Nice Yacht, Someone Financed It
Every sentence sounds better ending with the word “yacht.” Enjoying crackers and cheese on a yacht. Sipping champagne aboard a luxurious yacht. Even making money financing high-end yachts, the charm remains intact. Over the past six years, East Harbor Financial has been offering a range of financing solutions under their Luxury Assets category, which includes exotic cars, aircraft, and vessels. While the company has been in business for 11 years, President Bruno Raschio’s foray into the yacht industry provides a unique perspective from an outsider turned insider.
According to Yatco.com, there are currently 592,000 yachts in the United States and the global market size was valued at $8.91 billion in 2022, with expectations to expand 5.8% from 2023 to 2030. The most Raschio has ever financed on one unit was $2 million and he admits there is a lot of money to be made in this sector, but people must be willing to welcome the risk that comes with it.
“Lenders who embrace risk and identify a specialized market can consistently generate profits in a business,” said Raschio. “Nonetheless, market corrections often possess the capability to level out the gains amassed during prosperous years.”
Raschio emphasized that the industry has many brokers that do not necessarily need an in-depth knowledge on yachts. Nevertheless, the significance of understanding yachts itself is always advantageous. In the case of private lenders, like his own company, Raschio advised focusing on financing high-quality yachts that possess strong market appeal and retain their value.
With the increase in manufacturing costs, Raschio states that prices may not revert to pre-Covid rates, like when they initially joined the yacht industry. For instance, A-credit rates, which used to range from 4½ to 5% before the pandemic, have now risen to 8 to 9%. Similarly, rates for B, C, and D credit ratings, previously between 10 to 13%, have surged to 14 to 19%.”
“Consider this scenario, if you were buying a million-dollar yacht before, you’d typically put down 30%, leaving you with a financing amount of $700,000,” he said. “However, in a post-Covid market, if the same yacht is selling for $1.5 million and you still put down 30%, you’d be looking at financing $1,050,000. That means you’re financing nearly $50,000 more than its pre-Covid value.”
East Harbor specializes in financing high-end yachts, brands like Sunseeker, Azimut, Ferretti, Pershing, and Princess. Transactions typically range from $600,000 to $1 million, covering yachts that fall within the 40 to 75-foot size range. Working with clients nationwide, the primary regions where the company provides financing are South Florida, which is the largest market, California’s Newport Beach, the second largest, and various areas along the east coast, the third-largest market. The company exclusively offers short-term loan options, typically lasting between 5 to 8 years, as opposed to the more common 15 to 20-year loan terms for yachts.
“We prefer to expedite our financing process since we rely on private funding,” Raschio explained. “Furthermore, this type of financing is generally costlier than traditional bank loans. Therefore, many individuals find it more sensible to present it as a short-term solution, where you secure your financing, achieve your objectives, and exit, or sell the boat.”
Upon entering the boat financing business, Raschio first’s client came to him with a million-dollar yacht with a $500,000 down payment. It seemed like a solid deal, but there was also a high likelihood that the yacht was going to need very expensive repairs. Its details like this that can change the entire dynamics of the deal and it was a teaching moment for him.
“As an example, a major repair on a used yacht that’s heavily depreciated could cost more than the entire used yacht price,” said Raschio.Last modified: October 26, 2023
Anaya Vance is a reporter for deBanked. Connect with me on LinkedIn.