Finance Charters and Leases
Loans and leases
35.1 Amongst the principal means by which shipowners have traditionally raised finance to fund the acquisition cost of new or second-hand tonnage are loan and lease facilities made available for the main part by ship finance banks and financial institutions. These two types of facility are directly analogous. A leasing facility is often regarded (in economic terms) as a secured loan to the lessee by the lessor, particularly where the transaction involves a sale and lease-back. Both types of financing involve an advance of a sum of money by a financial institution which is then amortised by instalments (repayment instalments in the case of a loan and rental payments in the case of a lease) over a fixed term, with interest being paid on the advance either as an interest payment (in the case of a loan) or as an element of the rental payment (in the case of a lease).