After three whiffs at banks, Joe Lewis gets his inventory financing by skirting the 'F' word - floorplan
Industry officials have stressed that dealers need to think outside the box when looking for financing, but Joe Lewis, owner of Florida's Mount Dora Boating Center & Marina, could write the manual on how to actually do it.
Lewis, whose dealership sells mostly Crownline, Mariah and Harris FloteBote models, along with brokerage boats, began looking for alternative forms of financing back in 2008 - right after Textron announced it was exiting the industry and GE told dealers it was switching to the London InterBank Offered Rate (LIBOR). Finding that financing, however, took perseverance, patience and a very thick skin.
Lewis first approached RBC Bank, where his dealership had its checking and savings accounts, as well as its mortgage, and he was turned down. So he went to its No. 1 competitor - Wachovia. Again, he was turned down.
"After that second turndown I figured, OK, I'm really not getting anywhere going at it the way I'm going looking for floorplanning and it's time to change the sales pitch," he says. He began using the term "inventory financing" rather than "floorplanning."
"You can't use the 'F' word," Lewis advises. "I figured out after the second go-around ... it's all about choice of words."
With that in mind, Lewis' next trip was to Bank of America, but the third time was no charm - another rejection. "That's when the light bulb came on," he says. "We're not getting anywhere with the big guys. Let's go back to the small community banks that we used to do business with years ago. That's what we did and we ended up fostering a relationship with a bank that was actually three blocks away from our location."
One of Lewis' customers happened to be a principal at First National Bank of Mount Dora and, though he's not involved in commercial lending, the customer was able to make the much-needed introductions.
"We were able to put the deal together in 60 days," Lewis says. It was completed last spring.
First National Bank of Mount Dora is now where all of the business's banking is done - checking and savings accounts, the mortgage and a $400,000 line of credit for inventory financing. And while he still maintains a line of credit with GE through its program with Brunswick Acceptance Company, the dealership does not use it.
"We have a better rate [now] than we did with Textron," Lewis says. "We're operating on a shorter credit line than we did with Textron, but that's forced us to make better buying decisions. We now focus on what we can get in here and move through the pipeline pretty quickly."
Lewis says he's now working with the bank to expand the line of credit through the Small Business Administration's dealer floorplan program. Loans range from $500,000 to $2 million under the SBA 7(a) loan program, with a 60 to 75 percent government guarantee. Few dealers have been able to find banks willing to work with the program, and Lewis admits had he been a customer just walking in off the street, his bank likely would have said no.
"It's only because of the relationship that we currently have established and the volume of business that we're currently doing with them that they're even entertaining going through the process," he says. Lewis expects the application to be submitted in February.
His advice to the many dealers looking for new financing is simple. "It's going to take a lot of work. Just as in any sales, you can't take the first rejection and stop working the deal," he says. "You've got to go out there and be proactive in this."
Lewis says he's heard that many manufacturers and dealers are sitting on the sidelines, waiting for someone to do something. That's simply not going to happen, he says.
"This is all about establishing relationships," Lewis stresses. "There's no quick fix here and I don't see a quick fix coming for many years to come."
This article originally appeared in the March 2010 issue.