Adam Meredith

  • Tracey Cheek posted an article
    Buying a Foreign Aircraft and Importing It see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, shares what you need to know when purchasing and importing a foreign aircraft.

    Buying an aircraft is a complex transaction. Buying one from outside the United States and importing it only adds to the complexity. Paperwork and timing are two major aspects of a domestic deal that can become complicated with foreign transactions and the importation process.

    For instance, in the United States there’s only one place to go to verify aircraft records--the Federal Aviation Administration (FAA). Assuming an aircraft has spent its entire history in the United States, most reputable title companies should be able to ferret out any claims impacting the title by performing a quick title search.

    By contrast, in Canada, for example, there is no central source for determining an aircraft’s chain of ownership. Aircraft registration in that country is done at the regional level. There are many different provincial and territorial level queries that would need to be done to ascertain whether there are any claims outstanding on Canadian-owned aircraft.

    Every country has its own, distinct registration process. Unfamiliarity with a country's aircraft registration procedures can significantly impede the timing of the transaction and increase the paperwork. It should be mentioned that the International Registry (IR) was originally intended to help address this issue. However, the IR falls significantly short in providing certainty of a clear chain of title, even on those aircraft it covers.

    Aircraft pre-purchase inspection is another potential minefield. AOPA Finance recently stepped in to help somebody who had imported a plane without setting up a thorough Purchase and Sale Agreement (P&S). The two parties agreed the seller would fly the plane to the United States. Both also agreed the buyer could have an annual inspection performed by the buyer’s A&P as part of the pre-purchase inspection. During the annual, the buyer’s mechanic discovered several issues with the aircraft.

    A dispute arose over which country’s definition of airworthiness took precedence. The seller believed the aircraft was airworthy when it departed his country. The buyer’s mechanic begged to differ. So both the plane and the deal were in pieces. To add insult to lack of planning, the lender refused to release funds until somebody signed off that the aircraft was airworthy.

    In the United States, that somebody is the FAA’s designated airworthiness representative (DAR). Not only does the DAR control that aspect of the transaction, this person also oversees the de-registration and registration process. Every country also has their equivalent, which means there are options on how to proceed. Whichever course is chosen, it involves getting on the DAR's calendar, and paperwork.

    Other details to be resolved include: In which country will the plane be de-registered? How will it be flown or ferried into the United States? Where and how will it clear U.S. Customs? And how will the aircraft be re-registered?

    Our advice is to hammer out a rock-solid purchase and sales agreement before embarking on your journey. Clearly spell out all the details to make sure expectations are realistic. Have the P&S elaborate what’s going to happen, when and who is going to take care of which parts of the process. Have it specified when the money will become non-refundable, when the entire amount of the loan is funded into escrow, and when those funds will be released to the seller.

    Disputes happen. Lay out what the dispute resolution process will be. Clarify the logistics of when and where the aircraft will be de-registered and subsequently re-registered. Specify the time period for the designated airworthiness representative to inspect and deem the aircraft airworthy by U.S. standards.

    Our other piece of advice is to get title insurance. It doesn’t cost a lot on the one hand, and on the other hand, having a U.S.-based title insurance company to defend you if something does occur is more than worth the cost. Don’t skimp on this item. Get title insurance.

    AOPA has a plethora of online resources. We also can be helpful through our Legal Services Plan. We’re not the only ones. There is a small industry of other aviation professional service providers out there who are in the business of importing aircraft. Our goal is to provide an understanding of the process and help set expectations. Buying a foreign aircraft and importing it is absolutely a case where hiring professional service providers can only benefit you.

    This article was originally published by AOPA Aviation Finance Company on May 28, 2019.

  • Tracey Cheek posted an article
    Is There a Minimum Purchase Price to Obtain a 10-Year Loan? see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, answers your aviation loan questions. 

    Q: What's the minimum purchase price to obtain a 10-year loan? I'm looking at aircraft in the $20K-$30K range after 1960.

    A: Thank you for reaching out. The minimum loan amount required for a 10-year term is $20,000. This is after the minimum 15% down payment. Therefore, the minimum purchase price should be around $24,000.  Please feel free to give us a call as you get closer to purchasing. We always recommend that AOPA pilots get pre-approved as they shop.

    Q: I'm thinking of buying my first plane. Would you finance an experimental one? The one I am looking at this moment is a SONEX 2016, tri-gear, with asking price of $39K. What is rate and term?

    A: A number of our lenders offer financing on experimental aircraft. In some cases, a lender may require that the aircraft have an appraisal. Our account executives will discuss that requirement with you early in the application process. A SONEX is common enough that an appraisal is not likely needed. For a purchase price of $39,000 rates will fall around 7.5% for 10 years. Keep in touch as you search. Our account executives can help with providing rate quotes and valuations as you shop around.

