A View from Here

Bill's Sisson's weekly Trade Only blog

Who will step up with wholesale dealer financing?

Happy New Year everyone. Let’s make one wish for a cure to the biggest problem in front of us this year: credit, or actually the lack of it.

Senator Dodd and friends bailed out the banking industry with some impressive checks, but they forgot to attach any strings to them. So the banks said “thank you” and promptly purchased their competitors. Meanwhile, the dealers, with inventories that are not moving, are now receiving letters from those same bankers and floorplan institutions, discussing the higher rates they must now pay for their inventory and how they must now look for other financing sources. Seems the bailed-out banks are now casting the dealers away for other investments.

Without wholesale dealer financing, most dealers see a very bleak future. The manufacturers need to recognize this chain of events before it reaches its conclusion. If a dealer can’t finance his own purchases, there won’t be an inventory to sell from. No sales, and there is little chance that dealers are going to order anything, so it might be very important for manufacturers to consider how they might support their dealer network with inventory financing.

Key Bank and Textron have both announced exiting the industry, leaving GE as the largest player in that field. Let’s hope someone steps up to support the dealers and get credit back into the sales game. Without available credit — retail and wholesale — the recreational marine industry is facing the most difficult years ahead.

Grant W. Westerson
Executive Director
Connecticut Marine Trades Association Inc.
captgww@snet.net

Comments

9 comments on “Who will step up with wholesale dealer financing?

  1. Jason

    Grant – We all can “HOPE” until we are blue inthe face.

    The boating industry needs to understand that the banking industry are not your partners. They will be the industries biggest cheerleader during the good times, but when the economy turns they are the first one’s out. For those who are in the marine banking business and there cheerleaders please stop blowing smoke up our “bleep”. Yes banks are suffering major losses but not from the boating industry. Let’s face the facts. The repo rate is still less than 1% and yes that will increase in 09′.

    Hers’s my New Years gift to everyone. DON’T WAIT FOR THE FOR A BANK TO HELP YOU. GO OUT AND TALK TO OTHER SOURCES. Get involved with your local credit union. Get on the board. You will have alot of power sitting inside then being an outside. Use your own money to fund deals or find an investor to fund deals. I fund most of the deals that the banks turn down and make a min. of 12%. Talk with your small regional bank. They may be able to set you up with a line of credit for your inventory but if they don’t understand the boat business like you they may send you walking. You may get lucky and talk with someone that know’s his “bleep” from his elbow.

    I spoke to a freind of mine that is a president of a small regional bank. He tells me that the banking business will be on a freeze for the next two years. They will be cherry picking the deals they want and declining the rest to give the appearance that the are lending. He also tells me to get ready for the next shoe to drop from the bankng industry. The credit card defults in mid of 09′ will be huge and more and more of the big banks will fail and be forced to breakup.

    Don’t leave your future in the banks hands. TAKE CONTROL.

  2. Terry

    I also agree that without wholesale financing available there will be no marine industry. It is almost impossible to believe that we only have one wholesale lender left and they are hanging on by a thread. GE Capital last quarter dragged down the companys earnings by 22%. They are losing billions on the finance side and may postpone their dividend for the first time in thirty-two years. They just like Textron a couple of months ago are saying they are committed to the marine industry. The only thing they are committed to are their stockholders. CEO Imelt and the board will not allow Ge Capital to continue to be an anchor around their neck. If Ge is having trouble with access to and the cost of capital who do we think is going to replace them?

  3. Arch

    I’ve been telling all of you for MONTHS that the banks are not your partners. They are not and should not be obligated to do squat for the industry. They are just like any other business, trying to make money. They decide who and what they will put their $ into. They have a BOARD and MANY investors to keep happy.
    It is up to all of us in the boat business to know that and have a backup plan. JASON, you are absolutely correct. Finding local sources to replace your wholesale funding sources will be very tough though. Most local banks and credit unions are also losing money and cutting out the fat. And trust me, anything related to the boat/rv business for banks is fat.
    The NMMA needs to get on the ball here, use it’s power in #’s and find some banks that will offer floorplanning to dealers. Without it, mfg’s will suffer and go under.
    Understand that qualifying for floor plan will be tougher, and definitely more expensive for them to justify doing it. It’s going to hurt either way.

  4. David

    I would argue a couple points. Available financing will not return the industry to sales levels we have experienced in the last 5 years. To the contrary, with the housing market losing value coupled with a precarious job market, most qualifying consumers do not feel wealthy enough to indulge in the purchase of a boat. Note the “qualifying” remark which brings up the next point. No longer are consumers going to find 100% financing deals and will be lucky to find 80% financing. Given that a middle of the road 21 run-about is about $25,000, a consumer will think twice before handing over $5000 cash plus operating costs in order to go to the lake a few times a summer. Lastly, such a large portion of the the US is over leveraged and it will take them a few years to get their own financial house in order.

  5. Wade Nda Water

    A little off topic but here goes….
    In the last 8+ years buyers of recreational products & new tech toys (home theater & big screen tv’s, etc.) have financed purchases & down payments on them with money from real estate equity loans that borrowed on the assumed future values of that property. In other words a ponsey scheme, and Yes, the world economy was driven by this ultimate ponsey scheme.
    I never understood why follks did these equity loans -must be me. I though, I purchased a home/house/ my work locations, equipment, etc. to BUILD equity & security (in knowing I own my own home & tools), silly me.
    Now that the financial institutions that remain are pulling in the horns on high risk lending & financing we will have to go back to more realistic ways of doing business. (The good old days)
    Going forward, If you truely want & believe you have what it takes to be in the retail business then you will have to have enough of you own money to finance your dream & willing to put it at risk. Tough to understand seeing we drifted away from this business model decades ago when it was the norm. But going forward it will be the business model that survives- because it always has stood the test of time. Believe it or not I know dealers who have stayed to this model even though others scoffed at them as old fashioned & out of touch with the new economic ways of the future. These dealers are not over leveaged on their property, Inventory, etc. They will be among the survivors as they understand the value of ownership without a bank payment. The major issue they have today is all the hot shot overly leveraged competitors that are in panic mode & we all know the last act of a desperate person is to give everything away. Once desperation is bankrupt & liquidated the sun will come out. Yes, as in every other business, ours little industry will shrink. Fewer buyers equals reduction in the need for redundant manufactures of similar products (like boats) & fewer dealers & locations to sell & display those products. But bigger pieces for the survivors.
    Some here believe others should do more to get financing in place but seriously organizations suchas the NMMA have proven to be reactive organization not proactive & who are they any ways? An exspensive non inventive boat show promoter. Oh yea they have some folks in DC that react after the fact on proposed legislation & they taxed motors to grow boating that didn’t. They can spout it would have worked better but the economy this & that but the facts are shouldn’t they seen something coming as well??? And what a nice jester to return 85% of the motor tax collected to the builders. Why not 100% It reminds me of the IRS who over collects and has some folks believing they are getting a gift of a refund.
    Well it’s back to work, … Yes there are some of us old schoolers out here working hard before the sun comes up

  6. Jon

    I propose that every dealer in the US not pay thier interest to GE or Textron for the month of January. Maybe then they will work with us instaed of against us in negotiating better terms that we can afford. They can’t take all of the boats back and if we are united they will start to work with us.

    Have a nice day

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