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Denied financing, boat dealers pare inventories

Denied financing, boat dealers pare inventories

Boat dealers in the Capital Region have pared down inventories in response to a challenging lending

Boat dealers in the Capital Region have pared down inventories in response to a challenging lending environment that has cut back the number of sources for floor plan financing — a tool many RV, auto, boat and manufactured home dealers use to fill sales floors before units are sold.

“There’s a lot of dealers who can’t get inventory right now because the bank won’t let them floor plan them,” said Chris Rapp, owner of CR’s Marine Service in Schenectady. “There are certainly still buyers out there.”

Floor plan financing allows dealers to borrow against their inventory and increase their cash flow until customers buy their wares.

For instance, Rapp said when he buys a truckload of boats in the fall, he has them on the showroom floor all winter, but doesn’t have to pay interest until March or April. The goal is to show the boats and sell them before the interest comes due.

Without floor plan financing, having a diverse selection of boats for customers to choose from becomes difficult.

The credit crunch puts dealers in the same bag as consumers, home buyers and others who are finding fewer sources of financing now after the credit crisis began in 2008 with the implosion of mortgage-backed securities and other bad debt.

As a result, some lenders have gotten out of floor plan financing altogether, Rapp said.

Rapp uses GE Finance for his business, which is “one of the very few that is still doing resale or wholesale dealer floor planning,” he said.

“It’s a buyer’s market with anything, whether it’s a new or used boat,” Rapp said, adding that finding creditworthy buyers is often the most vital part to a sale.

Yankee Boating Center in Albany is also feeling the pressures of a constricted lending market, Service Manager Steve Hart said.

“We’ve been doing pretty good considering the economic times but it could always be better,” Hart said. “There aren’t as many trade-ins as usual, but there’s not as many people buying new ones. We didn’t have as many used boats this year. It’s a steady market but it’s been slow.”

Dunham’s Bay Sea Ray Sales Manager Mark Cioffi said the boat brand and value pricing can make a difference. He said the Latham-based business hasn’t been affected by the credit crunch.

“A few sources have dried up but the major players are still doing a good job,” Cioffi said. “We haven’t [been affected] because the companies that we deal with are still doing their job. By pricing them somewhat near market values, we’ve been able to sell our boats.”

The U.S. Small Business Administration has launched a pilot program aimed at addressing dealer financing woes.

As of July 1, boat, auto, RV and other types of dealerships can apply for SBA-guaranteed floor plan financing.

“In recent months, we’ve seen a dramatic decrease in the availability of credit for financing dealership inventories,” said SBA Administrator Karen G. Mills, in the announcement. “We want to be a partner for these small businesses and help ensure they have the resources they need to help keep their businesses open, save jobs and survive these tough economic times.”

The SBA’s program includes a revolving line of credit of $500,000 to $2 million. As each piece of collateral is sold by the dealer, the loan advance against that piece of collateral is repaid. As the loan is repaid, the dealer can borrow against the line of credit to add new inventory.

The program will run through Sept. 30, 2010. Those interested in the program should contact the nearest SBA field office to get a list of SBA-approved lenders in their area who may be participating in the program.

While financing issues are mostly affecting smaller dealers, Alpin Haus president Andy Heck said the retail mix has changed over the year for his Amsterdam-based company, which employs 150 in its four locations in the Capital Region as a major seller of boats and motor homes.

Whereas smaller craft, such as pontoon and fishing boats, were in demand last year, this year he’s seeing more interest in fiberglass pleasure boats and cruisers, which are typically more expensive.

“More people are coming back into boating this year,” Heck said. “Either they’re buying their first boat or upgrading.”

But the other side of the economy includes a number of people trying to get rid of the boats because they either don’t use them or can’t afford them, Heck said.

“We’ve been doing some boats on consignment, helping people sell their boats,” Heck said.

But others are trying to sell so they can buy more expensive boats.

Rexford resident Rick Segarra said he’s selling his 22-foot 1972 Starfire for $2,500 so his family can trade up.

“We just put it out there a week ago,” Segarra said. “We want another boat. We just wanted to go with a lighter boat so we could take it to the lakes and stuff.”

Dave Hyde, owner of Hyde’s RV and Boats in Rexford said he sold four new boats this week that he is getting ready to deliver. The boats ranged from a $57,000 Hurricane to a $12,000, 14-foot electric pontoon boat.

Only one of the four buyers is a first-time boat owner.

“I guess the time is just right for everybody to trade up,” Hyde said.

Hyde said there are a lot of boats up for sale in front yards around the area. Some of the owners want to buy better boats, others can’t afford the boat they’ve got now.

“They use them for a couple of weeks and there they sit,” Hyde said. “But sooner or later somebody will come by and buy it or steal it. There are some bargains out there.”

Buying used has been favorable among do-it-yourselfers, who can put in the work and avoid labor charges of $75 or more an hour among repair shops.

“It doesn’t have to be an expensive hobby,” Hyde said.

Accessory dealers like Ballston Spa-based TNT Boat Tops may be seeing some of that reluctance to spend more than necessary.

Owner Anthony Zielinski said business is better than last year, but it could be busier.

“Our speciality is custom work. A lot of people are starting to spend, but you have to cut back a little on the price to get them in the door. It hurts the bottom line a bit, but it’s all about keeping afloat,” Zielinski said.

Most of Zielinski’s business comes from everyday consumers. Only a quarter of his business stems from dealers.

After 45 years of operation, Zielinski said he’s unsure when a complete turnaround of the economy will begin.

“It’s up and down like a roller coaster,” Zielinski said.

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