Company estimates approvals are up 10 percent, as boat businesses adapt to new market realities
Getting wholesale financing is more likely today than it was a year ago, thanks in part to a "fundamental reset" in the marine industry - adjustments that have positioned companies to make money at lower sales volumes.
That's the conclusion of Bruce Van Wagoner, president of GE Capital Solutions' Marine Group - for years the major marine floorplan lender and the only national player that didn't quit the field in the early stages of the recession.
"If there was anything that I would want to be known, it's that GE's commitment to the industry has been unwavering during the downturn, and that is ongoing today," Van Wagoner says.
Now, marine wholesale volume is on the rise again, says Van Wagoner. "We're funding more in the industry today than a year ago," he says. "I'd say we're up at least 10 percent in the last few months relative to the year prior."
Dealers are taking a more responsible approach to inventory, Van Wagoner says. Much of what's "flying through the process" is inventory dealers are confident they will turn, including used boats.
Still, some dealers say they are being squeezed by floorplan limitations. Van Wagoner says GE looks at individual dealers, their brands and the performances of each when assessing credit and risk.
"You have to sell us on why we should continue to finance you as a business. And most businesses are successfully doing that," Van Wagoner says.
"We're working every day with manufacturers to provide credit lines for our dealers," he adds. "Obviously with the turmoil we've gone through in the last few years, we see financial statements that are still in distress, so it's a little harder to approve files, but they're being approved every day."
Even dealers in turmoil can continue receiving financing if they remain forthright about their problems, Van Wagoner says. "Most of those we do business with have been in business a long time, and they communicate well with us," he says. "They share their business experience and tell us what they're doing to survive - whether they're expanding service or reducing costs or what they're doing to run their business more efficiently. Through that communication, we're able to work hand-in-hand with the dealers and manufacturers to make sure credit is available."
Rates and risk
It's hard to say whether a new lender will enter the marine wholesale market, Van Wagoner says. "A lot of small, regional banks have done one deal here and one deal there in the automobile space, the RV space and a very limited amount in the marine space," he says. "As far as somebody jumping into this business full force, there are a lot of costs involved that some don't realize."
More competition might mean more favorable rates, some dealers say. Rates are associated with risks and dictated by the size of the transaction and amount of work associated with that, Van Wagoner says.
"Fortunately, we spend a lot of time and resources analyzing that risk, so we have a pretty good handle on what risks to take," he says.
Rates have come down slightly because securing funds is more under control than it was last year, Van Wagoner says.
Now GE is working with manufacturers to "step up and support distribution in these tough times" if they're financially able. "Frankly, we've had a lot of meetings with those manufacturers to understand what their issues are, and whether it's [trouble getting] windshields or engines, we're ready to issue approvals," Van Wagoner says. "Knowing that we're ready to fund these orders - that helps [manufacturers] to get these vendors to fill orders on a faster basis. You don't realize until you go through this stressed an economy that one supplier could affect the whole chain."
Still, GE is cautiously optimistic about the marine industry, Van Wagoner says. "We have gone through a fundamental reset," he says. "There are a variety of things - the economy, the oil spill - a whole variety of things that affect dealers' and manufacturers' ability to be successful."
Many manufacturers now are properly sized to make money at lower sales volumes, Van Wagoner points out, so GE is optimistic about those manufacturers and the dealers that do business with them.
"I think the words commitment and that we're still optimistic about the future of this business are the main points that we want to get through," he says.
This article originally appeared in the July 2010 issue.