The United States Maritime Administration (MARAD) recently issued guidance on its streamlined procedures for obtaining government-guaranteed vessel financing under the Title XI program, now dependent on the Federal Finance Bank (FFB) in as a preferred eligible lender. In what should be good news for those familiar with the delays typically associated with the Title XI application process, MARAD has put in place a streamlined and streamlined lending process available to select borrowers with strong financial backgrounds. As per the general Title XI requirements, under this new streamlined program, eligible borrowers must be U.S. citizens or business entities, and eligible projects include shipbuilding, rebuilding, or refurbishment at shipyards. US naval vessels, with an emphasis on new construction. Indeed, MARAD makes financing more accessible to borrowers with strong financial performance and willing to accept MARAD’s preferred loan terms.
The goal of the new streamlined application process is to improve efficiency and meet federal best practice findings in marine credit and lending. Under the new fast-track process, borrowers will be assessed on several factors, including strong financial data, a contribution of at least 20 percent of equity in the project (under Title XI, borrowers are required to provide a minimum of 12.5 percent equity), a willingness to accept Title XI documents with minimal modifications and other special circumstances. Strong financial data typically includes a debt ratio of no more than 2: 1, positive working capital, and minimum equity. Indeed, a strong financial position and a willingness to comply with MARAD’s term preferences can offer borrowers a faster and cheaper borrowing process. Additionally, applicants turned down under the simplified application review process can still have access to the standard Title XI borrowing process.
MARAD’s guidelines describe the streamlined process as taking place in four phases that would take approximately five to nine months from receipt of applications to loan closure, which would reduce the current Title XI application process by over a year. . New phase one includes partial application submission and preliminary credit quality review, while phase two includes full application submission, completeness check, underwriting and negotiation of terms. Phase three includes project approval and the calculation of warranty costs, and phase four includes document production and execution. The fees associated with the streamlined process include application fees, the cost of third-party expert analysis, and investigation and warranty fees.
The streamlined application process focuses on parts of the larger application, including the scope of the project, its economic soundness and expected revenues, as well as construction costs. Applications should also include financial summaries indicating when funds will be needed and spent and what types of guarantees will be provided by the applicant, in addition to providing MARAD with the safety of the vessel or the project itself. Although the streamlined process is likely to improve the speed of financing for some borrowers or potential projects, borrowers should still adhere to MARAD standards in terms of financial standing and flexible loan terms.
To participate in the streamlined process, the first steps are to request a pre-application meeting from the Director of the Office of Marine Finance and complete the application. Given the historically low rates offered recently by Title XI with FFB backing (as low as 1.225%) and the ability to fund projects up to 25 years, this streamlined program should be extremely attractive to well applicants. skilled workers seeking to build, rebuild or recondition ships in US shipyards.