How do I finance buying a yacht in charter?

How do I finance buying a boat in charter?

Charter ownership and programs offered with shared boating takes advantage of the strong demand in the tourism industry. It also enables new ways of financing a boat purchase and attracts new sailing enthusiast and holidaymakers with the hassle-free terms for the boat owner. But how does financing in the yacht charter ownership market work?


This article will help you understand and shed light on:

  1. Terminology and Definitions
    1. Full & Part-Financing: associated charter ownership programs
    2. Charter Ownership & Charter Management: is there a difference?
  2. Boat Leasing: Operational & Financial
  3. Limitations & Risks
  4. Knowing your market
  5. Comparing: What’s the best charter financing for you?


A boat ownership in charter may be a good way of getting that dream boat of yours and it has proven for many to be the solution for speeding up the purchase and removing the cost for up-keep of traditional boat ownership. While it has never been a better time to consider a new charter boat because of the overwhelming demand for new boats and the lack of inventory available on the market, there are still questions to be raised and dimensions of options that you need to be aware of, so it pays to talk to an expert in this field before you go into your local banking branch “hat in hand” and hope for the best. Whether you are new to yacht charter ownership or a seasoned investor, our goal is to give you a comprehensive overview of the possibilities in the charter management market. You will become informed and empowered, while having the freedom to choose.

So, if we assume you want to compare the market and find the best boat charter investment financing solution for you, then keep on reading this article to perhaps shed new light on what you already know and thought you knew about boat loans in charter and leasing for charter boats.

First let’s start with the terminology and understanding what all definitions really mean and how they are played out in the charter management programs and ownership programs offered by the most popular charter businesses.

Terminology and definitions


Full Financing Investment

Full Financing of a purchase or investment in a boat with a charter management or in charter ownership (with or without program) refers to the means where you, the buyer, pays the full asking purchase price of the yacht or charter investment program. This requires you to arrange your own financing with your local bank, financial service firms and /or credit union.

It will entitle you to the charter income produced by your charter management agreement or ownership (program) and other ownership benefits defined by the charter business you have contracted.

Associated Charter Programs: Charter Ownership/ Complete/ Performance Programs/ Investment Programs/ Guaranteed Income Programs


Part Financing Investment

Part Financing of a purchase or investment in a boat with a charter management or in charter ownership (with or without a program) refers to the means where you, the buyer, pays PART of the asking purchase price of the yacht and receives ownership benefits as defined by the charter ownership, and/or your ownership rights, benefits and options defined by the charter management during the financing period. 

Associated Charter Programs: Charter Management/ Leasing/ Partner/ Balloon Payment/ 35%-55% Down payments


Charter Ownership & Charter Management: is there a difference?


The definitions are commonly used in the industry by professionals and the boat owners themselves, as an umbrella term for the boat being used for commercial purposes. However, for the sake of determining when, why, and whom, the different terms apply to, we will make a clear separation between them both:

Charter Ownership
Refers to the contract or agreement made between the lender-/investor (the Customer) with a charter business and/or operator (the Service Provider), where most commonly the Service Provider is offering a Charter Ownership Program/Investment, with detailed and pre-made conditions for the Customer. The charter management programs are most often defined as a loan agreement, with the Customer receiving several options of boats, destination, contractual period. The investment or loan by the Customer, is most often covered by a mortgage and lean to the full right of the boat in the program, where the Service provider is paying back the ownership of the yacht at the end of the contract period, and during the agreement the customer receives ownership benefits in terms of maintenance, up-keep, mooring (berth), and defined sailing usage (usually points or the equivalent).

Charter Management
Refers to the agreement made between the boat owner (the Owner) with a professional charter business/ yacht management operator (the Operator), where most commonly the Operator is offering a standard or customised Management Agreement, with a detailed description of the services offered by the Operator during the contractual period. Services most commonly offered in charter management are: Agency service (the full service of renting out the boat), mooring (berth), ongoing maintenance, winter services, insurances, licenses and registration for commercial purposes.

Later in this article, you will get to know the limitations and options of the Charter – Management vs- Ownership.

For you to make a decision on what financing you will choose and whether you do the financing on your own, or like to enter a Charter Ownership Program or Charter Management offered by a charter business, or like receive the help of an industry professional to receive the best fit for your needs, you first need to know the difference between the TWO PARALLEL LEASING options (part financing) offered in the charter market.


Let’s dive straight into, the difference between Operational Leasing and Financial Leasing.


