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Financing Shipping Containers

20.12.2013 - Posted by Updated On 20.12.2013    

Financing Shipping Containers

Shipping container finance is a broad subject that can be broken down into several industry segments, with different options available to each type of individual or corporation that is taking on the debt. The three largest portions of container finance are residential, storage, and fleet finance.

Residential Shipping Container Financing

Residential shipping container financing can be available depending on the use of the container. In general, if you are purchasing a shipping container to use as a storage unit on your property, banks won't be interested in assisting you with financing options. Largely, because it's a relatively small amount of money and the container isn't locked into one location. The normal financing option for a single or smaller number of containers is through some type of unsecured loan, such as a credit card.

If you plan on converting the shipping containers into a modular house, then you may be able to apply for a residential mortgage loan. We've written about this in the past in the article "Financing a Shipping Container Home", and even since that article was published container homes have become more popular, and financing one through your local retail bank could be possible.

Storage Container Company Financing

If you are planning on starting a storage company and using shipping containers as the core component you may be able to apply for a small business or commercial loan. As with any start-up business you'll need a strong business plan to present to the bank and be able to prove to them that you know what you are doing and will be successful.

In a nutshell, the debt will be applied to the shipping container, or storage structure, itself. Given the low risk of the underlying asset, the shipping containers, losing value the main exposure for the business owner and bank is that there won't be enough cash flow to service the debt on a monthly basis. This is the main reason why it's important to select a good location for your storage company. To learn more about setting up a storage business, check out our article on "Creating a Storage Facility with Shipping Containers".

If you plan on starting a retail sales operation, one where you buy and resell shipping containers as storage units or other modified structures, the best option will be to find a revolving line of credit. Ideally, you will purchase and resell the containers quickly so the amount of time and energy involved in opening and closing individual loans would be exhaustive to both you and the bank. This type of financing will require you to do a little math and make sure that you have the shipping containers priced at a point that covers the cost of financing and leaves a little bit of profit for you.

Fleet Financing

Fleet financing is the type of financing that shipping lines and container leasing companies receive, and this type of financing is fairly complex and typically provided by international investment banks, German KG funds, and most recently hedge funds and private equity firms have arrived at the party. In almost every case a portfolio containing a fleet of shipping containers will be in excess of one million US dollars.

Unlike other maritime assets, such as shipping vessels, shipping container finance is similar in terms of structure to financing a fleet of automobiles. Banks providing financing for shipping vessels find security in the ability to track their asset at any point in time, which is nice to do however the utilization rate is either 100% or 0% - the ship is either transporting goods or it's idle. On the other hand, a portfolio of shipping containers has a more granular utilization rate and can be shifted around or sold off in parts, or as a whole, at any given time. It parts ways with automobile fleet finance when the bank starts to inspect the asset at hand - automobiles tend to depreciate quickly and have a short live span, while a shipping container depreciates slowly and has a life span of more than 10 years. The main concern with financing a fleet of shipping containers comes in the analysis of default, either the container leasing company, their client (the shipping line), or if the shipping line itself is financed. Should any of these parties fail the bank must work to recover the shipping containers and find a new organization to manage them.

The management team of ContainerAuction.com has been involved in shipping container finance for several years and provides consultation services to assist investment banks, private equity companies, container shipping lines and leasing companies. We've successfully raised capital to expand container leasing operations, as well as participated in sale and leaseback opportunities. Along with the front end of container finance, ContainerAuction.com has also participated in the recovery and remarketing of shipping containers. To learn more about our financial services please contact us at (307)222-9085, or in Europe/London at +44 (0) 75 8580 7560.



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