NAFA member Tripp Thurston, Chief Operating Officer at Flying Finance, shares his latest article on aircraft financing.
Financing an airplane is no small task. Here's our guide on how to simplify the process.
Purchasing your own aircraft is an exciting experience, but just like with any large purchase you may be feeling a bit overwhelmed. The journey to owning your dream aircraft involves a crucial step: understanding how aircraft financing works. That’s why we’ve created this guide: to explain the complexities of aircraft financing and dive deep into the loan process.
How Does Aircraft Financing Work?
Just like other forms of financing, aircraft financing follows the same principles but with different considerations due to the niche characteristics of aircraft. Let’s break down the basics:
- Loan to Value (LTV): This ratio determines the percentage of the aircraft’s value that a lender is willing to finance. LTV varies based on factors like the type of aircraft, its age, usage (pt. 91, pt. 135) and your creditworthiness.
- Interest Rates: Aircraft finance rates are influenced by factors such as market conditions, the borrower’s credit score, financed dollar amount and the chosen financing option. A lower interest rate can significantly impact the overall cost of ownership.
- Liens: Lenders often place a lien on the aircraft as collateral for the loan. This legal interest ensures the lender’s security in case of default.
Expected Aircraft Financing: Loan to Value
The loan-to-value (LTV) ratio in aircraft financing is determined by a few different factors:
- Aircraft Type: Different types of aircraft may have varying LTV ratios.
- Age and Condition: Older aircraft may have lower LTV ratios due to depreciation.
- Borrower’s Creditworthiness: A higher credit score may result in a more favorable LTV ratio.
- Aircraft usage: Part 91 vs part 135 will influence the LTV due to hours a year flown. (higher use=lower LTV)
Factors Affecting Aircraft Financing Interest Rate
Several considerations affect the interest rate in aircraft financing:
- Credit Score: A higher credit score often leads to a lower interest rate.
- Market Conditions: Economic factors such as Federal funds rates, SOFR rate, and WSJ Prime Rate impact interest rates in the aviation finance sector.
- Loan Term: The length of the loan term can affect the interest rate offered.
- Amount Financed: Lower finance amount will lead to a higher interest rate.
This article was originally published by Flying Finance on June 2, 2026.