Leasing: Operation & Financial

Part Financing options


Operational Leasing

Offered by most of the bigger charter businesses. Operational leasing refers to the loan structure and financing of the charter business, where the boat and a charter ownership program is offered in a Part Financing program by the charter business to you as the potential buyer (lender/investor). Your loan or part-financing is with the charter business. The financing and leasing behind the charter business is often with a specialised credit institution for the leisure marine industry. The charter business has the responsibility to follow the leasing payments and does what is necessary to meet the payment requirements and adhere to the ownership agreement with you as customer.


Financial Leasing

Offered by most independent charter businesses. Financial leasing refers to the loan structure and financing of a single credit approval (a yacht) whereby the buyer/customer is under no scrutiny, and the charter business itself is the guarantor for the validity and feasibility of the projected charter income and business plan. The buyer is in connection with the credit institution and has a charter management agreement with the charter business (operator) that will manage the charter and down payment of the leasing.


Limitations & Risks


What the banks have to say


So, what is the process of getting a boat loan?


Before you run of to your local bank or known credit institution, here are few a things lenders like:

  1. Not surprisingly, a high net worth appeals to banks. A 2:1 net worth/debt ratio is good. Financial institutions are also looking to cross-sell their products and high net worth individuals represent opportunities for other kinds of financing including primary residence, second home, auto, RV and even a business. Also, your debt/equity ratio will be important. The lender wants to know that you’re not already overextended with other loans. (*2 )
  1. Lenders want to see that the borrower has managed loans of a similar size before and therefore won’t be overwhelmed by the current transaction. Liquidity is also important. Just getting into the loan shouldn’t eat up all the borrower’s resources. Lenders look for liquid assets that will cover 12-16 months of payments if an employment situation should change. (*2 )
  1. Stability and consistency are key. Steady employment, a history in the current profession, and a primary residence are factored together by a lender as part of the candidate evaluation process. Having other high value assets helps too as they are potential secondary sources of repayment. (*2 )
  1. Credit scores in the 700 and 800s are ideal. However, even scores in the 600s may be acceptable today so long as other criteria look good. (*2 )
  1. Having gone through the boat buying process before is a plus. Lenders know that experienced boaters understand the requirements of marine lending as well as the ongoing costs of boat ownership and are less likely to overcommit when choosing a vessel. (*2 )

(referring to information by)

(*2 )


Cashing your yacht – not financing your yacht with a program or finance offered by the charter company

“what to look out for”


First, insurance is required and must be arranged before the closing of the loan. Your broker, dealer, charter business will help out with this.

When financing a yacht through our Yacht Ownership Program lenders do not consider the guaranteed income that you will receive as an owner to help qualify you for the loan. Therefore, it is a very similar process to financing a private yacht. There is no balloon on the note, meaning that you will not have one large payment to satisfy your loan at the end of the program.

So the next cheapest form of finance is using equity from your home or restructuring your home loan to take advantage of the lower interest rates and longer payment terms compared to commercial leases.

Your national and local bank, any financial service firm and credit union, will need some collateral that they are familiar with in estimating and a risk that they can handle. Therefore, it’s not uncommon to see charter boat buyers having a combination of a property redraw facility and a dedicated boat loan where a portion of the boat is paid for via the property redraw facility and a portion funded through a chattel mortgage (the loan on a moveable item).

With securing finance against equity in a property, it has the added flexibility to make progress payments in the case that the boat is being built new or overseas.

Normally, if you approach a credit institutes not specialised in loans for boating, you should expect a standard 20/20/5 loan (20 year loan with a 20 percent down payment at 5 percent interest) to be processed quickly and relatively hassle free.

However, there are exceptions to the rule, for example, Finance (United Bank) or Essex Credit (Bank of the West) for U.S citizens, which reports giving a 15 year loan with a fixed interest rate.

For European citizens, the most frequently used financing institutes for boat loans, are SGB, Erste, UniCredit, PBZ, OTP, Sea Lease, Close Brother, Lombard, and Santander bank.

These are all represented by affiliates and also have close relations with local national banks.

Every credit approval is unique, and the conditions often vary from 7 years (with no or balloon payment) to 12 years, depending on security offered by the buyer covered earlier in this article.

If you are considering leveraging your boat loan with a chattel mortgage because your property redraw facility does not cover the full purchasing price of the yacht, then you need to be aware of the collateral value of your yacht as the lean/mortgage for the lender.

Most often if you like to use the boat as collateral, it could potential restrict where you can place the yacht (flag state) as your lender needs the security in the boat and the risk is to great to have it sail in waters that they are not operating insurance and risk policy in.


Financing your yacht together with your charter business – operational leasing

-what to look out for

Many of the well-known charter business offer charter ownership programs, with very low opt-in, as low as 25—35% payment of the full price of the charter ready yacht on offer. Some of the programs offer balloon payments that needs to be met by you as the owner, i.e meaning that you will have to pay a residual value on the loan by year X (normally year 5 or 7) to release the ownership of the boat to you.

