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Performance-Boat Loans Still Tough, But Not Impossible

Without question, the consumer credit crunch has played a huge role in slamming the high-performance powerboat industry. But that doesn’t mean qualified buyers in search of loans for go-fast boats should abandon all hope.

To find out where things stands in the high-performance boat loan market, I caught up with Dave Patanaude, the vice president of Alliance Business Development for Essex Credit, which is the largest marine lender in the United States. (A boat owner himself with a 36-foot-long Concept center console, Patanaude also is the president of the New Jersey  Performance Powerboat Club.)

“There is money to be had, but the individual applying needs to be extremely well-qualified,” said Patanaude, who noted the majority of performance-boat loans Essex is making are for models of less than $100,000 and more than $500,000. “To give you an overall picture, three years ago there were 12 national banks lending for marine industry financing. Today, they are only six. Six of the banks have exited the market permanently or at least for the near future.”

Minimum down payments have increased from what they were just three years ago, according to Patanaude, when a buyer could qualify with as little as 15 percent down. Now lenders are requiring prospective clients, who must have a credit score at least 730 points, to bring in a down payment of 30 to 35 percent of the total purchase price of the boat. And finding a boat that’s worth significantly more than its asking price does nothing to mitigate the down payment requirement.

“Even if you get a boat that’s valued at $200,000 for $120,000, the  $80,000 doesn’t count as equity,” Patanaude explained. “The bank would still want 30 to 35 percent down. Why? Well, historically with performance boats, when they are repossessed they’re usually missing their engines and drives, which makes a good piece of collateral virtually worthless. That’s left banks with a bad tastes in their mouths.”

Patanaude added the pre-qualification is a must for anyone in the market for a new performance boat.  “I’ve already come across instances where people have sold their boats and cannot qualify for a loan for another one right now.”

What are the keys to go-fast boat loan approval? Patanaude offered four:

1. Credit score must be 730 or higher.

2. Debt to income balance must be less than 35 percent.

3. For every two dollars of debt, the loan applicants needs at least one dollar that is “liquid.”

4. Payment history can include no late payments.

Patanaude said he expects the credit market to loosen up in the next 18 to 24 months, but until then it will be tight and only well-qualified applicants will be approved.

“All banks, whether they have a Triple-A credit rating or were, well, less than discriminating, are incurring significant losses right now,” he said. “Things will change when those losses start decreasing and coming back to what would be more historically normal. When that happens, more banks will begin to take more risks and loosen the lending criteria for performance boats, and banks that are not currently lending on performance boats will start