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Are we past inherently political economic stimulus decisions?

If ever there were examples of inherently political economic decisions, the current recession has brought them out. Take Cash for Clunkers, for instance. Bottom line: $2.877 billion cash pumped directly into car dealerships. Or, how about the home buyer’s tax credit? Bottom line: The housing industry gets a $1.5 billion boost from the $8,000 tax credit first-time home buyers get this year. The credit, dollar for dollar, will be paid to taxpayers even if they owe no tax or the credit is more than any tax owed.

 You’ll love this one. Economic stimulus money is being spent to train hairstylists and nail technicians in, for example, the Tampa, Fla. area where the hairstyling industry says there are few job opportunities. But, the funds to learn how to craft a French braid are flowing into local beauty schools, for some more than $1 million this year. Bottom Line: A largesse being lavished on beauty schools and a clip job for taxpayers!

Is it boating’s turn now? Is our industry finally being viewed as politically important enough to get some help? That depends on how you define help. Last week, President Obama called for legislation to: (1) Increase the size of SBA 7(a) loans used for dealer floorplan financing from $2 million to $5 million; (2) Increase the size of SBA 504 loans for purchase/expansion of physical plants from $2 million to $5 million for standard borrowers (supporting a total project of $12.5 million) and from $4 million to $5 million for manufacturers (supporting a total project of $13.75 million); and (3) Increase the size of microloans (loans that can fund daily operations) from $35,000 to $50,000.

The President is recognizing that the recovery will be stunted until credit is available to small businesses like ours. This latest announcement is welcomed, if overdue. But, let’s get real here. To assume that this will have the mojo to actually help us is questionable. So far, the existing 7(a) floorplan loan program has been a bust. Talk about a fiddling SBA program while Rome burned . . . we’ve had a whole string section!

   So far, this announcement fails to address the total lack of participation by banks in SBA’s program. In fact, I am aware of only one dealer (Randy Wattenbarger) who commented last August 4 to this blog that he was within 3-6 weeks of getting an SBA- backed floorplan loan. (Note: Since comments to this blog do not reveal email addresses, if you’re still a reader, Randy, please comment again and tell us what happened.)

It’s abundantly clear that if the President and SBA really want this expanded program to go this time, a lot more incentives must be offered to the banks to get them to increase their lending to our industry or to get involved with SBA loans at all. Indeed, even ideas including direct lending by SBA and attractive cash incentives to buyers (“Bucks for Boats”) should be on the table now. It’s time for less politics and more direct stimulation of small businesses like ours.

Comments

12 comments on “Are we past inherently political economic stimulus decisions?

  1. steve s

    Norm, your last sentence said it best “IT’S TIME FOR LESS POLITICS.” Government assistance isn’t the answer to save this flawed industry from itself. Just look the GM of our industry, MarineMax. Last month they receive a cash bailout and then proceed to layoff employees and close stores! Besides, the feds aren’t about to assist any luxury based industries. Be it Aviation, RV or boats. You don’t see the Jewelry business wasting time pitching for assistance. So let’s stop wasting our time with political posturing and focus on selling boats!

  2. C

    To get a loan with SBA’s backing you can not show a loss. How the heck did the 100′s of Billions get loaned to the large companies. It is a waste of time talking about stimulus packages for the marine industry. I agree with Steve S. that you have to move on and sell. There is a very good chance I might not be here in the spring but I am not sitting around wining about it.

  3. Noel Osborne

    Since Fat-Cats are not Democrats and boaters are considered to be Fat Cats, this is all a waste of time. I have tried to help numerous dealers get financing and have failed in nearly all cases. The banks are NOT lending to boat dealers unless you don’t need the money. Then you might be able to get it.

  4. Randy S

    I Like the “Bucks for Boats” idea but don’t tie it into bailout, make it a “GREEN Iniative” Gov buys your old inefficient/dirty boat or motor and you heave to on a much greener vessel!

