No. 1 Survey does not, as a rule, neces sitate much outlay, but a banker should always bear in mind the importance of the succeeding surveys, and should consider carefully, as each one approaches, whether the owner of the boat will, or will not, be in a position to carry it through the survey. The most important is No. 3 Survey, and a sum of at least L2,500 may be required to be spent upon the boat before it will satisfy the surveyors.
The example of the 8,01)0 tons cargo boat, built at a cost of t5 per ton, dead weight, with the deductions for depreciation as above explained, would work out as follows :— As stated, the above figures relate to a cargo boat built in normal times, but if it is built at a time when trade is booming at a cost of, say, £7 to £8 per ton, the amount to be written off must be greater. For example, if at the end of three years from the building of a boat which cost £8 per ton a similar boat can be built for £5 per ton, the original cost must be taken by a banker as though it had been £5 and not £8 per ton, and then the deductions may be made as set forth above. Although the cost of building varies, it always reverts to about £5 per ton, and it would, therefore, be imprudent for a banker to advance two thirds of the value of a boat based on an original cost of more than £5 per ton. If he advanced two-thirds of the cost of a boat built at the rate of g, the value of the boat would suffer a severe fall as soon as the cost of building again declined to the normal £5. A banker would usually be safe in advancing two-thirds of the value of a boat, based on a cost of £5 per ton, dead weight, with deductions for depreciation as shown above.
In the case of a boat of, say, 2,000 tons, the cost of building is, as already explained, more per ton than for one of 8.000 tons. When the cost of a boat of 8,000 tons is £5, the cost to build one of 2,000 tons would probably be, say, £8. The same system of writing down the value would be adopted as in the example given, and the breaking-up value might be considered to be £2,000.
With respect to steam trawlers, the rate of deduction for depreciation should be greater, because the life of a trawler is shorter than that of a cargo boat, and the market for trawlers is not so extensive. Sixteen years at the outside may be regarded as the useful life of a trawler, and a banker should not look upon it as worth more than its breaking-up value after that time. In the case of a trawler which cost, in normal times, say, £6,500 to build, it might be well to deduct in the first year, as a trawler even after only six months would not, in ordinary fifties, sell for anything like its original cost, and to deduct 7i per cent. of the reduced value in each subsequent year. When the original cost has been reduced by yearly deductions to £2,000, the boat might probably retain that value for two or three years, if kept up in the ordinary way, but a banker would not, as a rule, consider it prudent, when the value is approaching that sum, to regard the boat as worth more than the breaking-up value. The breaking up value of a boat of this description would be very small, probably about £250. (See SHIP-MORTGAGE, etc.)