stay in touch in case the firm returns to marine?
Being able to take the “C” route is where marine dealers, manufacturers and others in the trade would be in the most secure financial position. To do so requires planning and, in some ways, makes it a bit more difficult to manage financing for consumers or inventory.
Some may argue that limiting the number of suppliers a business has — including money suppliers — takes less time, means not having to learn different “systems” to use, knowing whom to call when there’s a crisis, etc. Having all financial eggs in one basket is easier, more efficient and may provide volume benefits or discounts. At least until the basket holder takes it away.
Spreading financial needs among several institutions is the safer way. Ideally a business should have a bench that’s about three lenders deep for each money need: consumer finance, inventory loans and commercial use. Then, when – and probably not if – one lender decides to shut the marine window, there are at least two left to draw on. And when one lender exits, it’s time to bring another one on line. For consumer loans specifically, providing several sources defers the choice of loan to the buyer and reduces liability for the seller.
The reality is, lending institutions make decisions about markets they want to serve — or continue to serve — not necessarily based on current experience. Good financial reps, that provide real service and benefits, don’t have sway in boardrooms where discussion of the boat portfolio is simply another agenda item. They probably don’t know that a market they serve is under review. Even when the marine business is a pretty good profit center, the executive vice president may see more opportunity in a host of other markets. And when the credit markets roil, the amount of funding available to any sector can become tight. There are no guarantees.
Modern marine lending has existed only since the early 1970s and dozens of banks, national finance firms and loan servicers have both embraced the boating business and escaped from it. At the peak, the National Marine Bankers Association had 128 members in the mid 1980s; today it counts about 70 members. Much of that drop was caused by bank mergers or acquisitions. In a few instances, however, lenders with household names and national footprints simply said “no” to more boat loans then dumped marine portfolios in credit markets causing pain for the borrowers and significant disruption for dealers and manufacturers marketing the affected brands.
In fairness, some big lenders also hung on to service the industry when it would have been much easier to turn out the marine lights. But it really doesn’t matter knowing which firms are in for the long term versus those who aren’t. The only real insurance is to have more than one money source.
To create new marine lending sources, a business should look locally and beyond. Inviting banks into your business, sharing some financial information, describing the virtues of the market and even taking an officer for a boat ride can ring the bell. Inviting lenders to the local boat show as observers or exhibitors can make a positive impression. There are resources to help “groom” future marine lenders including positive statistics on marine portfolio performance at the NMBA Web site ( and information on its annual Marine Lending Workshop that teaches novices how to make good boat loans. Guidance on consumer and inventory loan programs are offered by non-allied lending groups including the Consumer Bankers Association and American Bankers Association, among others.
Having several sources of financing for a businesses’ customers and inventory needs will definitely take more time and effort. But, when the call comes from one institution that says it’s dropping out, the best offense of having a couple more to turn to is clearly the preferred defense.

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