Charter boat financing

Just a heads up for those who may have a boat on order. Financing options have dried up in the last 90 days. Even if you have pre approval you may find your company will no longer do the loans. Have a backup financing plan. This gets complex if you have down payments as they might not be refundable in the event you can’t finance.

Just a heads up for those here who will never, ever, even consider a desire to buy a boat, you will eventually be able to charter from your choice of Virgin Islands locations, but right now you can most easily do so from St. Thomas. A deposit will work a treat, and your terms will be negotiated between you and your charter provider.

To get the thread back after the hijack if anyone is finding a good source to finance a charter boat let me know. I have alternative financing available but would prefer not to use it.
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George
I’m assuming Bank of the West is one of the ones dried up?

Ellen

George-

I would be curious as to why it has dried up especially as financing seems to be readily available in most other areas.

You probably have thought of this but just in case how about a (1) Home equity line of credit (HELOC) or (2) Investment line of Credit although not sure I would want my house or investments at risk for my boat.

I am told that given the covid issues and travel restrictions banks are opting out of financing moveable assets in foreign countries. The first indications were rates moving up when all other rates were dropping. The same companies that due Marine loans also tend to do RV loans. They are swamped with RV loans and don’t need the Marine loans. A Heloc is my backup plan. Be aware that many banks or financial institutions are also refusing to write new Helocs. USAA is a example. I am told if I state the boat will be in limited charter only there are a couple of options however that requires lying to get the loan. I am not going that route.

Bank of the West/Essex credit has quit writing Charter loans as far as I know.

OK...thanks. I was curious as to what risk they see in charter financing. I haven't seen the HELOC issue in my clientele so maybe it is a USAA issue as they tend to be ultra conservative?. We just reset our own HELOC for another 10 year draw period and it was a major PIA. I believe the interest would be deductible for this "business investment" still...

I imagine you have seen the major RV dealer north of Richmond on 95 that always seemed to have packed lots and now has lots of empty space...

Good luck my friend...

Have you heard of people defaulting on their boat loans? I'm guessing that, with charter companies reneging on their guaranteed contracts, some owners have not been able to make their payments. Then, going forward, there is the risk that some charter companies won't survive the pandemic. Banks may not want that kind of exposure.

I am not hearing of defaults. When a loan is written for a charter boat normally the charter income is not factored into the approval process. Depending on the company and type of contract the last few years have been tough on some owners so there may be some defaults.
The real point of the thread is to make sure everyone has solid financing options before you place construction deposits on a boat.

George, didn't you say financial institutions could pre-approve and subsequently back out? Isn't that the real risk? Getting turned down for a loan isn't great, but committing to a large purchase and being unable to pay for it is a whole lot worse!

I agree that it is bad. It may be yet another nail in the charter industry future. If they can’t sell boats you will not have a business. I suspect however as more covid info comes out and some of the irrational fears go away things will improve. A effective Vaccine changes everything!
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I'm not sure if this is factoring in to the boat financing issues, but I have many clients refinancing real estate and the lenders have added additional requirements in the last 90 days or so. This is mostly an issue for business owners or those that have business interest. In the past, prior year K1s or proof of a current extension were all that were required. Now the lenders are wanting CYTD P&Ls and BSs....I am assuming the lenders are concerned that "past performance is no guarantee of future results".....fearing COVID may be impacting current sales/operations.

Just what I'm seeing in our neck of the woods.

All of that is a player. Never filled out so many loan docs in my life!
G