As earlier mentioned in this article, you are signing an agreement and paying the charter business that offer the charter ownership program. It’s their business to comply with charter ownership agreement and at the same time make sure their payments to the principal/ or credit institutions that holds the leasing (the lender) is met.

 The reasons why charter boat buyers opt to choose part-finance charter ownership programs, are arguably the: 

  • Availability from the charter industry, the boats are pre-ordered and it’s out of the interest of the charter business to make sure they have a steady renewal of their fleet, many of the well-known charter businesses fleets are in leasing, as the charter businesses pre-ordered hundreds of yacht per year at the ship-yards to the charter market and thus are not financing the purchasing themselves.
  • The easy to understand concept of the programs, as they are not targeted to be the best solution for you, but again to be a solution that is best for the charter market and the charter business. Its premises that you will receive a holiday program and the boat that you have chosen to be a part of the holiday program by the end of the contractual period.
  • It’s a free holiday and boat at the end. Many of these programs are extremely appealing to the new and growing demographic of boat owners, that are shy of taking on the burdens of traditional ownership and see the benefits of low-cost holiday program and the dream of getting a boat in the end. It’s per default (if all goes well) an investment in your lifestyle and grants you free ownership of a boat during the period, meaning no costs for upkeep and sailing during the years as the owner of the boat in charter.


Financing your yacht together with your charter business – financial leasing

-what to look out for

The same leasing terms and conditions offered in the well-known charter ownership programs, can be found directly with the credit institutions/ banks, that could potentially offer them directly to you.

Traditionally commercial leases from the major banks would not factor in the returns from the charter boat revenue, however for financial leasing, this is not the case.

As mentioned earlier in this article, the commercial projections and the business plan is defined by the charter operator you choose and approved by the lender before accepting the conditions of the leasing (year, down payment, interest rate, flag state etc). You will be given a initial leasing quote, that is approved by the lender as they have access to the all the necessary data and intelligence on the market, such as, the price list in charter for thousands of boats, the actual real time chartered bookings in any specific charter market, historic projections vs. outcome, all the necessary financial information about the charter operator you choose.

By no means, is the approval of the operational nor the financial leasing any guess work by the lender. However, the loan approval of the financial leasing accounts for more securities, such as the charter feasibility study, the yacht itself (equipment level and the market value), and the economic health and business performance of your chosen operator.


A detailed comparison between the Operation Leasing vs. Financial leasing, is dealt with later in this article.

It will give a better understanding of what you should expect and also enable you to choose with your eyes wide open.


The reasons why charter boat buyers opt to choose the part-finance financial leasing, are arguably the: 

  • The low down-payment: the strength of a well-planned charter management agreement, is of course the no-cost ownership for the buyer. It’s now also a close to the norm and no longer an assumption that the yacht will bring a positive yearly result and so the credit institutions specialised in the charter industry will often offer more favourable loans than for those granted in traditional yacht ownership. Many of the buyer’s also arguably find the low initial investment attractive as it could enable them to make more than one substantial purchase, as the charter income would cover all the leasing fees and free up capital for the buyer.
  • The non-conditional (no credit approval of the buyer): the significant difference between financial leasing and operational leasing, being that the operational leasing is based on a credit approval of the charter business and the subsequent loan granted to that charter company, and not the approval of a one-specific business case (a business plan for a yacht in charter management), presents options for the buyer that are not presented otherwise with a loan application at their local/national bank. As described earlier, the buyer will not be subject to scrutiny nor the subject for the credit approval, thus the readiness of a leasing approval is based on the charter operator and business plan (charter feasibility study), so the client will per effect have more options to choose from, such as: yacht models, destinations and the length of the charter agreement. Finally, the origins or where the buyer’s residence has not significance on the loan approval.
  • The years and flexibility: a financial leasing, is by default more flexible because it’s based on a business plan of a single entity and it’s manageable by the owner (the buyer/loan taker), as compared to an operational leasing, where the latter is dependent on the overall business model of a charter company, which then limits the leasing conditions offered by that charter company to the buyer/investor as they offer standard ownership programs and need to manage risk and liability overall (many investors/yacht owners where they are responsible for the leasing payments of every single yacht).

Knowing Your Market 

The conditions and financial structure in the industry are always changing, and unfortunately the companies and credit institutions invested in the industry are operating out of their interest as their service of lenders are their business model, which limits the amount of unbiased information and advice you will receive.

