Irrigation financing options increasing

Golf Course News, Nov 2001 by Overbeck, Andrew

EDITORIAL FOCUS:

Irrigation Equipment and System Leasing

When it comes to installing a new golf course irrigation system and pump station, more courses are exploring leasing and financing options. Many irrigation companies now offer various financing services that focus primarily on the renovation market.

TORO PROGRAM SURGING

Toro offers one of the most extensive financing and leasing programs in the industry. The program, which was unvieled in 1999, has grown steadily over the past two years.

"The trend is certainly going more towards financing on the renovation side," said Kristina Spindler, golf marketing manager for irrigation. "When we kicked this off we had one-in-12 courses financing their projects. Now it is roughly four out of 12 courses."

The company leases items that have residual value such as satellite controllers and offers straight financing on labor, installation, pipe, wire and heads.

"If the credit of the club is good we can finance these items based on cash flow," said Steve Snow, director of golf renovation and sales. "We do not do many of these with new courses because they do not have established track records."

"We are focusing on the renovation market," added Spindler, "because one of the major deterrents to renovating existing systems is cost. We need to let courses know that they can get financing for things like irrigation."

Deere Run Golf and Tennis Club in Lincoln Park, N.J. recently financed a Toro irrigation system because the bylaws of its association would not let the club go into debt.

"We couldn't go out and get a loan for the system," said golf committee member Ronald Kraft. "So we leased it. It is a different way of financing it, more like a rental really. This way we got a new system without having to change our bylaws or take on a large payment." At the end of the five-year lease, the club will buy the system for a dollar.

Since the bulk of Toro distributors also represent pump station maker Flowtronex, the company can offer a package deal on all irrigation components. "We work closely with Flowtronex and other vendors such as irrigation consultants and installers," said Snow.

Toro's program is handled by San Francisco-based Bank Group Financial Services which offers customized services.

"With irrigation there are a lot of variables," said Bank Group's Mike Meacher. "It is not like golf cars or turf equipment that have a high residual at the end."

Meacher estimates that just five percent of all irrigation systems are financed each year, but said the market will grow.

"Renovating the irrigation system on an 18 hole course is more expensive than a new fleet of golf cars or turf equipment," he said. "With technology always improving there is little incentive to leave a system in the ground for 30 years. There are more reasons to upgrade."

CREATIVE SOLUTIONS

To convince clubs that financing an irrigation system makes sense, Meacher breaks it down on a cost-per-member basis. "We go in and say, `You can get the system for a $4,000 assessment per member, or you can finance it and raise monthly dues by $47,"' he said. "When they look at it that way, one-third pay the assessment and two-thirds opt for the monthly payments."

To encourage clubs to do work in the off-season, Toro just introduced a six month, no interest, no payment plan.

"This allows courses to do the work in the fall and winter when there is less play, and not have to worry about payments during a time when revenues are lower," said Snow. "They don't have to make payments until the revenue kicks in in the spring."

Snow expects leasing and financing to keep increasing in popularity.

"As courses get more comfortable and familiar with these options, I think more will take advantage," he said.