How to Prepare for Aircraft Financing

If you’re considering acquiring an airplane, it’s important to understand your financing options early in the process, preferably before you sign a purchase agreement. Your first instinct may be to approach your own bank for an aircraft loan, but that may not be the best path forward. Working with a bank that routinely does aircraft financing will make the process smoother and faster. There are many options available, and working with an aircraft financing broker such as The Aircraft Lenders is a great way to drill down the best options for the aircraft you have in mind, your aviation mission, the type of financing and ownership structure that would serve you best, and your financial profile.

Understanding the Basics of Aircraft Financing

There are two main ways to finance an aircraft: term loans and leasing.

Aircraft Loans

Aircraft loans are term loans. They are similar to mortgages.

  • Down payment — with aircraft loans, you will typically put 15% – 20% down.
  • Term and amortization — terms vary from 5 years to 20 years. Often longer amortizations are possible, which means your payments will be lower, but the loan will involve a balloon payment when the term ends.
  • Securing the loan — The airplane itself serves as collateral, and the lender will file a lien on the aircraft with the FAA. However, personal guarantees are usually required unless the loan is a commercial loan and the borrower is a publicly traded company.
  • Rates — the airplane financing rates for this type of loan vary based on several factors such as the historical cash flow as shown on your tax returns, your liquidity, your credit score and borrowing history, the age of the aircraft, the loan size, and your mission for the aircraft.

Aircraft Leasing

Aircraft leasing is another viable method of aircraft financing, and there are several different kinds of leases available:

  • Finance lease – these are typically only available to businesses, and they usually involve 100% financing. Usually, the lessor retains title to the aircraft.
  • Sale-leaseback – this is also a commercial product. A leaseback is an arrangement in which the company that sells an asset can lease back that same asset from the purchaser. With a lease, you usually do not own the airplane but have the right to use it for an agreed period in return for periodic lease payments. Aircraft leasing companies usually offer several different lease products, and there can be various options at the end of the term, such as simply returning the aircraft, extending the lease, or purchasing the aircraft for a discounted amount that takes into account the lease payments already made.
  • Operating leases – these leases are available to both individuals and businesses, and are structured like a long-term rental, with fixed monthly payments over a defined period of time.

There are a number of things to consider before exploring your airplane financing options.

  1. Define Your Needs: The type of aircraft you need depends on factors like your intended use and budget. Consider your typical routes. How much range do you need? How many passengers do you want to be able to carry?
  2. Assess Your Financial Capability: Consider how much you are willing to put down as a down payment, and what kind of monthly finance payment you are comfortable with. You can calculate possible monthly payments by using an aircraft financing calculator, such as the one here: Aircraft Loan Calculator
  3. Choose the Right Aircraft Financing Company: When you consult with an aircraft financing broker such as The Aircraft Lenders, you will get an informed selection of the best loan or lease options available to you. The best aircraft financing brokers pre-underwrite your financial package so they can target lenders with the most competitive rates and terms that you can qualify for.
  4. Prepare Necessary Documentation: A good aircraft financing broker will ensure that a complete financial package is prepared before submitting to any lender. Experienced brokers such as The Aircraft Lenders anticipate any questions that lenders may have and get the answers ahead of time to smooth the way for a faster approval.

Exploring Aircraft Financing Companies

The Aircraft Lenders is well versed in aviation finance and offers a variety of financing options to cater to your specific requirements. Let them do the work of vetting your airplane financing options for you, to ensure that you can achieve the most competitive rates and terms for your aircraft, its mission, and your financial profile.