For those operating within the maritime transport sector or requiring a vessel for any reason commercially, commercial boat financing is a great way to help fund your business operations and the general growth of the company.
However, commercial boat financing can be tricky to navigate without any experience. Perhaps you’ve never needed funding until now, and you’re looking out for the best financial loan solution for your company?
In this article, you’ll learn all about this type of financing and what options are available for your business, whatever that may be.
Commercial Boat Financing Options
There are different types of marine mortgages and loans that are dependent on what type of boat you’re looking to finance. Lenders can provide a whole host of financing solutions to work for anyone, whether you’re looking to finance day charter boats for angling to barges and narrowboats that may be used as hotels and accommodation.
Commercial vessel mortgage
Getting a chattel mortgage for a commercial vessel is one of the most popular ways to finance a boat. A chattel mortgage is a financial agreement where the asset itself (the boat) is put up as security for a loan.
These marine mortgages are paid off according to terms agreed with the lender. Many lenders are flexible with their terms, and an agreement can nearly always be reached that suits both parties. Once you’ve paid off a mortgage, you fully own the boat.
Commercial vessel mortgages are particularly popular for high-value boats and those where the owner will be living on board permanently.
Equipment leasing
Another popular form of marine finance is equipment leasing. Equipment leasing works by a lender buying the vessel, and you paying a regular fee to rent it from them. A term is agreed for the lease, and there are various options when this term comes to an end. You can:
- extend the leasing term
- pay off the remaining balance and own the vessel
- return the asset to the lender
- potentially upgrade to a new model
Equipment leasing is an excellent solution since it means you obtain the asset straight away without putting up a large sum of money. Typically, lenders will ask for the first month’s rent in advance, but this may change depending on the boat’s value.
Another benefit of leasing is that you’re never tied down to a particular asset. If your business is booming and you require a larger vessel at the end of the agreed term, you can simply return the asset and lease a new one without having to sell the boat yourself. Some lenders may even have an upgrade service where you can add a new asset to an existing finance plan.
Commercial boat hire purchase
A hire purchase agreement is similar to an equipment lease, except you continue to pay back instalments until you fully own the boat. However, unlike an equipment lease, you cannot return the asset to the lender after a certain period or upgrade it to a new model after the first term. For this reason, many people consider hire purchase agreements to be less flexible than leasing.
However, with hire purchase, you legally own the boat from the start of the agreed term. In addition, you typically won’t have to put up the ship, or an equivalent asset, as security. However, you will often have to pay a deposit at the start of the term instead.
Do I Qualify for Commercial Boat Financing?
There are typical criteria that you’ll need to meet to qualify for most commercial vessels funding. With marine finance, there’s usually a minimum advance. You’ll also be required to put down a deposit, which will depend on how much the lender wants and the cost of the boat you’re looking to finance or refinance.
All commercial vessels must also comply with certification requirements for that vessel type in particular. They should also be fully British registered with the Red Ensign Territory. This time period is usually around 5 to 10 years, and the maximum age will depend on the class of the boat.
How to Apply for Commercial Boat Financing
To apply for commercial boat financing for your charter fishing business, you’ll first need an idea of which boat you’re after unless you are refinancing a boat you already have.
The lender will supply an application form that you’ll need to fill in with all the relevant details pertaining to the boat, the deposit available and your intentions for the boat’s usage.
After receiving the application, the lender will determine whether they want to loan to you or not and will provide you with an offer. Once that offer is through and approved, it can take anywhere from 10 days to a month to receive funding.
This might vary depending on the lender you pick, so be wary that this could be longer when receiving your marine finance.
Can I Get Financing for My Commercial Boat If I Have a Bad Credit Rating?
A marine mortgage is more difficult to acquire when it comes to paying or refinancing your commercial boat. Marine mortgages, though, are still attainable even with a bad credit rating.
The reality is that the marine finance available will be limited. Another downside with a bad credit rating is that the marine finance available will likely have a higher annual interest rate as a result.
It is financially beneficial that you attempt to improve your credit rating where you can before applying for marine finance or marine mortgages of any kind. It helps not only lower your interest rates but the amount you’ll be paying when it comes to those monthly repayments.
Improving your bad credit rating can be done by following this guidance from Experian.
Who Offers Commercial Boat Loans and Mortgages?
There are plenty of commercial boat loans and mortgage suppliers on the market. A short enquiry form is available on most to get a feel for what can be offered by each lender. It’s always good to assess the market and research each loan provider.
Some have fixed capital repayment mortgages, and some have fixed-rate options. When it comes to marine mortgage options, it’s always worthwhile to explore all of your options.
A quick search on the internet will bring up a variety of lenders specialising in niche sectors like marine finance and aviation finance. It’s always worthwhile to explore the range available rather than committing to the first loan provider you come across.
Be sure to check that the financial solutions you’re looking at apply to the type of boat you’re looking to finance or refinance.
Which Commercial Boat Financing Option Is Right for You?
Marine finance is a great option for many commercial companies looking to expand their fleet or kickstart their business this year.
If you don’t know where to start, you can always approach a broker who can do all the work for you. These specialist brokers will have an in-depth knowledge of what you’ll need to get the right boat finance for you.
This can also be helpful in situations where you need to present all the relevant MCA registration requirements. Documents like vessel title paperwork are required during the registration process.
Having marine assets can be a great way to build your business. With lots of marine mortgages out there, there are plenty of opportunities for your business to secure finance in the marine sector without too much hassle.
Final Thoughts
If you’ve been considering boat finance, whether you’re looking at fishing boats, narrow boats or coastal ships, there are plenty of opportunities and finance solutions to help finance or refinance your sea vessels.
As long as you can meet the criteria, getting commercial boat finance is pretty straightforward. Make sure you consider all marine finance options before choosing the right one for you. If you have any worries or doubts, then it’s worth getting expert advice from those within the industry, whether it be a financial advisor or fellow sea vessel owners.
FAQs
How much down payment is required to secure a commercial boat business loan?
For the down payment, loan lenders will often require a payment that’s around 10% and 20% of the cost of the boat. However, this can depend on the lender and how much the boat costs.
It’s important to factor in what type of boat you’re after and whether you can afford the downpayment with that boat in mind. You might need to lower your search in terms of cost, or alternatively, you might be able to afford more.
Do I need to provide security to get a commercial boat business loan?
Commercial boat loans are usually secured loans meaning you will need collateral to put as security against it. This can be risky as if payments aren’t met, the collateral such as property or other assets will be used as payment instead.
The lender may also wish to take possession of your motor boats, tug boats, or other ships if you fail to make the repayments on your marine finance.
What credit score will I need to obtain a commercial boat business loan?
It’s good to have a relatively high credit score to get a wide range of lenders for your marine finance or commercial boat loans.
Whilst it’s not impossible to get a loan with bad credit, it’s always financially beneficial to improve your credit score as much as possible. That way, you will get better boat finance as a result.