SELLER FINANCING FOR VESSELS

This can be a useful option in a vessel transaction where traditional funding can be difficult to obtain

- RALEIGH P. WATSON, ESQ.

We often receive questions related to seller financing, the documents required, and whether it is a legitimate option in a transaction. There are often scenarios where banks and other traditional financial institutions are unable to provide a loan to a vessel purchaser, whether it be due to the type, age or usage of a boat, or perhaps the creditworthiness of a borrower. For example, it is more difficult to obtain a traditional marine loan for a 40-year-old wooden charter boat than a new production sport-fisher to be used purely as a recreational vessel. As a result, we are regularly engaged by clients involved in unique scenarios who wish to draft a customized seller-finance package.

THE SAME PROCESS

The reality is that a buyer and seller can arrange financing in the same manner as if a traditional lender is involved, with the seller having the same basic rights and the buyer with the same legal obligations. Of course, the difference is that a seller is fully funded at closing by a lending institution but only partially funded through a seller-financing transaction, the amount of which depends on the terms of the parties' agreement.

THE DOCUMENTS