The yacht businesses are often based in low tax jurisdiction which makes it hard to open bank accounts and access low cost banking. This global guide will explore the challenges you may face, the main currencies involved, and potential digital banking solutions that can simplify your operations.
What Are The Banking Challenges For Yachting Businesses?
1. Compliance
The yacht business often operates across multiple jurisdictions, including offshore locations, which requires a degree of compliance adherence. On the bank side they must ensure that the business is not involved in the money laundering schemes or is not providing services to sanctioned individuals, which can make it difficult for yacht businesses to open and maintain bank accounts. These businesses frequently engage in high-value transactions and international money transfers, raising red flags for banks wary of potential risks.
2. High-Risk Industry Perception
The maritime and yachting industries are often perceived as high-risk by financial institutions due to their association with wealthy clientele, offshore accounts, and the potential for money laundering. This perception can lead to higher scrutiny, longer processing times and document requests, and in some cases, outright refusal by banks to open accounts.
3. International Operations
Yacht businesses frequently operate in international waters and across borders, necessitating the management of multiple currencies. The need for multi-currency accounts and the ability to handle foreign exchange transactions efficiently is critical, but not all banks are equipped to offer these services at competitive rates.
4. Liquidity Management
Managing liquidity and cash flow in the yacht business can be challenging, especially given the high costs associated with maintenance, staffing, and operations. Banks may require extensive documentation and proof of financial stability, which can be cumbersome for businesses with fluctuating cash flows.
What Are The Main Currencies In The Yacht Business?
1. US Dollar (USD)
The US Dollar is the most widely used currency in the yachting industry, especially in markets like the Caribbean and the Americas. Given its global dominance, it is often the preferred currency for transactions, including yacht sales, charters, and related services such as fuel or insurance.
2. Euro (EUR)
In Europe, the Euro is the primary currency for yacht businesses. With key yachting hubs like Monaco, France, and Italy, the Euro is essential for transactions within the European Union and beyond.
3. British Pound (GBP)
The British Pound remains significant in the yachting industry, particularly in regions with strong ties to the UK. With London being a major financial hub, many yacht businesses prefer the GBP for its strength and the UK’s favorable regulatory environment.
4. Swiss Franc (CHF)
The Swiss Franc is another important currency, especially for high-net-worth individuals and businesses that value Switzerland’s reputation for financial stability and confidentiality. The CHF is often used for luxury purchases, including yacht acquisitions and maintenance services.
Digital Banking For Yacht Businesses
1. Digital-Only Banks
Digital-only banks, also known as neobanks, are increasingly popular for yacht businesses due to their flexibility in onboarding, competitive fees, and well developed, easy to use platforms. If you would like to get an up to date list of digital banks welcoming yachting businesses, fill out our contact form and we will send it to you by email.
These digital banks provide the advantage of real-time financial management, allowing yacht businesses to track expenses, manage payroll, and handle charter payments. All necessary currencies in one place with good exchange rates and personal account manager.
2. Cryptocurrency Solutions
While still a niche option, some yacht businesses are exploring cryptocurrency as a way to facilitate faster and more secure transactions, especially for international payments. Cryptocurrencies like Bitcoin and Ethereum as well as stable coins are gaining acceptance in luxury markets, offering an alternative to traditional banking systems.
3. Integrated Payment Platforms
Integrated payment platforms like Stripe, PayPal, and Square are useful for handling client payments, particularly in chartering businesses. These platforms offer seamless integration with websites and booking systems, enabling yacht businesses to accept payments from clients around the world.
However, to receive settlements from online payment collection platforms yacht businesses need to have a dedicated bank account.
Opening A Bank Account - Practical Steps
1. Trying Several Options
Before choosing a bank, conduct thorough research on the banking options available in your primary operating regions. Consider factors such as the bank’s reputation, fees, services offered, and their familiarity with the yachting industry. Moreover, you may consider opening several bank accounts in order to protect your business from sudden regulatory changes or account closures.
2. Documentation
Ensure that all necessary documentation is prepared in advance. This typically includes proof of business ownership, financial statements, and identification for all account signatories. Being proactive about compliance can streamline the account opening process.
3. Consider Local Accounts
Given the international nature of the yacht business, it might be beneficial to maintain local accounts across different countries that your business is operating in. This can help to manage local operations smoothly, such as payroll or taxes.
4. Leverage Digital Tools
Utilize digital banking tools and platforms to manage your finances. For example, you may consider mass-payments for payroll or FX forwards to hedge the currency risk.
Conclusion
Opening a bank account for a yacht business is a complex but crucial step in managing a successful operation. Whether through traditional banks or innovative digital platforms, the right banking solution can make all the difference in navigating the financial seas of the yachting world.