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May 2017 | Boating Industry | 37 [ Bigger, better, faster ] www.BoatingIndustry.com what companies are seeing. Wells Fargo Commercial Distribution Finance says it has seen its dealer gross revenues grow substantially since the recession, which necessitates larger credit lines. Underwriting those transactions has become more com- plex and managing large or multi-location entities more demanding. "The trend toward bigger boats and bigger facilities has meant that we needed to respond with larger credit lines," said Bruce Van Wagoner, presi- dent of the Wells Fargo CDF Marine Group. "We are responding but we are in a period of unprecedented growth and keeping up is a challenge we face every day. … CDF is a proven leader in this regard and has seen our customers succeed in this rapidly expanding market." Baqir says his OEM customers are increasing production in order to fulfill their dealer's floorplan needs. However, he sees a period of saturation coming in the industry's future – even if it doesn't happen this year or next. There will be a shallowing in growth and consumers will pull back on buy- ing new products. "Unfortunately, our industry is driven by everyone ordering and buying their product in the summer at the dealer meetings, but they're selling it in the spring or the following summer. There's a window of time where things can happen," he said. "All of a sudden [the consumer] doesn't feel as wealthy where [they] can't go out and buy a boat, so you have that backing off, and that's what creates the aged inventory the following season, and that's what creates the gulf we have on the cash flow." Trends in the industry would suggest it would be easier for dealers to obtain floorplan financing than immediately after the recession, which is half true. After the recession, it was harder for small businesses to get credit lines, as lending standards tightened and many businesses became less credit- worthy as their cash flows declined and their real estate collateral lost value, according to LH-Finance. However, this has eased in recent years. "Because their sales have increased and dealers are more profitable, it's easier for them to get financing today than right after the recession," said Herve Bonnet, president and CEO of LH-Finance. "As the market contin- ues to improve and grow, increase in demand will boost their profits, which in turn could support bigger credit lines." Northpoint sees the ability to make a conscious decision on risk in cases of floorplan financing for OEMs and dealers because the economy supports a higher-risk scenario. "Because the economy is strong and we're seeing cash flow and bal- ance sheets move in a positive direction," he said, "the dealer's financial status is warranting increased credit lines or somebody entering the mar- ket space has the ability to garner or gain a positive cash flow position quicker because of [the economy], which gives us the ability to allow them financing." While the industry is growing and financing is available, there are many factors to consider to be sure dealers, manufacturers and lenders continue to make smart decisions about floorplan financing. "To keep it healthy, there needs to be a balance between risk and re- ward," said Van Wagoner. "That's where CDF's experience in underwrit- ing and servicing play such a critical role. Knowing the regional markets and the trends is also a factor. Our Commercial Team works directly with the OEMs and new dealers to make sure their respective needs, in that market, are met." Smarter since the recession Lenders remain cognizant that a recession is ultimately in our future, but the industry is confident lessons from the last recession have positioned deal- ers, manufacturers and lenders to meet the challenge and thrive through it. "We're still making decisions knowing that there is going to be a down- turn. It's not a matter of if, it's a matter of when," said Baqir. "We've all been around long enough that we know that 18 months, two years, somewhere out there we will have a market where it won't be a crash but it will be a shallowing, and what will happen is you'll have aged inventory go up and then you'll have dealers that have understood and understand how to "WE'RE STILL MAKING DECISIONS KNOWING THAT THERE IS GOING TO BE A DOWNTURN. IT'S NOT A MATTER OF IF, IT'S A MATTER OF WHEN." — Russell Baqir, senior vice president of business development at Northpoint Commercial Finance