  5. Chris Lyons

    Thanks Norm fore another great blog and Randy S you are going down a good path. If you take the politics out of the “Cars for Cash” program and the first time home buyers credit they worked for there industries. We just all need to remember that gov stimulus programs has been around for decades they just called it subsities or something else and we all benifited from them directly or indirectly. To lay down and say that the gov. is not going to help me or that the industry would be wasting our time to even try for a boating stimulus program like “Bucks for boats” is foolish. To make a play for a boating industry stimulus program we all need to come together. Not just the NMMA pitching the program but a unified voice from the whole industry. The gov. will hear our voices if it comes from all segments.

    We have a better chance if we as an industry came to the table with something in our hands rather than just asking for help. What if all segments of the industry pooled there financial resources and put together a program asking for a matching stimulus package. What could we raise? The industry did it before with the “Grow Boating” program. Yes times was different then but don’t tell me everyone is flat broke. Heck I’ll even kick in $1,000.

    Randy S, I remember back in the early 1980′s I worked as a grunt for a boat yard in S. California that was contracted by the state and local county to take in old boats that litered the the marina’s and storage yards. I had a blast with a chainsaw and I’m sure some of those old boats was replaced with NEW fiberglass boats. It was a win, win for everyone.

    Just think how many NEW boats dealers could sell if we had something like a “Cars for Cash” program. Boat builders could go back work. Suppliers could sell more products. Service people would book more jobs. Marina’s would fillup. And so on….

    We should act NOW. We don’t have the time to debate if we are wasting our time or not.

    Thank you for your time.

    Chris

  6. Don Thurston

    Picture 2 squirrels sitting at the entry to their nut cave in the side of a big 100 year old oak tree saying that the nuts weren’t too plentiful this year and they doubted the nuts they had would get them through the Winter. As they were speaking , a truck drove right up to their tree. The truck was brand new GM (Government Motors) top of the line model and had a fancy US Government sticker on it. The sticker read “Squirrel Reief Agency”. You see, the Government in Washington , DC has heard that the nut harvest was very bad in the forest this year, and the squirrels in this particular area were going to die of starvation. So they established a sub agent agency to help the poor rodents!
    The two men in the truck were pointing right up the tree at the door to the nut cave and one said “Look, there’s 2 squirrels we can save !” He took his brand new chainsaw out of the back of his brand new truck, read the operator’s manual on how to operate the saw and proceded to cut down the mighty oak tree. The home to generations of squirrels came crashing down, and as it did, it aligned itself in what one could only describe as an amazing Kamakazee path directly onto the brand new Government motors truck, destroying it, the resident squirrels and anything else in its path. The two Government doofusses were spared and carted off to the local hospital for some free medical attention.
    After 6 months of paid leave for jangled nerves and squirrel kill trauma, the men went back to work. They were immediately sent to work for the SBA in the department responsible for administration of floorplan loans to the troubled boating industry.
    The moral to the story is that if you wait for the government to help you, you will end up losing your livelyhood (nut tree) and your nuts (acorns) as well !

  7. steve s

    Don, your tale is the best prediction I’ve seen on a possible relationship between the marine industry and the government. Prior to sending the Squirrel Relief Agency they would also need to appoint a “Boat Czar” and a “Marine Industry Oversight Committee.” Both of which will have no marine industry experience but will somehow know whats best for us. As for “bucks for boats”, the only reason why the short lived cash for clunkers worked is because the banks created reasonable financing.
    Again, we need to stop looking for the government to help any luxury based industry. HERE’S THE BIG SIMPLE SECRET, THE BOAT BUSINESS WILL REBOUND WHEN THE BANKS RE-ENTER THE MARINE INDUSTRY AND DECIDE TO OFFER REALISTIC FINANCING. Instead of wasting time with the Senate/Team Pelosi, relentless focus should be on the banks.

  8. Chris Lyons

    Steve S – Are you kidding me? Do you think financial institions came up with special financing just for the cash for clunkers program? I can tell you first hand that the same credit that was available before the “Cash for Clunkers” program and after the program ended is still the same.

    As a marine finance specialist I can tell you that my eight banks that I use are lending. They are not lending like they used to back in 08′ but they have loosened up a little. Buyers don’t need a letter from the POPE any longer but buyers still need a good credit profile. If you are looking for REALISTIC financing the please feel free to call me at 949-400-9001.

