The Pain Points of Geographic Expansion for Lenders

Powersports has the largest presence in states such as California, Texas, Nevada, and Florida, thanks to a combination of long roads, sights, and optimal year-round riding weather. This makes them attractive territories for lenders both big and small who are looking to increase the reach of their businesses.

However, there are a number of factors to consider for lenders looking to geographically expand to any of the 50 states. Compliance, business opportunity, credit performance, and good old fashioned bureaucracy all play into process of what a lender has to go through to operate in a new state.

There’s a lot that a lender needs to consider, and here are five tips for finance companies looking to reach more territories.

1. Research Individual State Laws

While remaining complaint to the federal government is always a priority, not every state follows the exact same guidelines. Often times, there is no compliance “cookie cutter” for lenders as state governments can interpret regulations differently.

“There are as many ways to calculate a lease it seems as there are states,” Frank Dionisi, director of sales at Speed Leasing told Powersports Finance. “Some states require different things for titling, while others are different for repossessions. You have to make sure that you are registered properly in each of the states and that you are doing business legally and correctly so that the dealers don’t have an issue with getting their titling done.”

Speed Leasing has expanded its business into 20 states since it was founded in 2017.

“We have in-house counsel and compliance to keep us on the right side,” Mark Davidson, head of sales at Roadrunner Financial, told PSF. “We want to be a long-term partner for all of our manufacturers and dealers, and making sure that we’re doing the correct things is super important to that.”

Compliance remains a key factor for any lender looking to extend their reach. Roadrunner Financial considers compliance to be one of the top priorities when it comes to operating in new states. Each state can interpret laws differently, so lenders need to be prepared to be flexible to accommodate.

“As long as you are able to do the business the right way in each state then you are fine,” Dionisi said. “But, if you can only do business one way, you’re only going to be able to go into the states that allow you to do business that way.”

2. Stay on top of State Licensing

When a finance company wants to begin lending in a new state, it needs to apply for a license with that state’s government. Dealing with these institutions and regulatory bodies can be a big pain point, as the decision is “out of your control,” Davidson said.

“There was one state where our license application was sitting on their desk for almost a year,” Davidson recalled, “We followed up with them and said, ‘what’s going on? Put a stamp on that and we can start lending.’ They said ‘Oh, you’re behind like 10 other licenses, I don’t know if I can get to those this year.’”

Typically, Roadrunner follows up with the state and works to push through their license so they can begin lending.

3. Have Dealers Partners Prepared Beforehand

Speed Leasing makes sure that it has its dealer partners set up and ready to use their services before the state approves their license. That way, dealers are more prepared once Speed Leasing finally launches in the state. However, this takes some balancing to make sure that the dealer doesn’t get too excited in what could be a lengthy licensing process.

“We’ve gotten pretty good at [balancing] to where you want to make sure that you’ve got some dealers ready to go, but you don’t want to get their interest peaked too hot before you’re ready because then they start cooling off,” Dionisi said, “When we are ready to roll out in the state, the dealers are ready to go at the same time.”

4. Finding Opportunity Through OEM Partners

Roadrunner Financial is partnered with manufacturers such as Can-Am, Textron Off Road, Hisun Motors, and Triumph Motorcycles. Once partnered and set up in a new state with an OEM, the lender can use that partnership to find opportunities for expansion based on the OEMs network.

“The manufacture partnerships help us identify where the opportunity is because after we partner in one state with a manufacturer, we get to understand what their presence is in another state,” Logan Shedd, Roadrunner’s vice president of powersports, said. “We can see their retail efforts, see what they have in that state, and understand what the market opportunity is.”

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