The Current State of
Marine Financing

Why beg or steal when it’s still easy to borrow?

A lot of people, perhaps you’re even one of them, are living under the misconception that marine financing has become about as hard to come by as ice at the end of a Saturday night raft-up rendezvous. Despite this prevailing perception, the fact of the matter is that banks have never stopped, and are continuing—even aggressively at times—lending money for the purchase of boats.

A lot of people, perhaps you’re even one of them, are living under the misconception that marine financing has become about as hard to come by as ice at the end of a Saturday night raft-up rendezvous. Despite this prevailing perception, the fact of the matter is that banks have never stopped, and are continuing—even aggressively at times—lending money for the purchase of boats.
It’s no secret that the U.S. economy has seen better days and as such, we’ve all learned to scrutinize our purchasing decisions. Banks are not much different. When it comes to lending money, a bank is in essence “purchasing” the borrower’s debt obligations. So all that banks have done really is to increase the level of scrutiny with which they select those borrowers.
We solicited the input of several lenders who specialize in or actively pursue marine clients, for their professional views and opinions on the matter and received a number of quite positive responses. George P. Johnston, Senior Vice President and Regional Manager at Essex Credit Corporation related, “People are buying at a better pace than in 2010. There is plenty of money to lend as long as credit is good and income can be verified. Lending rates on 15 and 20 year contracts are at historic lows. Now is the time to buy.”
Maria Elena Ferrer, V.P. of Private Client Group at City National Bank  responded, “We will discuss the purchase of new and used yachts with all U.S. residents and citizens, as well as the refinancing of yachts at rates that are very competitive and attractive right now.”
Her colleague, Rosary Falero, Managing Senior Vice President and Private Client Group Manager, chimed in similarly, “Yacht owners must deal with environmental concerns, maintenance, safe room preparations and more; they shouldn’t have to worry about financing. We now offer expanded yacht services that enable new clients to secure the financing they need.”
But it’s not just the big national banks that are seeking the business. While many of them are indeed shying away from marine lending there are still a host of quality regional, local and even international financial institutions seeking the business. They’ve determined that consumer marine loans have a greatly reduced incident of loss than many other types of consumer loans. In fact, in some cases there’s been an increase recently in both the number and value of boat and yacht loans.
Once you’ve decided to seek a boat loan, it’s vitally important that you go about doing so in the most prepared manner possible. Lang Ryder, Senior Vice President at Seacoast National Bank and the Director of Seacoast Marine Finance, ran down the basics:
“Gone are the days of ‘No Doc’ or ‘Light Doc’ loans where applicants were approved based solely on credit score, stated income or limited financial disclosure. Borrowers today will be required to provide full financial disclosure as dictated by the lending institution. When applying for a loan, presentation counts and can affect the outcome. Borrowers need to be sure their application is complete in order to have it fully reviewed.”
In today’s world that means:
-A complete credit application
-Detailed personal financial statement
-Two years’ of Federal Income Tax returns
-Year-to-date income verification
-Verification of personal liquidity
-Self-employed business owners must provide business
Income Tax returns and financial statements as well.

“Based on the information provided, conventional marine lenders will look for those applicants with credit scores generally over 700, good liquidity remaining after the down payment, and the ability to demonstrate consistent income and cash flow year over year. Cash flow is determined by an analysis of the tax returns. Verifiable income must be sufficient to service all current debt, new boat debt and projected boat maintenance while maintaining a surplus for living expenses. Typically banks like to see annual debt service-divided-by-annual-income less than 50 percent.”
Lang also offered this extremely sound, but not always so obvious advice:
“In the search for ‘lower rates,’ it is unproductive to simultaneously submit your loan application to multiple finance companies because it results in multiple credit inquiries which ultimately erode your credit score and, for marginal applicants, can jeopardize your ability to receive a loan approval. I suggest that you interview finance company representatives until you find your preference, then let them go to work for you.”
As for current loan rates, fixed rates on those in excess of $100,000 hover in the mid 5-6 percent range, variable rates will be a point or so lower, and you’ll find it makes little difference in the rates if you’re buying a new or used vessel. However, if the boat you seek to own is 20 years or older, expect the rate to be a bit higher and the term somewhat shorter.
Don Parkhurst, Senior Vice President and Manager of SunTrust Bank Marine & RV Finance Division offered these final thoughts:
“We have seen steady volume in marine loans this year with moderate growth in larger boat sales. Marine loan interest rates are very attractive historically and this is also feeding a lot of refinance activity, which is about 20 percent of our business this year. Most people refinancing boats purchased prior to 2009 are having to make principal curtailments to their balances in order to qualify for a refinance, but large numbers of boaters are choosing to do this to take advantage of the low rates.”
Once you’ve done your homework of choosing the boat that’s just right for you and you have negotiated a reasonable price, you’ll find that there are a lot of lenders out there prepared to make your boating dreams come true.