Rebuilding Marine Finance

Ready availability of consumer and commercial credit has been undermined in the U.S. and with it the easy ability for boat buyers to obtain loans and marine businesses to gain inventory and operating finance lines. That said, the marine lending function can be rebuilt and reenergized in anticipation of growing boat purchases as the overall economy rebounds. The challenge lies in engaging all segments of the boat industry to participate in the revitalization process.
Leading this effort is the National Marine Bankers Association. It has the experts, knowledge and statistics that can communicate a picture of marine lending as profitable, safe and deserving of funding. Thirty years ago, NMBA spread this message from a handful of marine boutique lenders to national and global lending markets and attracted new and growing sources of funding from major national and regional banks, the savings and loan sector, and investment houses that turned boat loans into asset-backed securities. The flow of credit to lenders and boat buyers resulted in better rates (and profits), improved lending terms, increasing affordability and ultimately market growth.
Today, a framework of marine lenders and loan brokers is still standing, but their numbers have been reduced and ability to serve the market curtailed through more stringent borrowing standards. Yet these businesses can be the base on which a new finance up cycle can be launched.
Rebuilding this time will not be easier, but improvements in lending processes and support services offer further incentive for those with funds to loosen up. Financial management programs have been improved in recent years and are in greater use at manufacturing and retail levels. This will give lenders a clearer view of the firms they are considering doing business with and can simplify and reduce costs in booking and servicing loans. Marine title insurance has gained acceptance and can be used to insure the paperwork and parties involved. Keeping track of and valuing collateral (both in inventory and in consumer’s hands) continues improvement via Internet sources. Remarketing has gained sophistication and acceptance.
The hardest part of the process will be developing funding sources. Competition will be high for the short term at least. That’s precisely why all sectors of the industry need to be engaged in the funding drive:
Manufacturers should be encouraging current lenders to extend both floorplan and retail programs to their customers. The largest manufacturers might consider establishing these operations in-house or pooling to create a captive financing operation (e.g., within buying groups).
Dealers and brokers can knock on non-boat lender doors in their trading areas to promote funding; they might consider “back room” financing where they fund and service loans.
Everyone in the industry aligned with credit unions should request that they add boat loans to
their offerings.
Marine insurance firms, lawyers and other service providers need to determine if they are doing business with potential lenders through their underwriters or clients and request funding consideration.
Industry ambassadors should look to other major recreations, such as RVs or cycles, to see if funding cooperatives can be forged.
There is plenty of qualified talent to manage new finance jobs. As banks and other financial entities consolidated and discontinued non-core lending (typically including boats, RVs and other recreation products), they closed offices and cut staff. That staff is now ready and available to move to lenders coming back to service recreation and those new to the game. Survivor marine lenders can deliver their know-how in the financial arena, or can assist in setting up operations in manufacturing and retailing. A “talent pool” of these existing and available professionals should be identified and maintained by the industry job banks.
“NMBA is taking charge of the rebuilding, but will need additional resources,” asserts the group’s President, Jim Coburn of Flagstar Bank. He has called for assignment of staff from other marine organizations to be the contact points for the effort. Coburn adds that upfront money will likely be needed to get the right people talking to each other (e.g., those to secure funds from those who have them), for promotion to potential lending storehouses (groups such as the American Bankers Association), and to provide educational forums explaining why newcomers should lend on boats and how to do it.
During the credit crisis of the early 1980s, when consumer interest rates were running at 20 percent and credit availability dried up, a rallying cry emerged reminding that “boats run on financing as well as fuel.” It’s time again to reinvoke that message.