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The Department of Business and Trade (DBT), in partnership with UK Export Finance (UKEF), has launched the Shipbuilding Credit Guarantee Scheme. This innovative initiative is designed to stimulate growth in the UK shipbuilding industry by offering a partial loan guarantee to ship buyers and operators procuring new vessels, or undertaking refits, retrofits, or repairs of existing vessels from UK shipyards.
The scheme functions by guaranteeing a portion of a loan provided by a lender to a ship buyer or operator, enabling UK shipyards to receive payments akin to a cash contract. In return, the buyer benefits from extended repayment terms.
Under this arrangement, loans are typically repaid by the borrower over a period of 2 years or longer. Crucially, DBT can provide partial guarantees covering up to 80% of the risk to lenders, with a maximum repayment period of up to 12 years.
Benefits of the Scheme
The Shipbuilding Credit Guarantee Scheme brings a wealth of benefits to all involved parties. For shipyards, the scheme ensures payment as though they have a cash contract, improving cash flow and providing greater financial stability.
Buyers or borrowers benefit from extended repayment terms, with the flexibility to borrow at fixed or floating rates. This extended timeline to pay, coupled with the potential for cost savings, makes new vessel procurement, and the refitting or retrofitting of existing vessels, a more feasible and attractive proposition.
Lenders, on the other hand, gain protection against non-payment of the principal and interest due under the guaranteed loan. This protection shields lenders from the risks typically associated with financing such large-scale projects, providing confidence to invest.
This robust credit guarantee scheme provides a strong incentive for domestic and international ship buyers and operators to choose UK shipyards for their procurement and retrofitting needs, driving growth and creating job opportunities within the industry. It's a crucial step towards bolstering the UK shipbuilding sector, setting the stage for a vibrant, sustainable future for our national maritime industry.