Lenders often face significant hurdles when entering the recreational and commercial vehicle lending markets. However, with the right strategies, your institution can turn these challenges into lucrative opportunities for growth and diversification. Here’s a look at some common concerns and how to address them.
1. Tackling Competition From Other Lenders
A number of factors might influence your strengths and weaknesses when you go up against your lending competition, including:
- Community relationships
- Sales force size
- Financing resources
National lenders usually have more extensive assets, but smaller lenders often have deep-rooted relationships within their local communities. Identify these areas of concern and take steps to improve as you expand to be more competitive in these markets.
2. Streamlining the Lending Process
Automating workflows is an ideal solution for the traditionally manual and error-prone workflows found in vehicle lending. Implementing tools that manage documentation significantly reduces funding exceptions and increases efficiency. Automation also speeds up the lending process and simplifies the overall experience for users by providing a consistent, compliant guide.
3. Overcoming Expansion Uncertainty
The potential for large financing amounts may be a deterrent for your lending institution since recreational and commercial vehicle loans range from $10,000 to $10 million, based on what we see in AppOne-submitted loans. Though these loans often feature attractive rates and terms for lenders, and borrowers typically have high credit quality, the initial cost might extend your portfolio too far without predetermined boundaries.
As with any large financial venture, discuss your options within your business and with recreational and commercial vehicle industry experts. For example, ask the following questions:
- What amounts can you finance without overextending yourself?
- What level of creditworthiness is worth the risk as you build your portfolio?
- Does financing specific vehicle types that generate better terms and rates make sense when you first enter this market?
Asking these questions and creating a detailed course of action for expansion will help you enter these markets without opening your business to excessive risk too quickly.
4. Managing Dealer Relationships
There’s a misconception that a large sales force is necessary to manage a recreational or commercial lending program. In reality, you can choose to do business with any selection of dealers or dealer groups as appropriate for your institution. You can decide whether to focus on existing relationships due to a small sales force or seek out a wider network through partner relationships. To avoid overwhelming your resources, determine a growth plan that matches your institution’s capacity for expanding into recreational and commercial lending markets.
Conclusion
Recreational and commercial vehicle lending offer significant opportunities if you’re willing to explore this reliable market. Carefully consider which factors have inhibited your expansion previously. By addressing concerns about competition, workflow efficiency, loan dynamics, and dealer relationships, you can successfully navigate and enter these markets. Rely on trustworthy industry and lending partners in this sector to help create a plan that meets your goals without putting your business at risk.
