Tim Stickney, Key Equipment Finance senior vice president and national marine specialist, wrote about alternative fuels, new-builds and retrofits for marine industry growth in Marine Link.
Global industry growth
As the global marine vessel market grows, marine industry companies are finding innovative options to grow their operations for profitability and sustainability.
Stickney pointed to research from Fortune Business Insights that shows the global marine vessel market is projected to grow from $170.75 billion in 2021 to $188.57 billion in 2028. “From transportation vessels to workboats to marine construction ships, companies want to grow their business, stay current with new technologies, gain a competitive edge and be good stewards of our environment,” he wrote.
Alternative fuel vessels and new construction options
Alternative fuel is the future for growth in the marine industry. Stickney points out that due to the cost of new construction and supply chain issues, many companies are retrofitting existing vessels with alternative-fueling capabilities. Retrofitting is not a quick process, and companies need to be aware of the timeline and plan ahead when funding is needed for these projects.
As marine industry companies focus on growing their business and remaining competitive, some are opting to order newly constructed vessels built to use alternative fuel. Companies who consider financing their new-build vessels may face challenges in securing loans for this type of purchase. Since new-build construction comes with increased risk (e.g., lengthy timeline to build, seaworthiness of the finished product, inflationary risks causing build costs to go over budget, etc.), some lenders won’t finance new builds.
Financing considerations and planning
Modern marine technology is a large investment, so many companies choose to finance – allowing them to reap the benefits of state-of-the-art vessels with minimal impact to capital budgets. Stickney points out that companies who choose to finance should plan in advance, be aware of their options, and understand the challenges they’re likely to face along the way.
Stickney wrote about financing options – in both type and structure – to consider. He encouraged readers to plan ahead to find a lender willing to work within construction timeframes and under certain risks. “Working with lenders who are very active in the marine space is critical. Active lenders in the syndicated loan market have industry relationships, and are attuned to pricing, terms and structures that can ‘clear the market’ successfully.” Additionally, knowing the type of vessels a lender will finance is another key component in planning.
Stickney also called out key benefits to consider when choosing funding options such as:
- Lease structures that can offset taxable income
- Flexible payment options to complement seasonal cash flow requirements
