Ship Finance Fundamentals
Who Finances Ships?
Summary
Ships are financed by commercial banks, leasing companies, export credit agencies, debt funds, public investors, private equity, sponsors and occasionally public development institutions.
Why this matters in ship finance
Each source has different return, security, jurisdictional and reporting requirements, which affect financing feasibility and the total cost of capital.
The concept
Banks generally prefer predictable repayment and controlled collateral; lessors focus on lease cash flows and residual value; equity investors absorb residual risk for upside; official export support follows programme eligibility rather than general entitlement.
How it is used in practice
Match the financing source to vessel type, size, age, charter employment, sponsor standing and required tenor. Consider blended and subordinated capital separately.
Practical issues
A lender’s regulatory obligations do not become direct obligations of the shipowner. Institutional eligibility, KYC checks and sanctions screens must be examined for each transaction.
How ShipFinance.ai uses this concept
Provide a source-comparison tool for pricing, advance rate, tenor, covenants and recourse.
Key takeaways
- No universal cheapest capital source exists
- Eligibility and tenor matter as much as margin
- Sponsors retain ultimate economic exposure where agreed
Primary legal, rule and scholarly sources
- Schinas, Grau & Johns (eds.), The HSBA Handbook on Ship Finance (Springer, 2015) - scholarly reference, not legislation
- Schinas (2018), Financing the New Generation of Ships - scholarly chapter
- Regulation (EU) No 575/2013 - Capital Requirements Regulation (CRR; lenders within scope)
- Directive (EU) 2015/849 - EU anti-money-laundering framework (as applicable in 2026)