The following advice and guidance are there to empower you and give you better overview of what you can expect when starting your research or deciding on what your next step is to get the yacht you want and the lifestyle investment that suits you the best.

Used-boats vs. New Boats


It’s not uncommon to see used boats being purchased out of a charter fleet and taken over for private use. The question remains if its worth it?

A very interesting vlog on this is seen here:

Since over 85 percent of boats sold in the U.S. are pre-owned (*2 ), it’s good that used boats can be financed too. It is however, more complicated and often more expensive to secure a loan for a used vessel. New boat loans may be originated, processed and closed in a week, which is much faster and easier than real estate loans. Financing for pre-owned vessels takes longer. First, used boats need a survey or appraisal, which means a haul out and other costs. Sometimes a bank will require comparables in addition to the survey to assess a fair market value and comps can be hard to find on unique/older vessels. A title examination will be needed to make sure there are no outstanding liens. Some lenders may finance a boat that is up to 20 or 30 years old.

Talk to an expert or specialised advisor

Lenders who know the marine industry can process paperwork faster, provide worksheets with guidelines of all the things that are needed for a boat loan versus a real estate loan, can refer needed resources, and have an interest in making the loan go through. They may be infinitely quicker and easier to work with than a borrower’s personal banker.

The Yacht-Match Network consist of connection of +40 regional yacht dealers, +14 specialised financial institutes and the majority of the renowned European ship yards, that together with a few selected independent charter operators, serves the purpose of supplying our boat owners with a more individual and tailored customised version of the traditional charter ownership.

Our platform: Yacht-Match, is an informative and educational platform to advice and guide anyone interested in buying a boat in charter.

We are the only advisory company in the industry able to offer you a full service where you are the principal and where we are not acting as sales representatives.

With your interest and preference in mind you are able to receive a personal and tailored version of the traditional charter ownership programs and the financing required from our professional and unbiased approach and network.

You will become informed and empowered with the right means of making and informed decisions on what is possible and how the different options compare. 


The U.S Market and Tax Deductibles 

Tax deductions are possible. As long as the vessel has a bed, a head and a galley, it qualifies as a second home so the interest is deductible on federal tax returns. For example, borrowers can pay cash to get the vessel immediately but opt to finance later (like 3-6 months later, but not years down the line) (*2 ). 

Additionally, a vessel may be put into a family trust but in this case, be sure to factor in additional costs for attorney fees. And, more borrowers put yachts into single-asset limited liability corporations so long as the boat is meant for personal use. This has some tax advantages especially when it comes time to sell.

For US customers and taxpayers looking to maximize the tax benefits of Active Ownership, Section 179 of the IRS code requires ownership by the yacht investor.

Yacht-Match, has the right CPA who can guide you, not everybody is eligible.


Understanding the Phase Out and the Residual Value

The Phase-Out refers to the maintenance and work to be undertaken for the yacht leaving an exciting charter fleet. The Residual Value refers to the market value of the yacht or the cost of releasing the yacht from its financing at the end of the charter ownership program or leasing.

If you are planning to pay for a part-financing charter ownership program with a balloon payment at the end of the agreement, you should consider what you are paying for now (equipment, the current market value of the yacht) and how the ongoing maintenance and phase-out maintenance will affect your total investment and depreciation of the market value of your yacht.

Therefore, a key aspect in deciding, is not just what yacht you choose and where to place it for the best possible charter income scenario, but also WHO takes of your yacht and what their phase-out will include to make sure they take care of your investment.


Comparing: What’s best for you?

Based on these Assumption, we advise our clients to:

Full Finance (expect a yearly charter income)

  1. Do you have the means of restructuring your house loan or any other fixed security? This often leads to more favourable loan conditions with the already established relationship with your local bank/credit institution, so the expected NET income from charter operations will not just finance your “domestic” loan, but also result in a positive NET cashflow and investment.
  1. More flexibility in ownership?
  2. Choose of yacht and equipment?
  3. Change destinations?
  4. Sail and explore the world on your own terms, with the services and investment value of charter management?
  5. The feeling of true ownership?
  6. Trade Up and Trade In factor made easier?


Part Finance (low down payment – no (or small) expected yearly charter income) 

  1. Operational – the yacht nor destination of the yacht is the primary deal breaker
  2. Operational – is all about the holiday value
  3. Financial & Operational– you are not likely to receive the loan locally.
  4. Financial – the yacht is an important factor
  5. Financial – the flexibility of the payment intervals is essential

You get a wider perspective, become equipped with our unique comparison tools and financing options as well as get access to the best deals on the market. We will compare existing offers from the top charter operators offering charter management and either customise them or create new proposals to match your wishes. You get to enjoy all the benefits of a tailored charter management.

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