Consumers shopping on YachtWorld.com and Boats.com will soon have access to more loan dollars from more banks.
Secured Marine Transactions and Sterling Associates will partner with the Web sites owned by Dominion Enterprises to provide buyers with loans through Internet-based financing and refinancing for new and used boats.
“We partnered with Sterling because they have a wider number of banks than we do,” says Secured Marine Transactions CEO James Nolan. “The reason that is important is that each bank has its own sweet spot for loans. Each of the banks has different requirements, and that’s why it’s important we deal with as many banks as are making loans.”
Access to more funding sources should allow more opportunities for creditworthy consumers to buy boats, Nolan says.
Connecticut-based SMT had been providing 50 percent of the loans through the Web sites, with the other half going to Key. But after partnering with Sterling, headquartered in Massachusetts, the group secured exclusive financing rights, Nolan says.
Key would have been one of the several funding sources used by SMT and Sterling had it not pulled out of marine lending altogether in September, Nolan says.
Before the partnership, SMT had about five or six relationships with lenders, Nolan says; since then, that number has expanded to at least 10 banks.
“It’s a good opportunity for us because we do have sources,” says Tom Smith, president of Sterling.
Finding a match
The consumer’s experience will not change, according to Nolan. When somebody is interested in buying a boat listed on YachtWorld or Boats.com, that person can click on a “Finance it!” button directly from the Web site.
Software will then process the application and automatically eliminate some based on a preliminary glance; for example, somebody with a credit score in the 400s would get tossed without further consideration, Nolan says.
Then, each potential borrower is matched up with a lender that meets his or her needs. For example, one bank’s criteria might be very conservative and begin at $50,000. That bank, for instance, might require a 15 percent down payment on loans under $100,000 and 20 percent down on larger loans. That bank might make allowances for minor credit glitches, but might need to see proof of income or tax returns, and will not offer optimal rates for any credit misstep.
Another bank might start at a lower dollar amount, say $15,000, but will require proof of income and financial statements on all loans. That bank might be a little more lenient on debt-to-income ratio, but might require 20 percent down on all purchases and strong credit.
A third bank might loan between $3,500 and $60,000 for powerboats only, denying other types of boats such as sailboats. Such a bank might require only 10 percent down and go easy on credit history, but may be a stickler on debt-to-income ratio.
The vast differences in criteria make having more sources of funding available crucial in helping consumers secure loans, Nolan says.
Dealers will also be able to forward leads to SMT if they are unable to get financing through their traditional lending sources.
“We would try to place it,” Nolan says.
And customers shopping on YachtWorld.com and Boats.com would have an option between using the built-in financing or going out on their own, Nolan says.
“We’re not saying it’s mandatory to finance through us if you go through Boats.com or YachtWorld.com, but we are a source. And if you’re creditworthy, we will get it done and follow it through,” Nolan says.
SMT also provides insurance, extended warranties and other financial services consumers might need, according to Nolan. SMT receives the same referral fee any other F&I services business receives for each loan made, which is then split with Sterling and YachtWorld and the yacht broker, if appropriate, Nolan says. The referral fee varies on each loan based on the amount loaned and the interest rate charged.
The partnership comes at a time when there is little positive news regarding capital in the marine industry.
Key Bank, which announced in late September it would leave both retail and wholesale marine finance, is the most recent example in a long line of top 15 financial institutions that have scaled back or abandoned marine lending altogether.
Last summer, Citizens Bank and Wachovia pulled out of marine finance, and GE Money quit retail marine lending.
“There’s a lot of talk or grumbling about some of the players that have left the industry,” says Don Parkhurst, senior vice president of marine lending at SunTrust Bank, which also has a relationship with Sterling. “This is an example of how companies are stepping up to the plate. They had the foresight to go in and secure that exclusive deal.” Though the Internet is an important channel for marine finance business, it is still small and relatively new in terms of the bigger lending picture, Parkhurst says.
Before Key and SMT handled the financing for YachtWorld.com and Boats.com, which is owned by the same parent company as Soundings and Soundings Trade Only, Ganus E-Trade had an exclusive arrangement and launched the Web-based marine finance format, Parkhurst says.
The practice has grown since and may indicate a shift in marine lending. Secured Marine Transactions, based in Branford, Conn., is a division of Secured Marine Trust LLC. Founded in 2002, the company provides an online management system for expediting sale transactions. SMT’s flagship product, ONEtool, is an online business-application solution for handling all aspects of sale and purchase transactions.
Sterling Associates is a financial services firm that provides financing, insurance and documentation solutions for boats, recreational vehicles and manufactured homes.
Together, Seattle-based YachtWorld.com and Boats.com offer more than 140,000 new and used boat listings worldwide offered by more than 4,000 brokers, dealers and builders in 115 countries. The sites receive more than 4 million hits a month.
The partnership is good news for the industry, Nolan maintains.
“The key point is: loans are available today; the banks are still making loans; it’s just changed,” Nolan says. “You used to be able to borrow 100 percent; you can’t anymore.
“With the current climate, with Wachovia and Key pulling out, people are saying the world’s going to end,” Nolan adds. “It’s not. The world’s a little harder to live in, but if your client is creditworthy, he can get a loan.”
This article originally appeared in the December 2008 issue.