Waterfront Business Financing: Understanding the Complexities of This Economic Cycle

Since 2022, the economy has delivered mixed messages on the strength and stage of the national economic cycle. What can be inferred about the future and the commitment of lenders to fund projects for marinas and other waterfront businesses?

Remarkable conditions and policies have occurred in a short period of time. Since the pandemic hit, economic changes have occurred. Many businesses were forced to close for quarantine purposes. The push for inoculations grew to unexpected proportions. Larger businesses and the government moved workers to home offices. The recreational marine segment of the economy is a small piece and not always correlated with the national economy. Boat sales were positively impacted by the COVID-19 outbreak after consumers quickly realized a good place to be during a pandemic is on the lake with family.

As the world moves past the pandemic, there have been major impacts to the national economy that affect everyone to a greater or lesser extent. Some of those issues include supply chain disruptions, tension with China, a war in Europe, exploding government spending, cultural new frontiers, higher gas prices, policies to diminish dependence on petroleum, bank failures, crime in major U.S. cities, border issues, and inflation.

Understanding the Broad Picture
The political parties read the economic numbers and headlines differently; loudly proclaiming doom or boom. But the public wants to know whether a recession is looming. In a recent report, the Bureau of Economic Analysis wrote:

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“Real gross domestic product {GDP) increased at an annual rate of 2.6% in the fourth quarter of 2022. In the third quarter, real GDP increased by 3.2 percent.”
A more recent report states GDP growth is 1.1%. Another decline signals a trend.

Another important factoid is money supply. M1 is cash. M2 is cash plus savings accounts such as CD’s, money market accounts, and thereby monetary reserves that citizens maintain.

In an April 30th article written by Sean Williams for the U.S. Small Business Administration’s Agency Financial Report Fiscal Year 2022, chief investment strategist Liz Ann Sonders with Charles Schwab was cited as noting a 4.1% decline in M2 through March represents a historic decline. Williams also quoted Nick Gerti of Reventure Consulting for the following facts:

This is the second largest decline in M2 money supply in more than 150 years of history. The previous four instances of M2 contraction led to three depressions (1870s, 1921, and the Great Depression) and one financial panic in 1893. (The writer acknowledges that sufficient programs exist now to avoid a panic or depression.)

Williams stated that the takeaway of only the fifth decline in M2 money supply since 1870 is that there is an increased likelihood a U.S. recession is taking shape in the not-too-distant future.

Lending Looking Back/Looking Forward
These statistics prove that the economy is slowing. GDP was stronger in 2022 than it was for the start of 2023. One measure of lending – SBA financing— improved in the fiscal year ending in September 2022. Per the U.S. Small Business Administration Agency Financial Report Fiscal Year 2022, “…the SBA’s 7(a) and 504 loan portfolios expanded by $3.2 billion (3.1 percent) and $1.9 billion (6.7 percent), respectively.”

Marinas are by no means financed exclusively by SBA guaranteed loans, but SBA loans are popular. What cannot be measured right now is the loan activity occurring this year. It’s always possible to gain hindsight but ‘current sight’ is far more difficult to accurately assemble. The most accurate ‘current sight’ requires the ability to study only the waterfront business segment of the economy due to the success of recreational boating sales during the pandemic.

The literature is full of assertions that loan demand is weak primarily because of the recession and high interest rates. Jana Rouble, senior vice president of Acclivity Financial, who is a specialist in SBA 7(a) and USDA said demand is lower this year because of the rising interest rates. “This is making it harder to get new loans to qualify because of lower cash flow, but sellers still want top dollar,” Rouble said. “However, SBA loans are known to be more in demand during times like these as conventional lenders get more conservative on their loans.”

Rouble pointed to the commercial banking crisis. “Customers will need more downpayment or use a government guaranty to offset the risk to the bank.”
She predicted that interest rates should level off in 2024, which will make payments more predictable. “Then if businesses can offset their costs by raising prices and continue to have strong demand for their services, the market could stabilize,” Rouble said. “However, if there is a drop off in demand because prices are too high then we could have stagnation and an unpredictable market for buyers and sellers for another year.”

What Will 2024 Look Like?
If there is a recession, will there be a soft or hard landing? Will inflation ease further? Will the Federal Reserve decide to pause interest rate hikes or even lower them some? While inflation is not whipped perhaps leadership will see that stability of interest rates would be advantageous for a time. Will the administration act to improve the economy as much as possible for the election year?

Bet on this. There will be business opportunities which overcome cash flow hurdles, and increased risks. Savvy entrepreneurs will adjust to unsettling cultural issues. There will be banks willing to make those loans.

Michael Ellsberry is the Founder of Anchor Financial Services assisting small businesses in obtaining the best fit financing for those seeking to expand or refinance or plan for the future. He can be reached at or call or text (preferred) to 903 681 4789.