Lender’s View: How Banks Approach Financing Jones Act Vessels

# Overview Brett Hewitt, Executive Director of Marine Finance at Wells Fargo Equipment Finance, lays out how lenders think about financing Jones Act vessels. The core points: vessels can be long-lived, the regulatory and inspection framework supports collateral value, and lender decisions rest on cash flows and operator quality as much as on the physical asset.

# Why vessels appeal to lenders Vessels documented with the U.S. Coast Guard and subject to inspection, maintenance, and scheduled drydockings offer predictable collateral. That predictable lifecycle helps lenders structure deals because there is historical evidence that the asset will remain in service and be available to support repayment.

# Cash flow and operator quality drive credit decisions Whether providing term debt or bareboat charter financing, Wells Fargo prioritizes cash flow. Lenders also evaluate safety records, reputation, management depth, market position, and long-standing customer relationships. Safety stands out: a major casualty or environmental event can cripple an operator and endanger the lender's recovery prospects.

# How asset type changes the math For familiar, well-traded assets like hopper barges, ship-assist tugs, and dredges, lenders rely on decades of experience and secondary markets. That history allows more flexible terms and lower equity requirements for good credits.

For less familiar assets — all-electric tugs, wind turbine installation vessels, or service operation vessels — residual value is harder to predict. With few comparables, lenders typically demand higher owner equity (25%–50%) and may shorten loan tenors to limit exposure.

# Inflation and higher newbuild prices Rising shipyard labor, steel, engines, components, and tariffs have pushed newbuild costs up. After sustained inflationary pressure, Wells Fargo increasingly treats higher construction costs as structural rather than temporary. That changes underwriting: larger equity cushions or different structures are required when replacement costs are elevated.

# Technology and residual-value risk Diesel-electric propulsion has accumulated enough operating history to be acceptable to lenders. Emerging options — batteries, hydrogen fuel cells, ammonia, and other novel systems — introduce uncertainty. Lenders worry that today's leading technology could become obsolete quickly, making secondary-market liquidation difficult. The practical response is to require more owner capital, reduce lender residual exposure, and use shorter financing terms.

Wells Fargo does not reject new technology outright. The bank prefers early involvement to understand technology fit, fleet deployment plans, and whether customers will pay for the capability.

# Cargo cycles and sector differences

# Practical takeaways for owners and operators

• Keep clear, long-term customer relationships and maintain strong safety and maintenance records.
• For conventional assets, expect flexible structures but be prepared to show decades of operational history.
• For novel vessels or propulsion systems, plan for higher equity contributions, shorter loans, and active lender engagement on commercial viability.