Marina Dock Age, July/August 2001

Where to Turn for Marina Loans
by Harry Nieman

In the last several months, Federal Reserve Chairman Alan Greenspan has lowered the Fed rate six times, by a half percent each time. One would think that with the bank prime lending rate at around 7 percent, loan funds would be plentiful for any reasonable purpose, such as financing a marina. You already may have learned that is not the case.

Banks are reluctant to finance marinas in a go-go market, and are now really in a rather cautious lending mode. The uncertain economy has caused cash flows to be adversely affected in regular business enterprises well known to the banking community. One can only imagine how banks react to marina loan applications.

STORAGE = STEADY INCOME

Very few lenders in the market place understand the marina business and its strengths and weaknesses. Most believe it to be highly volatile because of the recreational aspect of boating and are unaware that the steady income generated from storage (wet or dry) is the heart and backbone of any marina’s success.

Most of this revenue flows to the bottom line, also known as NOI (net operating income) or EBITDA (earnings before interest, taxes [income taxes], depreciation, and amortization). Much of this income will not be impaired in an economic downturn because the boats have to be housed somewhere.

Today, zoning and other ordinances generally prohibit storage in a non-commercial industrial location. If the boat owner is unable to make his payment to the bank for his boat and the bank repossesses the boat, it is now the bank’s obligation to make storage payments to the marlna owner.

Surely, before this happens though, the boat owner can find cheaper storage. If the boat is small enough, the owner might take the boat out of the water or the dry stack building and store it on dry land himself. This causes income to go down for the marina owner, and in a downturn or slow economy, fuel sales are reduced, as well as repair, service, and new boat sales.  

If disposable income is reduced, it has an effect on recreational expenditures (i.e. golf, vacation, etc.) but most fishermen continue to use their boats because they enjoy the sport, own a boat anyway, and are limited to spending money on other diversions so they continue to support boating. Continue »