The Aircraft Lenders’ Guide to Financing Options

The process of financing an aircraft can seem overwhelming at first. Where do you start? Are you best off working with your own bank? How do you know you are getting the best deal? One of the best ways to ensure you are considering the most favorable options available to you is to work with a reputable aircraft financing broker like The Aircraft Lenders. They have already done the work of combing the market and have the best rates and terms at their fingertips.   The Aircraft Lenders can guide you, offering insights into the aircraft loan financing process, guidance on how to finance an aircraft, and a shortlist of the best airplane financing options that carry the most competitive rates and terms.

Aircraft Loan Financing

Term loans are the most popular aircraft financing structure and are the most flexible. These are offered by traditional banks that have aviation financing programs. Not all banks finance aircraft, however. Whether your own bank will finance aircraft or not, it’s a good idea to check the market for the rates and terms offered by lenders who routinely offer aircraft loans. The easiest way to do that is through an aircraft financing broker such as The Aircraft Lenders. They can advise on the best market rates and terms for your aircraft and mission.

Here are some things to know about the various aircraft loan structures offered by aircraft financing companies:

  • Traditional Term Loans: This is the most popular aircraft finance option, wherein you borrow money and pay back over a fixed period. Common term lengths are 15 or even 20 years, but those are usually only available for aircraft purchases of $5mm and under, for Part 91 use.
  • Term Loans with a Balloon: In many cases, especially for charter aircraft or $5- million-plus purchases, lenders will structure loans with a 5-year term and a longer amortization. After the 5th year, the borrower will need to pay off the balloon or refinance.
  • Refinancing Options: Primarily used to leverage better interest rates or loan terms, or to finance a balloon payment or even an upgrade to the aircraft such as an engine overhaul, avionics upgrades, installation of wifi, or paint and interior.
  •  Leases: These are usually reserved for businesses. They offer 100% financing and require that all payments on the lease be made if you want to pay off the lease.
    • With leases, the lender often retains title, so that impacts depreciation possibilities. Terms and amortizations are typically shorter than for term loans.
    • 100% financing means leases can be a good choice for those trying to preserve capital expenditures.
    • Operating leases are another option. These are equivalent to “renting” the aircraft for a monthly fee for a fixed time period. The lessor retains title.

Choosing the Right Plane for You

There are many considerations when choosing the right aircraft for your needs. It’s a significant investment, and there are many practical considerations. To make an informed decision, it’s crucial to have clarity on a number of key factors:

  • The typical distance of your missions – how much range do you need?
  • The specifications of the runways and the altitude of airports at your frequent destinations.
  • The required cabin size for accommodating passengers – how many people do you want to transport?
  • Your ideal category of aircraft. Do you need a jet? A turboprop? Or will a piston aircraft fulfill your needs?
  • The amount of capital you’re willing to invest in terms of down payment.
  • Your budget for annual operating costs.
  • Your plans for crewing the aircraft, whether through an internal flight department, hiring pilots on as as-needed or contact basis, or employing a management company.
  • The frequency of aircraft usage.
  • Possible financing restrictions regarding the age of the aircraft.
  • Consideration of tax implications, including optimal ownership structures and depreciation possibilities.

Aviation Finance with Private Lenders

Moving beyond traditional loans and leases, private lenders are another option for aircraft financing. These lenders can be hard to find, but some aircraft financing brokers may have access to private lenders. These can be useful when the transaction is under extreme time pressure, when the borrower is not bankable for some reason, or when the aircraft or mission is more unusual.

Financing Companies

Aircraft Financing Companies, including banks, equipment financing lenders, and private lenders, play a crucial role in the airplane finance industry. They offer various financing and leasing options, thus enabling more aircraft buyers to navigate the aircraft purchase path easily.

Frequently Asked Questions (FAQs)

1. What are my options for aircraft financing? You have multiple options for aircraft financing, including traditional term loans and term-loans with balloons, and leases.
2. What are some popular aircraft financing companies? There are many aircraft financing companies, each offering different financing structures to suit various needs. Financing your dream aircraft is a process that will be greatly enhanced by working with an expert aircraft financing broker such as The Aircraft Lenders.