How to Finance a Boat Being Built in the UK, While Living in the US

[mauibound]

Hello Everyone,
I have been calling banks and so has the builder (Discovery Yachts) trying to find a company that will finance a boat being built in the UK whil living and working in the US. Down payment, credit and income are not an issue. Anyone done this? All help appreciated

[Sabbatical II]

Originally Posted by mauibound

Hello Everyone,
I have been calling banks and so has the builder (Discovery Yachts) trying to find a company that will finance a boat being built in the UK whil living and working in the US. Down payment, credit and income are not an issue. Anyone done this? All help appreciated

G'Day Mauibound

I am currently about 60% of the way through building a semi-custom 42' yacht in Australia. The money lenders in Australia are about as liberal as any at the moment since we have been hit the least by the GFC. However, they will only lend on a completed yacht. My building project will end up taking almost 2 years and the builder requires progress payments during each stage of construction. I have legal ownership of the semi-completed boat and all parts bought for it that I have paid for. However the bank's argument is that only a completed boat has any resale value so they won't lend on it until it's finished. They will make their own valuation of it and will use 80% of the cost prices of new 42' production boats as a guide, despite the fact that this boat should be worth considerably more than a production boat. I am basically paying cash as we go, but some months I am short and need to borrow a bit. The only way I have found to do it, was to take out one of the modern Viridian loans against my home. The bank has been told it's for building construction work so they have definately been told the truth. I don't know any other way in Australia and I think there are probably fewer options in the USA. This may not be your situation, but I hope this gives you some ideas.

Greg

Oh BTW: Discovery Yachts....verrrrry nice.

[Curmudgeon]

The dollar is stong against the pound right now. So the first thing to consider, if you want to have a boat built in the U.K., is buying pounds with whatever funds you have set aside for the boat.

I don't know about finding a lender (I've never used debt financing to purchase a boat), but the bank's argument is silly. Banks give construction loans all the time. You should be able to get one too if your credit is good.

[speciald@ocens.]

Good luck ewith that. Unless you can a broker to front your purchase, its not going to happen. I've had two boats built through American brokers with only 20% up front. The first Was a C&C and it was the last boat out of the factory before they went belly up. The 2nd was built by Ta Ching, a well financed and stable Taiwanese company. Discovery, on the other hand, may be a risk. Like Trintella and Moody before them, they are a low volume company now suffering through unfavorable exchange rates. I'm not aware of the companies finacilal solidity. As the bank says, an incomplete boat has no marketable value.

[Curmudgeon]

Then find a more solvent builder, e.g. Oyster or Northshore. One option would be to see if you can get the builder to guarantee the loan and factor that risk into the cost of the boat (which will cost you more as a result). A builder might be willing to do this so as not to lose a sale (same as a broker).

[capt_douglas]

I've done new builds for owners and we had a milestone payment built into the contract. We generally gave 20% down, 20% when the hull, deck, and engines were in and the survey approved the construction, then 10% steps to about 80% with the rest due at commissioning, again pending surveys and insurance approval.

The biggest benefit for the yard is change orders. That's when they make their money because they know, based on history, that changes will come. They may not like surveys but they've been written into so many contracts they're about standard. Surveys are on your dime, and deficiencies and errors the yards responsibility to make good for the surveyor.

Building you own boat can be a rewarding, thrilling, frustrating, and exasperating time. Many folks like it so much they get hooked by the challenges. Others get frustrated and take their boat as is, hoping to get it fixed under warranty (good luck with that).

As great as some yards are, you have to be a regular visitor there or have a surveyor stopping by at regular intervals to check workmanship, adherence to contract details, and answer questions. The further you go down the build line without correcting an earlier problem the greater the aggravation - and sometimes the cost.

[svHyLyte]

It would be wise to contact a bonding agent in Europe to determine whether your builder has the financial strength to qualify for a guaranty of completion/performance bond. If so, your next task will be to find a lender that will accept the Bond--which depends upon the strenght of the surety, together with a lien on the yacht; and, your "up-front" payment--in this market likely 30% - 35% of the final delivery cost--as security for a loan secured by the yacht. With the foregoing, the lender will make the periodic payments to the builder as each stage of the construction is completed--initially with the funds you advanced, and later with the proceeds of the loan. These progress payments are normally subject to, and conditioned upon, a progress survey by a Registered Surveyor who attests that the stage of the work in question has been completed in a satisfactory manner; and, your added certification that you accept the work to that stage and liability therefore.

In the event the builder fails to complete the work, you and the lender call upon the Surety that, if necessary, steps in and funds or otherwise arranges the completion of the build, delivery and performance of the yacht. If the builder has done many/or likely any custom builds, it should have an agent to handle the bonding aspect of the arrangement unless the builder is not creditworthy. If not, than you should not be dealing with the builder either as, no matter what happens, you will ultimately be on the hook for at least 30-35% of the cost of the build whether you ver get actual possession of the yacht or not.

Frankly the foregoing is somewhat more difficult to describe than it is to effectuate provided one has a quality, experienced, builder and a knowledgable, experienced lender.

FWIW...

[denverd0n]

Originally Posted by Curmudgeon

...the bank's argument is silly. Banks give construction loans all the time.

Banks give construction loans on houses because the land has intrinsic value regardless of whether the house is ever finished. What's more, they will NOT give you a construction loan without first vetting your contractor and plans. Having worked some years back for the mortgage division of Wells Fargo, it does not surprise me at all that a typical bank would not make a construction loan on a boat. Perhaps a company that specializes in boat loans might be more willing to make a construction loan on one. Or perhaps not.

For the OP, I suspect that you are going to have to offer some other collateral to get a loan. Home equity loan, for instance, if you own your house. Or perhaps a personal loan if your credit is good enough.

Good luck.

[mauibound]

Thanks! I'll be talking to Discovery about this.

[mauibound]

What are the most common problems that surveyors see during construction?

[svHyLyte]

Originally Posted by mauibound

What are the most common problems that surveyors see during construction?

Unfortunately, there are many ways a builder can "skimp" on a build although a quality builder will not. Nothing--to the extent possible--should be left to the builder's discretion. Specifications--prepared by your naval architect--should be very exact, from lamination schedules to timber type, grade and quality, to equipment, to wires sizes and arrangement details, fabric and foam densitys, etc., etc., etc. Bob Perry has a consulting service--Robert H Perry Yachts Designers Inc. - CONSULTATION SERVICE --and it would be wise to employ Bob or a similar consultant on this project.

FWIW...