    We need to get our heads out of the sand and come together to approach the state and Fed. gov on a program that they can’t refuse. Just becuase we sell luxury items does not mean that we don’t need a hand up. Look around! Many industries and big companies are getting Fed. money. The list is long. Just in California Donald Trump received money from the Feds. to develop a coastal resort. Last year the wine industry received a ton of money to grow and market grapes. Has the airline industry ever get a bailout? yup! Can you get a money from the gov. for NEW window, a NEW A/C and a NEW refer.? yup! Has all that money helped those industries? yup! It help buyers buy those products even if the buyer did not need that window, AC or refer.

    Here’s the SIMPLE FACT. We don’t own the banks and we can not tell them what to do. We do however own our gov. (Senante/team Pelosi). They work for us! So Let’s all come together as a group and preasure our local and national representatives for help.

  9. steve s

    Chris, no kidding around here. As a dealer I have skin in the game. My business, employees, house and entire net worth are at stake here. I know as a loan broker, your marine finance experience is only limited to this current downturn. As a dealer, I’ve financed vessels for 3 decades and this is my third downturn rodeo including 1991, 1982. It’s the same story every time, wasting two years with politics and then moving forward. The reason why we want to focus on the banks is unlike the feds, they don’t need to poll the population for a decision. The majority of tax payers could care less about boaters.

    What is the current realistic financing your referring to??? 760 fico/25%down/85% of invoice/wholesale, tax returns for a $60k loan??? That’s not even close to realistic.

    Regarding the government helping the food&beverage, home supply and airline transportation industries, that has absolutely nothing to do with luxury retail- yacht, boat, RV, aviation, jewelry etc. YOU ARE IN A DREAM WORLD IF YOU THINK THE FEDS WILL ASSIST ANY INDUSTRY CONNECTED TO THE CONSPICUOUS CONSUMPTION ERA! We have as good of a chance as the adult entertainment industry did with their attempt.

    As for heads being in the sand, you and others can continue to waste your energy playing in the political sand box with Team Pelosi and I’ll focus on selling boats.

  10. gordy mckelvey

    Pretty soon the bankers will realize there is more money to be made loaning the money than looking at it sitting in the vault. Once that happens everyone will be able to borrow all they want.

  11. Chris Lyons

    Steve S – How can you assume that as a loan broker I only have been around for for the past few years? The fact is I have had made my lifes career choice for the past 20 plus years in this marine industry (not all in finance). Yes and I too have skin in the game. You of all people should understand that marine financing has come along way from the 80′s and early 90′s. Marine lending will never go back to the stated income of $350K, NO MONEY DOWN and credit scores of 630 good old day’s (Ha,Ha) of the past few years.

    REALISTIC financing with the boat loan that I am closing is buyers with 680 credit scores or better. Banks do want to see boat buyers putting a little skin in the game with 15% down or more and they want to see that the boat buyer has the financial ability to payback the loan. Really not much to ask from a bank. Don’t get me wrong I still would like them to look outside the credit profile box they seem to put people in. Lobbying the banks to do want you want is not going to work. Remember our industry has a Marine Bankers association made up of great people that has been in this game just as long Randy S has been.

    I wrote about six months ago how we could have control of our financial future with our own Marine Industry Credit Union but only a few wanted to do something about it. We can’t tell banks what to do but if we owned our own credit union we would be on the board that directs the CU in the direction we all need (with big brother looking over our shoulders of course).

    You can argue all day long about how little our gov. cares about about the boating industry. I am sure if I did some digging I could find a few programs in the past fifty years that helped a luxury industry or two. Maybe a program that Reagan and Pelosi may have put together.

    Gordy, Check out some of the biggest banks. They are recording big profits. They don’t need boat loans. Example: Wells Fargo. The profits are not coming from me, I bank with CREDIT UNIONS.

  12. steve s

    Chris, now your talking. This industry, when the pork was rolling in during good times, should’ve created a marine credit union/bank for both retail financing and floor planning. Brunswick is the last big player standing at this point and should make this a priority.

    I think the biggest problem with the current finance qualifiers isn’t the fico scores or down payment as much as the 80-90% of invoice/wholesale. This forces a dealer to get at least 30% down to have any chance at a decent profit margin. The main priority needs to have a 100% of new invoice/used wholesale a standard. No need to return the insane 110% days.

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