2. Lusitania was subsidized by the British Admiralty when it was built
In 1903, Cunard Line approached the British Admiralty with a plan to build two new liners, designed to outperform those of its principal rivals, White Star Lines and the German companies; Hamburg America Line and North German Lloyd. In June of that year the Admiralty, which at the time was in an expanding arms race with the German Kaiser, provided a loan of sufficient amount to enable Cunard to commission the ships. The Admiralty offered the funds at a low rate of interest for the time, and a twenty-year repayment schedule. Cunard also negotiated mail carrier contracts for both vessels, giving them the designation RMS, and annual operating subsidies provided by the British government.
The Admiralty did not provide Cunard such favorable terms without receiving some concessions of its own. If war did break out, the ships would be turned over to the Admiralty to operate as Armed Merchant Cruisers. Conversion would be done under the control of the Admiralty. The plans for the ships were altered to allow for the construction of gun mounts on their decks, as well as ammunition hoists and other necessities for a combat vessel. Secure ammunition storage spaces were built into the holds, and all machinery necessary to propel the vessel was moved below the waterline, where it was better protected from enemy fire.