46 CFR 298.11: MARAD due diligence and approval of applications

Last reviewed: October 14, 2026

This section explains how MARAD reviews each Application it receives. MARAD decides in its sole judgment whether an Application is qualified and eligible for financing. It then approves, conditions, delays or denies the Application, using a term sheet and an approval letter.

Applies toApplicants whose Applications for financing of a Vessel Project or Shipyard Project MARAD receives.

What it says

  1. MARAD will conduct a due diligence investigation of every Application it receives.

    46 CFR 298.11(a)“MARAD will undertake a due diligence investigation of every Application it receives”

  2. An Application must be qualified for financing, meaning the project is deemed an acceptable credit risk, with the Applicant's ability to repay a Note as the primary basis for approval.

    46 CFR 298.11(a)(1)“the Applicant's ability to repay a Note will be the primary basis for MARAD's approval”

  3. An Application must be eligible for financing by meeting applicable requirements, including statutory requirements for economic soundness and the requirements in § 298.15 for Vessel Projects and § 298.17 for Shipyard Projects.

    46 CFR 298.11(a)(2)“including statutory requirements for economic soundness, and in these regulations for Vessel Projects in § 298.15, and Shipyard Projects in § 298.17 of this part”

  4. MARAD may decline or delay approval of financing or disbursement to any Applicant found to have pending legal actions or unresolved claims.

    46 CFR 298.11(c)“may decline or delay approval of any financing or disbursement to any Applicant found to have pending legal actions or unresolved claims”

  5. MARAD may require any terms and conditions on approvals that it believes, in its sole discretion, are necessary and appropriate.

    46 CFR 298.11(d)“MARAD may require any terms and conditions on approvals that MARAD, in its sole discretion, believes to be necessary and appropriate.”

  6. MARAD will tell Applicants it is willing to approve an application by issuing a summary of business terms or term sheet, and not accepting terms may lead to denial.

    46 CFR 298.11(e)(1)“Non-acceptance of any terms and conditions may result in denial of the Application.”

  7. MARAD will deny any Application it determines is ineligible.

    46 CFR 298.11(e)(2)“Any Application MARAD determines is ineligible will be denied.”

  8. After the Applicant accepts the term sheet, MARAD will issue a letter saying the Project is approved subject to the availability of appropriations.

    46 CFR 298.11(e)(3)“MARAD will issue a letter to the Applicant advising that the Project is approved subject to the availability of appropriations.”

Common questions

What does MARAD look at when reviewing a financing Application?

MARAD decides in its sole judgment whether the Application is qualified, meaning an acceptable credit risk, and eligible, meaning it meets applicable requirements.

“to determine if, in MARAD's sole judgment, an Application is both:”

Can MARAD delay approval because of lawsuits or claims?

Yes. MARAD may decline or delay approval of financing or disbursement to an Applicant with pending legal actions or unresolved claims.

“may decline or delay approval of any financing or disbursement to any Applicant found to have pending legal actions or unresolved claims”

What happens after an Applicant accepts the term sheet?

MARAD will issue a letter advising that the Project is approved subject to the availability of appropriations.

“Upon acceptance of the term sheet by the Applicant, MARAD will issue a letter to the Applicant”

The text of 46 CFR 298.11

Electronic Code of Federal Regulations (eCFR), current as of September 3, 2026 · Read it on eCFR

Initial due diligence and approval

(a) MARAD will undertake a due diligence investigation of every Application it receives to determine if, in MARAD's sole judgment, an Application is both:

(1) Qualified for financing because the Vessel Project or Shipyard Project is deemed an acceptable credit risk (the Applicant's ability to repay a Note will be the primary basis for MARAD's approval); and

(2) Eligible for financing because it meets applicable requirements, including statutory requirements for economic soundness, and in these regulations for Vessel Projects in § 298.15, and Shipyard Projects in § 298.17 of this part.

(b) MARAD will approve eligible and qualified Applicants by evaluating the information obtained during the Application and due diligence process.

(c) MARAD, at its sole discretion, may decline or delay approval of any financing or disbursement to any Applicant found to have pending legal actions or unresolved claims.

(d) MARAD may require any terms and conditions on approvals that MARAD, in its sole discretion, believes to be necessary and appropriate.

(e) Credit decision and approval. (1) MARAD will inform Applicants that it is willing to approve an application by issuing a summary of business terms or term sheet that describes the terms and conditions of the financing for a Project. Such terms and conditions are at MARAD's sole discretion and will be incorporated in the Financing Documents. Non-acceptance of any terms and conditions may result in denial of the Application.

(2) Any Application MARAD determines is ineligible will be denied.

(3) Upon acceptance of the term sheet by the Applicant, MARAD will issue a letter to the Applicant advising that the Project is approved subject to the availability of appropriations.

Sections it refers to

The plain-English explanation on this page was written with AI from the regulation text above and checked automatically before publishing: every quote appears in the text, every number comes from it, and a second model confirmed each statement adds nothing the text doesn't say. Regulation text current as of September 3, 2026. The regulation text governs. RegKnot is not affiliated with the U.S. Coast Guard.