Buying a new commercial boat is a big decision for a business. And with numerous financing options on the marine lending market, it can also be difficult to determine the best way to buy your new vessel. In this guide we will outline the three main financing options you can select for your boat purchase - Chattel Mortgage, Commercial Hire Purchase, and Boat Lease.
Our expert Jade Boat Loan brokers have a vast list of 80+ banks and lenders at their fingertips. Secure the best rate on the commercial marine lending market by engaging us to compare the extensive range of rates and terms for you. As professional brokers, we work for you and we use our strong negotiating skills and bargaining power to get you the best rates possible.
Chattel Mortgage
Used for many business structures and a vast number of boat acquisitions, chattel mortgage is the most popular commercial finance facility on the commercial market. With this commercial finance facility, the lending company takes a ‘mortgage’ over the boat until the loan is completely finalised by the borrower. The lender’s interest in the boat (aka the chattel) is then registered with the Personal Property Security Register.
It is essentially a loan that is secured against a movable asset. The main difference between a chattel mortgage and a traditional mortgage is that traditional mortgages are used to finance immovable properties like houses or land.
With Chattel Mortgage, the borrower takes ownership of the boat at the time of initial purchase and signing of the loan agreement. They will then make monthly repayments for the term outlined in the finance contract. If a borrower defaults on their loan, the asset can be repossessed by the lender.
| Advantages | Disadvantages |
|---|---|
| Lower interest rates | Lender can repossess asset |
| Flexible repayment terms | Higher monthly payments than some other loan types |
| No need for large deposit | Higher interest rates than some other loan types |
| Immediate access to asset | Balloon payment at end of loan term |
Commercial Hire Purchase (CHP)
Used to facilitate the purchase of expensive business assets, like boats, Commercial Hire Purchase (CHP) is suited to a vast range of businesses. Whether your business is a large fishing operator, a small fishing business, a marine salvage and repair operator, ferry operator, charter vessel owner, boat and houseboat rental business, or other marine business operation - CHP could be a fantastic financing option for your new asset.
Suitable for the purchase of single vessels or multiple vessels, or the refinancing of an existing boat loan, CHP involves the lender purchasing the boat on behalf of the borrower. Then the lender essentially ‘hires’ the vessel back to the borrower at the agreed monthly loan repayment amount. For the duration of a CHP loan, the lending company will hold ownership over the boat for the term of the hire (loan) agreement. Throughout the loan term, the borrower retains use of the boat and is responsible for the maintenance and operating expenses of the vessel during that time.
CHP allows businesses to utilise essential assets to generate revenue, even if they’re still in the process of purchasing them.
| Advantages | Disadvantages |
|---|---|
| Spread our cost of high ticket items | Total cost can be higher |
| Ownership at end of term | Ownership only after final payment |
| Immediate use of asset | Commitment to fixed monthly payments |
| Relatively easy financing to obtain | Generally involve lengthy terms of 3 - 5 years |
| Fixed interest rate | |
| Workable terms and repayments |
Boat Lease
Businesses wanting to acquire a boat while keeping it off their balance sheet, may choose a boat lease to finance their marine purchase. Boat lease is a good financing option for the purchase of a variety of new and second-hand vessels, from dealers, private sellers, or auctions.
Boat lease is a commercial finance facility that involves a business having complete use of the boat during the loan term while the lender holds ownership. In this circumstance, the lender effectively leases the boat back to the business, the borrower. After all the monthly payments and residual have been settled, the ownership of the boat will transfer to the business. A key benefit of a boat lease is that during the lease term, the boat will not appear on the business’ balance sheet as an asset/liability. The monthly payments instead appear as an operating expense.
| Advantages | Disadvantages |
|---|---|
| Affordable down payments | Lender retains ownership during lease |
| No repair and maintenance costs | Potentially higher long-term costs |
| Lender ownership retention | Restrictive lease terms and conditions |
| Off Balance Sheet Benefit | Potential extra fees and charges |
| End-of-lease Options | |
| Tax deductible leasing payments |
To determine which finance product is best suited to both the boat you are purchasing and your business structure, our expert marine finance brokers recommend consulting with your accountant.
To find the most compatible and cheapest boat loan rates based on your needs and responsibilities, reach out to Jade Boat Loans.
Our team brings your boating dream to reality with better finance options for your leisure and recreation vessel. For consumer recreational use we offer secured lending and unsecured loans. For marine businesses we provide the full suite of commercial marine financing products. With strong bargaining power across a wide selection of banks and lenders, our brokers have the advantage of assessing and comparing the top lenders and identifying who is offering the best deals.
Let us negotiate on your behalf for the best deal. Call us on 1300 000 008, or request a quick quote online.
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