Building a superyacht? What your lender will really be looking at

Commissioning a superyacht is one of the most complex purchases you can make. But if you’re financing that build, there’s another set of eyes on your contract; those of your lender’s. While your interests and the bank’s are usually aligned against the builder, the bank will conduct its own forensic review of your contractual terms. Addressing these points early in your shipyard negotiations will smooth the credit approval process considerably.

So what exactly will your lender be scrutinising? Here’s a practical guide.
 

Builder non-performance

The lender’s primary concern — as much as it is yours — is what happens if the builder doesn’t deliver. The biggest risk is insolvency. Your bank will rigorously assess the builder’s creditworthiness, track record, and capability to deliver on time. Only financially robust and technically proven shipyards will pass muster for pre-delivery financing.
 

Buyer non-performance

Most buyers focus on protecting themselves from the builder. But your lender will ask: what if you don’t perform? If the buyer defaults, the builder can stop work or terminate — meaning no yacht. Lenders mitigate this by requiring you to inject equity upfront and securing future payments through deposits or guarantees.
 

The contract price

This is fundamental. Your lender needs certainty on what you’ll pay and when. They’ll want to know whether the price is fixed or subject to escalation clauses for materials like steel. Any ambiguity here creates financing risk.
  

Change orders

Superyachts are bespoke — changes to specifications are inevitable. Your lender will require that material price changes above certain thresholds need bank consent before you commit. This gives the bank the option to fund the extras (if they add value) or require you to inject more equity.
 

Payment timing

Purchase price is typically paid in instalments tied to construction milestones. Your contract must clearly define those milestones and how they’re verified. Payment provisions usually link to refund guarantees or title transfer — both critical to your lender.
 

Inspection rights

Both you and your lender need contractual rights to inspect progress throughout construction. Banks typically want to send independent surveyors or at minimum receive copies of inspection reports.
  

Sub-contracting

Most contracts allow builders flexibility to sub-contract certain works. The risk? Quality control, retention of title claims, and supplier's liens. Ensure your builder obtains warranties from sub-contractors and can assign them to you.
 

Liquidated damages

Building contracts typically fix damages for delayed delivery or specification failures. Your lender will want to know how these are applied — are they netted off the final instalment or paid separately? This affects their recovery position.
 

Builder’s warranty

If the bank had to enforce security and take the yacht within the first 12-24 months, it needs to know it can rely on warranty rights. And if you have to fund repairs yourself because warranty cover is inadequate, that affects your ability to service the loan.
 

Termination by the builder

If you fail to pay instalments, the builder can ultimately terminate, sell the unfinished yacht, and recover its costs plus a profit margin. Any surplus goes to you; any shortfall, you owe. From a lending perspective, the bank expects visibility on payment due dates and defaults. Critically, the assignment documentation should require the builder to notify the lender before exercising termination rights, giving the bank an opportunity to step in, cure the breach, and protect its position.
 

Default by the builder

The builder’s obligations are complex and varied, so potential defaults are numerous. Serious defects may entitle you to reject the yacht entirely — a decision that typically crystallises at sea trials. Your lender will want involvement in any rejection decision. The building contract must make rejection rights clear and enforceable.
 

Consequences of builder's default

If you terminate for builder default, you’ll recover instalments paid plus interest — but typically nothing for consequential losses. For lenders, this is less concerning; they’re primarily interested in loan recovery. The key is ensuring repayment rights are watertight.

If you are planning to finance your construction, contact Ezio Dal Maso or your usual contact at Stephenson Harwood.