How Brokers Assess Financing Risks in Shipping Projects

My name is Davide Ramponi, I am 20 years old and currently training as a shipping agent in Hamburg. In my blog, I take you with me on my journey into the exciting world of shipping. I share my knowledge, my experiences, and my progress on the way to becoming an expert in the field of Sale and Purchase – the trade with ships.

Whether you’re buying a second-hand bulker or financing a cutting-edge LNG newbuild, one thing never changes: risk. Every ship deal carries uncertainty—market volatility, regulatory shifts, technical delays—and when money is on the line, understanding these risks becomes just as important as negotiating the price.

That’s why today’s shipbrokers are doing more than sourcing vessels and connecting buyers with sellers. They’re also playing a key role in assessing financing risks—advising clients, identifying red flags, and helping structure deals that are built to weather uncertainty.

In this blog post, I’ll take you behind the scenes of how brokers assess financing risks for their clients. We’ll explore the tools and methods used, the factors brokers must consider, and go through real-world examples of common risks—and how they’re successfully mitigated. If you’re a broker, an owner, or simply involved in ship finance, this is your guide to smarter risk management.

Why Risk Assessment Is Part of a Broker’s Job

A successful deal isn’t just about closing—it’s about sustainability. If the financing unravels after delivery, nobody wins. That’s why brokers increasingly function as early-warning systems, helping clients identify and manage risks before contracts are signed.

Here’s what’s at stake:

• If a financing structure is too aggressive, lenders might walk.

• If market forecasts are off, the ship may become unprofitable.

• If technical or compliance risks are overlooked, costs can spiral.

💡 Bottom line: Brokers who understand how to assess and communicate financing risks become long-term advisors—not just one-time intermediaries.

Key Tools and Methods for Financing Risk Assessment

How do brokers actually assess risk? It starts with using the right tools and gathering the right data.

1. Financial Modelling and Sensitivity Analysis

At the heart of every risk assessment lies a financial model. Brokers often support clients by building or reviewing these models.

✅ The model includes:

• Purchase price / newbuild CAPEX

• Operating expenses (OPEX)

• Charter income assumptions

• Loan terms (interest rate, tenor, LTV)

• Exit value or scrap assumptions

📉 Sensitivity analysis:

This helps simulate “what-if” scenarios:

• What if charter rates drop 20%?

• What if interest rates rise by 2%?

• What if delivery is delayed by 6 months?

💡 Pro tip: Brokers who present downside and base-case models earn trust quickly—with both shipowners and financiers.

2. Market Intelligence and Benchmarking

Understanding market cycles and pricing benchmarks is key to assessing external risks.

✅ Tools brokers often use:

• Clarksons Research

• Baltic Exchange indices

• Drewry or BIMCO reports

• Vessel valuation platforms (e.g. VesselsValue, MSI)

💡 Example: If a client is buying a 10-year-old Panamax, a broker will compare it to recent comparable sales, assess market trends, and factor in employment potential.

3. Checklists and Risk Scoring Frameworks

Experienced brokers often rely on internal checklists to identify and rank risks quickly.

✅ Sample checklist questions:

• Does the vessel have upcoming special survey or BWTS retrofit costs?

• Are charter revenues sufficient to cover debt service?

• Is the ship’s flag acceptable to the chosen lender?

• Is the builder on a bank’s approved yard list?

💡 Framework: Some brokers use a low-medium-high risk score across key categories (technical, financial, regulatory, market).

Key Risk Factors Brokers Should Consider

Let’s break down the key categories of financing risk—and what brokers should look for in each one.

1. Market Risk

Markets shift fast. Brokers should assess how exposed the deal is to rate volatility.

✅ Questions to ask:

• Is there a long-term charter in place?

• Is the vessel entering a stable or oversupplied segment?

• How does the current rate compare to the 10-year average?

💡 Mitigation: Seek long-term employment or COAs to protect income.

2. Credit and Counterparty Risk

The strength of the charterer or borrower directly affects bank confidence.

✅ Brokers should check:

• Charterer’s credit history and track record

• Owner’s financial strength and management quality

• Guarantor or parent company involvement

💡 Red flag: A high-value vessel with a start-up owner and no charter in place may face lender pushback.

3. Technical and Regulatory Risk

An older vessel might have lower capital cost—but higher compliance risk.

✅ What to watch:

• Does the vessel comply with IMO 2023 and upcoming EEXI/CII requirements?

• Is the BWTS installed and operational?

• Are any class notations or recommendations pending?

💡 Solution: Recommend a technical inspection or pre-purchase condition survey with class involvement.

4. Financing Structure Risk

The way a deal is financed can introduce risk itself.

✅ Brokers should evaluate:

• Is the LTV too high? (Typically >80% is seen as aggressive)

• Are interest rates fixed or floating?

• s there a balloon payment that requires refinancing?

💡 Advice: Suggest a financing model with realistic DSCRs and a contingency buffer.

Examples of Common Risks—and How Brokers Helped Mitigate Them

Case 1: Over-Optimistic Charter Assumptions

A broker reviewed a client’s financial model for a geared bulk carrier acquisition. The owner had based projections on spot rates 20% above the historical average.

🔹 Broker's solution:

• Provided market data from the Baltic Exchange

• Revised model using conservative rate assumptions

• Recommended a minimum rate clause in the charter

✅ Outcome: The bank approved the deal with a lower loan amount and adjusted repayment schedule.

Case 2: Compliance Risk in a Second-Hand Tanker

An owner wanted to buy a 15-year-old Aframax tanker for spot trading. The broker noticed the ship lacked a ballast water treatment system and had upcoming EEXI obligations.

🔹 Broker’s input:

• Flagged CAPEX risk for retrofit

• Suggested re-negotiation on price

• Helped schedule an expedited class inspection

✅ Outcome: Deal closed with a $1.2M discount and a revised delivery timeline for retrofitting.

Case 3: Bank Reluctance on Startup Owner

A newly formed company approached a bank to finance a product tanker acquisition but lacked a track record.

🔹 Broker’s action:

• Introduced a technical manager with an excellent reputation

• Helped the owner secure a 3-year charter with a first-class oil major

• Supported preparation of a professional investor pack

✅ Outcome: Financing secured from a regional maritime lender with 70% LTV.

Conclusion: Risk-Savvy Brokers Build Better Deals

Assessing financing risks isn’t just the job of banks—it’s an essential part of the modern broker’s toolkit. By identifying potential issues early, advising clients realistically, and supporting smart structuring, brokers don’t just close deals—they build resilient, bankable transactions.

🔹 Use models and sensitivity analysis to test assumptions

🔹 Benchmark deals against real market data

🔹 Score and rank risks in every project

🔹 Help clients find risk-mitigation strategies early

Have you navigated financing risks in your own deals—either as a broker or an owner? What lessons did you learn? I’d love to hear your experience in the comments—I look forward to the exchange! ⚓📉

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