Marine industry professionals across the country are at long last experiencing some positive indications of renewed consumer confidence.
“Lingering high unemployment and the uncertainty it brings to those working or not will still hold consumers’ spending back at modest levels,” predicts Jim Coburn, managing partner of Coburn & Associates, LLC, based in Macomb Township, Mich., and immediate past president of the National Marine Bankers Association.
But modest spending is a big improvement over no spending. Those consumers tired of “waiting on the sidelines” for the economy to improve are ready to spend their discretionary dollars on commodities such as boats. And dealers’ doors are wide open to welcome them.
One obstacle many dealers face, however, is getting potential buyers financed. With tighter loan policies, increased down payments and the requirement of high FICO scores, dealers must now consider what they can do to be more proactive in helping customers secure boat loans.
Get to know your banker
Building relationships with lenders is one way for dealers to improve their chances of obtaining financing for a customer.
“The dealers need to get to know their finance companies,” says Coburn. “Find common ground and understand their programs and how they work. If a bank requires a down payment, meet that requirement. If a bank has a minimum FICO score, understand the FICO score, don’t try and push the envelope.”
Jan Kelly, president of Kelly Enterprises, based in Vancouver, Wash., is also a proponent of stronger dealer/lender relationships.
“It’s necessary to make friends with local credit unions and banks,” says Kelly. “If the dealer has a strong relationship with a local lender who knows the area, economy and dealer, and then a customer comes in [wanting to purchase a boat] with a down payment and is in an equity position going in, the dealer can then use their influence to possibly get that customer approved through dealer-controlled financing.”
A strong relationship with a lender may also assist the dealer in gaining market share, pursuing new business opportunities, and even developing better sales and marketing plans.
Do your homework
Not every dealer in the country has as strong a relationship as they would like with their local bank or lender. But doing some research early in the application process may help seal the deal.
“One of the most important things I do is I pull my own credit reports first,” says Nancy Smith, vice-president of Colorado Boat Center in Loveland, Colo. “I read and analyze these reports so I know what the banks will be expecting. This way, I know which bank I should send it to and receive a more favorable response without pulling my customer’s credit report several times.”
This also provides the opportunity for Smith to work more closely with the underwriters in the event a loan application is declined. In some cases, she’ll contact the underwriter prior to submitting the application to discuss certain faults or other discrepancies on the customer’s credit report.
“When I do need an underwriter to look at an application, I will know what is on that report,” she explains. “If they come back with a decline for specific reasons, I will then go back and work with the underwriter. In some circumstances, I will call the underwriter before I send the application in so I can talk to them about what is on the credit report. This is to see if it’s something they are willing to take a look at. This often gives me better chance of getting deals done.”
In the event of a loan being rejected, Smith will often ask the customer for additional information based on the rejection. And, according to Smith, sometimes “no” doesn’t necessarily mean “no.”
“A lot of banks have auto-declines,” says Smith. “That means if the loan application criteria doesn’t correspond to the computer systems’ parameters, it’s automatically rejected. Sometimes dealers don’t realize this. You can go back and ask for an underwriter to review the application. You don’t have to take the decline as a flat ‘no.’ If I think I need additional information from a customer, I’ll get that in advance so I am not going back and forth with the banks. The fewer times an underwriter has to open a file, the better chance there is for approval.”
Bring it up early
While dealers may have been able to postpone talk of financing until late in the sales process a few years ago, today’s market demands that such conversations begin during the first customer interaction.
Determination of the type of boat they want to purchase, the type they can afford, and the mandatory down payment should take place prior to the loan-approval process.
“Dealers should train their sales staff to do a thorough interview with the customer,” suggests Kelly. “Land the customer on a boat they can afford, not necessarily the boat they want. If dealers can sell what consumers can afford, I think they will have more sales.”
Getting the customer pre-approved is another strategy to consider. A procedure commonly employed in the real estate market, pre-approvals are starting to be used by larger marine dealers, which ideally prepares the customer to buy the boat they want to purchase. It also allows the customer to think more clearly about their loan application, providing them with the opportunity to manage unpaid bills and devise a positive presentation prior to sending their credit information to the lender.
“Pre-approval defines what deficiencies there may be [in the loan approval process],” says Karen Trostle, NMBA president. “Pre-approval can be an effective sales tool and, potentially, the dealer can move the consumer up to a larger model. It also helps save time in the sales effort.”
Contributing to consumer financing challenges are misconceptions about obtaining loans, according to Trostle. Banks not wanting to lend, tighter policies on loans and increased criteria for obtaining credit are just some of key reasons why consumers are not looking at big-ticket items such as boats.
To overcome this, marine dealers might consider launching marketing campaigns at local boat shows to inform the public that financing is, in fact, available to qualified consumers.
“One of our goals this year at the NMBA is to get the word out that there is money to lend and a lot of members in our association are looking for loans,” says Trostle. “With all the news surrounding the credit crunch, people have this perception that there isn’t any money, and they are so strict about approval. This really is not true. There are lenders that want to lend, and there is money to borrow.”
With the U.S. recovery slow to gather momentum, there is a long way to go before the industry experiences pre-2008 levels of demand, if at all. But by establishing close relationships with lenders, gaining an understanding of consumers’ financials early in the sales process, and communicating the availability of financing, dealers may have a better chance of increasing their financing business, as well as their overall sales.
— By Steve Fennell