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Funding Your Yacht Purchase Through a Charter Business Model
You love being out on the open water so much that you can’t stop dreaming of buying a yacht. But can you afford one? It’s not just the initial expense of buying the yacht, but also the costs of maintaining, operating, and storing it off-season.
Fortunately, there are a number of ways to finance a yacht. One creative way is to start a charter yacht business. This won’t just help you secure financing, but it will also help pay for the operating costs of your yacht and ensure your yacht is used as an asset rather than just an expensive toy.
Starting A Charter Business
How would creating a yacht charter business help you buy a yacht? It opens the door to new financing options. But starting a business isn’t for everyone as it will take a lot of time and work to make it successful.
Before you decide to do it, do some research into the local market. Are there other charter yachts in the area? What marinas do they operate from? What is the demand like? How can you set yourself apart by offering different services or options?
If you don’t have experience in business, creating a yacht charter business might not be the right path for you unless you’re open to learning or are willing to bring on a partner who has business experience.
The first thing you need to do when starting a charter business is incorporate as a limited liability company or LLC. An LLC will protect you from liability if someone gets hurt on your yacht.
What Types of Financing Are Available As a Business?
Here are three types of financing that are available to your yacht charter business.
Small Business Loans
Small business loans provide business owners with capital to start or grow their business. For new businesses, they often require the business owner to have good credit and take personal responsibility for repaying the loan.
Small business loans can be an easy and quick way to get financing as there are many online lenders who offer financing in as little as a few days. Banks and credit unions will take more time to decide whether to lend to you but they could offer better interest rates.
The downside of small business loans is that they sometimes have very high interest rates – especially those willing to lend to new small business. While the rate will depend on your personal credit, you might end up paying over 20%.
Security-based loans are a great option when it comes to a yacht charter business. That’s because they use an asset – like a yacht – as security for the loan. This reduces their risk and results in lower interest rates. These loans might still require the business owner to take personal responsibility for the loan, but that is less likely since the loan is already secured by the yacht.
The good thing about these loans is the potentially lower interest rates and the increased likelihood that you will be approved for a loan because it is secured. The downsides are that it sometimes takes longer to get approved and get your money and that lenders might also be hesitant about lending to a new business.
Another great option for financing a yacht purchase is via private investors. In this case, your yacht charter company won’t be taking on debt, but rather giving away equity or partial ownership of your company to those who help you finance the yacht.
This can be a more attractive option to business owners since it reduces the operating costs of the business by eliminating debt repayments. However, it means that you also have to split any income from the business with investors. Investors could put pressure on the business owner to make more money or to sell the business if it’s not going well.
Does the Business Model Pay for the Yacht?
Once you create a yacht charter business, you’ll need to start hustling to make money. That means you’ll have to price your services taking into account all your costs such as staff, maintenance, docking fees, fuel, insurance, food, depreciation, and other amenities you provide onboard.
Yacht charters can be a good investment if you price your yacht charter right and find the right boat. This article looks at the economics of yacht chartering. It suggests that booking 18-20 charters a year on an averaged sized sailing yacht might gross $200,000 to $224,000 per year. If you have a catamaran, you might do better and gross $320,000 or more a season. Whether you make money and can pay for your yacht’s costs will depend on your boat, your location, and your expenses.
While a yacht charter business can help you make your yacht owning dreams come true – you need to also think about the time you put into your business. If you just want the pleasure of enjoying a yacht for a few weeks a year, then you might be better off just chartering a yacht yourself. However, if you want to make an investment and don’t mind the extra work of running a business, owning a yacht charter can be profitable if you do it right.
Andrew Rombach is a Content Associate for LendEDU – a website that helps consumers and small business owners with their finances. When he’s not working, you can find Andrew hiking in the mountains or hanging with his cat Colby.