Dry Dock Financing & Leasing: A Comprehensive Guide for Marine Businesses

Dry docks are essential for marine businesses involved in ship repairs, maintenance, and storage. Whether you operate a shipyard, repair facility, or maritime service business, Dry Dock Financing & Leasing solutions can make acquiring or upgrading this valuable infrastructure more accessible and affordable. With the right financial strategy, your business can achieve the capacity to dry-dock vessels efficiently, keeping operations on course without straining cash flow.

In this guide, we'll explore the different financing and leasing options available, their benefits, and how to choose the best option for your dry dock needs.

Why Finance or Lease a Dry Dock?

A dry dock can cost millions of dollars, depending on its size, location, and capabilities, making upfront purchases challenging for many businesses. Financing or leasing options provide a solution by spreading the cost over time, allowing businesses to leverage their capital for other operational needs.

Types of Dry Docks Available for Financing & Leasing

1. Floating Dry Docks: Highly flexible and portable, ideal for locations where permanent infrastructure is not feasible.
2. Graving Docks: Permanent, excavated docks offering stability and security, commonly used for larger vessels.
3. Syncrolift Systems: Specialized systems with platforms that lift vessels from water, ideal for shipyards with space limitations.
4. Marine Railways: Use a rail system to move vessels out of the water, suitable for smaller ships and boats.
5. Modular Dry Docks: Versatile options with parts that can be added or removed depending on the business’s current needs.
6. Shiplifts: Similar to syncrolifts but typically larger, handling more weight and capacity.

How Dry Dock Financing Works

Financing a dry dock enables businesses to acquire ownership through a loan or credit line, repaying the cost over several years. This is a suitable choice for companies that want long-term ownership of their dry dock infrastructure.

Here’s how financing a dry dock typically works:

1. Select the Dry Dock: Identify the type and size of the dry dock that meets your operational needs and get detailed pricing.

2. Apply for Financing: Submit a financing application to a lender specializing in marine infrastructure. The lender will assess your business's financial health, creditworthiness, and ability to make regular payments.

3. Loan Approval and Purchase: After approval, the lender provides funds to acquire the dry dock directly from the vendor, and you begin ownership.

4. Repayment: Make monthly payments, including interest, over the loan term, typically between 5 and 15 years, depending on the loan agreement. After completion, the dry dock is fully owned.

How Dry Dock Leasing Works

Leasing a dry dock allows businesses to use the facility without committing to full ownership, making it a flexible option for temporary or fluctuating needs.

Here’s how leasing a dry dock works:

1. Choose Your Dry Dock: Work with a leasing company to select the dry dock that aligns with your operational requirements.

2. Apply for a Lease: Submit an application to a leasing provider. Lease terms vary but are generally 3-10 years, depending on the equipment and type of lease.

3. Monthly Lease Payments: Pay a fixed monthly fee, which is often lower than financing payments since the leasing company retains ownership.

4. End-of-Lease Options: At the lease’s end, you typically have several options:

   • Renew the Lease: Continue leasing the dry dock.
   • Return the Dry Dock: Return it to the leasing company if it’s no longer needed.
   • Purchase the Dry Dock: Some leases allow you to buy the dry dock at a reduced residual value.

Key Differences Between Financing and Leasing

1. Ownership

   • Financing: Leads to full ownership after loan repayment.
   • Leasing: Ownership remains with the leasing company unless you opt for a buyout at the end of the lease term.

2. Monthly Payments

   • Financing: Typically higher monthly payments as you’re working toward eventual ownership.
   • Leasing: Lower monthly payments since it’s a rental agreement.

3. Upfront Costs

   • Financing: May require a down payment.
   • Leasing: Usually little to no upfront cost, preserving cash flow.

4. Flexibility

   • Financing: Ideal for businesses wanting long-term ownership and infrastructure investment.
   • Leasing: Best suited for temporary needs or companies that prefer not to commit to ownership.

Benefits of Financing a Dry Dock

1. Asset Ownership: Financing results in long-term ownership, adding value to your business.
2. Potential Tax Benefits: Interest payments may be tax-deductible, and you can also depreciate the dry dock, reducing taxable income.
3. Building Equity: Each payment builds equity, making the dry dock a valuable business asset.
4. No Ongoing Rental Costs: Once the loan is repaid, you fully own the asset and eliminate future payments.

Benefits of Leasing a Dry Dock

1. Lower Monthly Payments: Leasing generally offers lower payments than financing, improving cash flow.
2. Operational Flexibility: Leasing allows you to upgrade or change your setup based on current needs.
3. Maintenance Options: Some leases cover maintenance, reducing repair expenses.
4. Tax Benefits: Lease payments can often be deducted as a business expense, offering tax advantages.

Choosing Between Financing and Leasing

Consider the following factors to decide on the best option for your business:

1. Long-Term Needs: Financing is ideal if you need a dry dock for the long haul and want ownership. Leasing is better for short-term requirements or changing needs.
2. Cash Flow and Budget: Financing often requires a larger monthly payment, while leasing allows for lower, consistent monthly payments.
3. Flexibility: Leasing provides the option to return, renew, or purchase, making it ideal for businesses with evolving demands.
4. Tax Strategy: Consult a financial advisor to understand the tax implications of financing versus leasing.

How to Qualify for Dry Dock Financing or Leasing

1. Financial Health: Lenders and leasing companies assess profit and loss statements, tax returns, and balance sheets to gauge financial health.
2. Credit Score: A strong credit score improves your chances of favorable terms.
3. Industry Experience: Experience in the marine or shipping industry strengthens your application, as it demonstrates business stability.
4. Revenue and Cash Flow: Consistent revenue streams assure lenders of your ability to make monthly payments.

Conclusion

Investing in a dry dock is a significant decision, but financing or leasing can make it accessible without major upfront costs. Selecting the right option allows your business to manage cash flow effectively while equipping you with the essential infrastructure for marine operations.

At Crestmont Capital, we offer tailored financing and leasing options for marine businesses. Contact us today to learn more about how we can help your business secure the best dry dock financing or leasing solution.