    This article was originally published by AOPA Aviation Finance Company on June 12, 2019.

  • Tracey Cheek posted an article
    Painting the Financial Picture see more

    NAFA member Adam Meredith, President of AOPA Aviation Finance Company, shares what items you need when preparing to finance an aircraft. 

    "You don't really need all of this financial information, do you?" It’s a question often asked by AOPA Finance clients. Yes, yes we do. If you want the lowest rate, the most competitive structuring, the least amount down, and the lowest payment, an exhaustive analysis of your credit worthiness must be made.

    Financial Documentation

    IRS Schedule Cs or Schedule Es are not enough. While they may indicate whether the ownership structure has any pass-through income on an individual's tax return, the description of that pass-through income is summarized as a line item or two. Likewise, K-1s only indicate percentages of a shareholder’s income and liabilities. Line items and percentages don’t tell the whole story. Full tax returns do.

    Global Cash Flow

    Your tax summaries may show cash going from one related entity to another. But are you actually taking from the “left pocket and putting it in the right pocket?” If so, that isn't real money, is it? The lender will net that out of your “global cash flow.” Global cash flow—also known as a Consolidated Statement of Cash Flows—is a listing of all the various entities in which a person has ownership and what their net cash flow from all the entities is.

    And then there’s the global debt schedule.

    Global Debt Schedule

    What is a global debt schedule? It’s a comprehensive list of all the ownership entities. It’s a listing of the actual total debts of each entity in which the individual has ownership. It details what the total amount owed is, and to whom. What the monthly payments are. How much is interest versus how much is principal. It also includes maturity dates for all debt.

    Depending upon what one’s business relationship is with his partners, the lender may require additional documents to help fill in holes in the financial picture. Those might include hypothecation, subordination, or even side agreements.  A hypothecation agreement could be submitted from the controlling party acknowledging the CEO emeritus is entering into a financial relationship.

    Speaking of partners, imagine a borrower has two partners and he owns one-third of the business. Some lenders may require the other two partners’ to be party to the transaction.

    For some, that’s just too much. They’re only going to have the loan for three years so the “pain-in-the-neck” factor is not worth their time and effort. Other folks just don't want to disclose all their financial information for personal reasons. Still others have obligations with lenders elsewhere that restrict them from guaranteeing debt or have covenants in place from other business debt. For these individuals, a collateral-based loan might be the more appropriate option. The trade-off is simplicity for a little bit higher interest rate.

    Collateral Based Loans

    A collateral-based deal might proceed more quickly from initial inquiry to funding but it does come with a different paperwork burden. Even so, the process is usually far less onerous. Banks will conduct an exhaustive search on the quality of the individual as well as on the aircraft. For the individual, they want to know if this person has filed bankruptcy. Do they have tax liens against them? Are there pending lawsuits on them, for any reason? A person applying for a collateral-based loan should be crystal clear how good or bad their character looks on paper.

    Every time an AOPA Finance advisor must request additional information because our client’s paperwork is incomplete adds additional stress to the process. Bottom line-- there are no shortcuts. A transparent, painless credit deal requires in-depth financial paperwork.

    This article was originally published by AOPA Aviation Finance Company on June 12, 2019.

  • Tracey Cheek posted an article
    Will High Time Engines Complicate the Loan Process? see more

    NAFA member Adam Meredith, President of AOPA Aviation Finance Company, discusses finding the "perfect airplane" and the loan process.

    You’ve finally found the perfect airplane. It has no damage history, all of its logs, great avionics, and good interior. The high time engines are the only downside. You’re not worried because the plane is flown often and mechanically is in great shape. When you present it to your lender, though, the lender balks. Why?

    Lenders tend to keep the worst-case scenario in mind. For them, that case is if they might have to repossess the aircraft with it needing an overhaul. To make it marketable again, the lender would have to use their own money for an overhaul. To counter that, most lenders are going to specify you have enough liquidity to cover an overhaul from Day 1.

    Some lenders may require an overhaul as part of the purchase. Others may require a "hold back" amount of money as a precursor to financing. That "hold back" amount must be sufficient to cover overhaul costs upon taking delivery. Because lenders recognize that the likelihood of other expenses popping up at any time with an airplane is high, they may also require an additional cushion of liquidity as a condition of completing the deal. Some lenders will simply bow out of the transaction entirely.

