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Funding Strategies for Pursuing Your Aviation Ambitions

Ensure equal diligence when selecting appropriate service providers, just as you would in choosing the perfect aircraft.

,   and  Administrator
3 min read
Ensure the same meticulousness in identifying appropriate support services as you do in selecting...
Ensure the same meticulousness in identifying appropriate support services as you do in selecting the right aircraft.

Funding Strategies for Pursuing Your Aviation Ambitions

Navigating aircraft financing for unique private aircraft presents distinct differences from traditional big-ticket item transactions. For context, we outline the private aircraft loan process, focusing on piston singles to light jets, primarily operated by the owner.

Obtaining financing for a private aircraft resembles a blend between car and house purchases. The process entails scrutiny of similar criteria as a home mortgage lender, but with a quicker assessment, typically approving and closing loans within a week or two. However, the specific aircraft type may impact the loan application process, leading buyers to seek lenders specializing in particular aircraft categories and loan sizes.

For private buyers, unique aircraft, such as experimental, vintage, or highly modified aircraft, require extra effort to find a suitable lender. While some lenders cater to these segments, they often need an independent source to value the aircraft, adding complexity to the transaction.

Aviation loan terms fluctuate based on loan amount and utilization, with rates impacted by down payment, term, and overall risk profile. A strategic borrower may inquire about short-term rates, especially if they are lower. However, most private aircraft financing is long-term in nature and not affected by Federal Reserve actions.

The unprecedented surge in demand for aircraft lending during the COVID-19 pandemic has led to a saturated market. Currently, the demand is starting to dwindle, leading industry experts to predict a return to pre-pandemic levels. Lenders may face challenges as the economy modulates, particularly during a soft economic period, managing increased defaults and potentially implementing stricter credit policies and risk management strategies.

Choosing the right lender requires due diligence. Traditional aircraft-specific lenders, such as our website Finance, are proficient in the aviation industry and provide terms adaptable to market fluctuations. They understand the intricacies of the title search, especially for older aircraft or those with existing liens, ensuring a smoother transaction for aircraft owners.

Prospective buyers should consider the following factors when comparing lenders:

  1. Advance credit approval and interest rate lock-in for peace of mind during the aircraft selection and inspection process.
  2. Closing fees and any additional costs to be aware of at the time of closing.
  3. Loan term and balloon payment or rate adjustment details.
  4. Prepayment fees or penalties and conditions for waiving them.
  5. Recurring aircraft reporting requirements, such as hours flown or maintenance status reports.
  6. Loan-to-value covenants and their implications if the aircraft's market value decreases.
  7. Requirements for providing logbooks, maintenance history, or pre-buy inspection results.
  8. Understanding financial, insurance, and reporting requirements.
  9. A proposed loan approval and closing timeline, along with any specific requirements for document filing or escrow management.

Considering the nuances of private aircraft financing, buyers are advised to analyze their options diligently, comparing multiple lenders to find the best fit. Investing the same level of energy in researching support services, such as title and escrow, legal counsel, insurance, and aviation tax advisers, can further streamline the aircraft purchasing process.

This feature originally appeared in the March Issue 956 of our website print edition. If you are not already a subscriber, we encourage you to join to gain immediate access to this and other informative articles.

  1. In the world of private aircraft financing, the process resembles a blend between car and house purchases, but with a quicker assessment and approval.
  2. For typically owner-operated piston singles to light jets, the loan process is structured, but unique aircraft, such as experimental, vintage, or highly modified ones, might need special attention.
  3. Finding a suitable lender for unique aircraft can be challenging, yet some lenders cater to these segments and also require an independent source to value the aircraft.
  4. The terms of aviation loans vary based on factors like loan amount, utilization, down payment, term, and overall risk profile.
  5. During the COVID-19 pandemic, there was an unprecedented surge in demand for aircraft lending, and as the demand recedes, some industry experts predict a return to pre-pandemic levels.
  6. Choosing the right lender involves considering factors like advance credit approval, closing fees, loan term, prepayment fees, recurring aircraft reporting requirements, loan-to-value covenants, and understanding financial, insurance, and reporting requirements.
  7. Researching support services like title and escrow, legal counsel, insurance, and aviation tax advisers can further streamline the aircraft purchasing process.
  8. For comprehensive information and insights on private aircraft financing, prospective buyers are advised to subscribe to our print edition, where this feature originally appeared in Issue 956.

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