Luxury Financial Group was established in 2017 to provide lending solutions to boat, yacht, aircraft and recreational vehicle buyers. The company, based in Fort Lauderdale, Fla., is led by president Noelle Norvell. She has 32 years of finance experience and is an expert in navigating the marine lending landscape for her worldwide client base.
Soundings Trade Only sat down with Norvell in May to discuss the marine lending landscape, and how she and her team are helping brokers, salespeople and dealers steer their clients through the borrowing process in today’s climate of elevated interest rates.
This interview has been edited for clarity and length.
Tell us about your professional background.
I started in lending in 1992. My first decade was spent in consumer and commercial lending, and obtaining my Series 7, 63 and mortgage licenses.
How did you get into marine lending?
As a private banker in 2000, my clients were buying yachts through a large dealer, and I was financing them myself instead of through the dealership’s finance and insurance department. Since then, I have entrenched myself in the marine lending community and educated myself in virtually all aspects of marine transactions when lending is involved. Invariably, the fun part about the job is that rules and guidelines continue to change, so we must stay educated for our clients. I also have my marine insurance 220 and 120 licenses, as insurance has become challenging for the marine industry.
Tell us about Luxury Financial Group.
We have significant lending experience, and can lend on marine, aircraft and RVs. Our customized approach allows us to pair the borrower with the right lender to best suit their needs. For example, not every lender loves a real-estate investor borrower profile, as their cash flow can vary quite a bit with projects year over year. I underwrite the file and have lenders that prefer that profile. Maybe a charter client in the British Virgin Islands is not suitable for every bank, and perhaps they also want charter or limited charter. So, we pair them with a lender that has an apptite for that kind of client.
What sorts of boats and yachts does Luxury Financial Group typically lend for?
All types: center consoles, catamarans, megayachts, sportfish, sportboats and sailing vessels.
What are some common misconceptions about securing a boat loan?
Lots of borrowers think they may need collateral above and beyond the boat itself. I only need to use the boat as collateral. Some people don’t realize a proper survey and insurance coverage review is required, as well. Other borrowers might not realize that rates on boat loans are higher than other consumer loans. Last, some of our largest clients don’t know that yacht loans exist for multimillion-dollar yachts. I enjoy educating them that the debt can be placed solely on the yacht without them having to use all cash or a securities-based loan.
Do you find that borrowers conflate the auto-loan process with how boat loans are sold?
Boats are wants, not needs. Generally speaking, you need an automobile to get to work, shop for groceries, and so forth. So marine lending is different than the experience for getting a loan for an automobile.
Are there any loan fees that often catch borrowers by surprise?
Foreign registry fees can accumulate quickly on larger-yacht deals, and the lenders often make the buyers pay the bank’s expenses. Foreign registries are when a client is wanting to keep a boat outside of the United States. It typically is easier to flag in countries like the Caymans and Marshall Islands because they are not monitored by a coast guard.
Sales tax, if not addressed by the broker, can be a surprise. We like to mention all the aspects of the purchase and be a valued resource for the buyer. Duty is another expense if the yacht is foreign and has not been imported into the United States. Duty is applicable on foreign-built boats that come into the United States. These duties are generally included in the sale price, especially if it’s a high-volume production yacht.
Can taxes, documentation and registration fees be included in the final loan total?
It depends on the lender. Most of them allow the loan-to-value ratio to include the sales tax. We ask up front if this is a necessity so we can assign the client’s profile to the correct lending institution.
Is a survey always required to secure a boat loan, or only for preowned vessels?
Yes, absolutely on used, very similar to an appraisal for a home. The survey usually requires a haulout to see the bottom, and a sea trial to make sure the boat performs to specs. They’ll also do a walkthrough and take photos. If the boat is smaller, we have a group that can do inspections with photos that are less expensive. For new boats, the survey is not required since the boat is leaving the factory or dealer with virtually no use.
What is the range, in dollars, of loans available for a boat or yacht purchase today?
About $100,0000 to $25 million.
What is the minimum credit rating required to secure a boat loan?
Marine lending is different from the car and mortgage industries. The scoring is usually a minimum of 680. Auto lenders go as low as in the high 500s. Our lending tiers start at 800 and typically drop in 20- or 30-point increments for rate adjustments. If a client has an unusual event on their credit bureau resulting in a score under 680, we try to work with the lender to explain the situation.
What is the typical credit rating required for no-documentation or verification loans?
For no-doc, the guidelines usually call for a credit score above 800 and will max out at close to $200,000 to $250,000 total loan amount. No documentation means a borrower does not have to show formal tax returns but does require a credit application and personal financial statement. These loans rely heavily on a high credit score to gauge a borrower’s ability to repay.
What kinds of items on a credit report have the largest negative impact on a consumer’s ability to borrow?
The most negative aspect on a credit bureau is score, which encompasses the overall credit profile of the client. Second are late payments on mortgages. High revolving unsecured credit card usage and late payments on previous recreational loans are also red flags.
What sort of loan-to-value percentages can marine borrowers expect today?
Under $100,000, most lenders will provide 90% loan to value. As you go up in loan amount, the down payment tends to go up, too. Most lenders are requesting 20% down by the time you get to $500,000. A loan amount of $2.5 million typically will require a 30% investment from the client.
How are elevated interest rates affecting marine lenders?
Certainly, clients are second-guessing when the payment is a few hundred dollars higher than expected. That said, there are some deductions that they can speak to their CPAs about, and refinancing after a certain period of time is another option.
What sort of deductions? Secondary home type things?
Yes, borrowers should talk with their financial advisers to find out the kind of tax savings they can use their boat to leverage.
What advice would you give to prospective boat buyers when considering marine lending?
Choose experience. Speak with a lender who knows the industry and doesn’t just toss out the lowest rate over the phone. Often, that client will call me back after a challenging experience. There are so many nuances to a marine deal, so you want someone who will champion your purchase and assist with documentation and insurance.
This article was originally published in the July 2024 issue.