    For many pilots, having to fold an overhaul into the purchase price looks like a pricing discount opportunity. The reality is aviation market appraisers have already figured that into the equation. For example, if two identical aircraft are for sale and one has a fresh overhaul while the other is at TBO, the airplane with the fresh engines will have a market value of at least $30,000 more per engine over the TBO plane. 

    We've had clients who felt their ability to potentially liquidate an asset to cover an overhaul should have had that counted in their favor. Lenders tend to disagree with that assessment for two reasons. First, offering to liquidate an asset against an overhaul changes the global financial picture of the borrower. Keeping in mind that every aspect of one's financial picture is interconnected; it becomes easy to see why changing one part may have a negative domino effect overall.

    Second, where borrowers tend to feel eternally confident about their ability to quickly liquidate any asset they own, lenders are more sanguine about the reality of asset disposal. Financers can draw from plenty of historical precedent where circumstances changed for the worse, and the asset a borrower thought would be easy to sell to cover the unforeseen event fetched far less than expected or didn't sell at all. 

    The flip side of that coin are two specific instances where an airplane owner whose engines are at TBO might easily obtain an overhaul loan. In the case of an aircraft that is free and clear, it’s generally possible to get virtually 100% financing. The second situation is when a loan is still outstanding. If the amount requested--plus the remaining principal--adds up to less than 80% loan-to-value (LTV), a lender will typically refinance. In that case, the owner may not have to go more than 20% out of pocket to pay for the overhaul. 

    Lenders who provide this type of refinancing find it attractive for another reason. Often a pilot will include an avionics or interior upgrade, thus turning a simple engine overhaul into a whole aircraft refurbishment. The one caveat is, at least on the piston side, the relatively small dollar amount of a refinance loan for an overhaul is low, so it's not necessarily attractive to a lot of lenders.

    This article was originally published by AOPA Aviation Finance Company on July 10, 2019.

  • Tracey Cheek posted an article
    Financing An Aircraft Before It's Moved To The U.S. With FAA Registration see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, answers your questions about loans for engine replacements and aircraft financing.

    Q: We are looking for financing options to purchase a pressurized Baron that is currently based and registered in Canada. I am writing to ask if you’d be willing to finance this aircraft before it is moved and transferred to the US with FAA registration?

    A: For aircraft being imported from Canada our lenders will require that the deregistration from Transport Canada and new FAA registration be completed prior to releasing funds to the seller. In most cases lenders are able to position funds in escrow while the import is completed. Imports from Canada typically only take a couple days. Give us a call to discuss further. We can also help you set up escrow with our AOPA Strategic Partner, Aero-Space Reports.

    Q: I own my aircraft outright. Do you provide loans for engine replacements?

    A: Yes, like avionics upgrades, our lenders will finance up to 85% of the aircraft value with an overhauled engine. Having no debt on the aircraft potentially allows for the lender to finance the full cost of the overhaul. Call us today so we can get you started on the application and approval.

    This article was originally published by AOPA Aviation Finance Company on July 30, 2019.

  • Tracey Cheek posted an article
    Adam Meredith, President of AOPA Aviation Finance Co., shares helpful steps when financing aircraft. see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, shares helpful steps when financing your aircraft.

    AOPA Aviation Finance and our experienced and trusted specialists can assist you in making your purchase by offering a wide array of financing options that are tailored to your specific needs. 

    Here are eight steps to help you start flying: 

    Gather Supporting Documents

    Gather your tax returns, financial statements, and personal net worth information for submission with your application to speed up the process. The fastest approvals are applications where W-2's are submitted with no business ownership, usually within 1-2 days. Additional approval time may be required for applicants with business entities.

    Complete an Application

    Fill out the application as completely as possible to avoid a delay in processing and remember to provide an original signature on the application before submitting it through the online portal. 

    Get Approved or Pre-Approved Quickly

    Once your application package is complete, your account executive and analyst will identify and select the best lender based on your aircraft selection, usage, loan structure, and financial history. 

    Still Shopping?

    A pre-approval ensures that:
    - You don’t lose the aircraft of your dreams due to lack of financing.
    - Your loan closes quickly. 
    - You have 90 days to decide on your aircraft with the rate locked for 30 days.

    Negotiate a Balanced Purchase and Sales Agreement

    Don’t just sign anything given to you by the seller, have someone familiar with the process review to ensure it’s balanced. The purchase and sales agreement is a binding legal document that sets the sales price and all conditions to close, including time to complete pre-buy, time to complete transaction, how and where escrow and deposit are held, and who pays to move the aircraft, etc.

    Schedule a Pre-Purchase Inspection

    We highly recommend a pre-buy inspection by an independent 3rd party to avoid any surprises and conflict of interest once you take ownership of the aircraft.

    Typically, the prospective buyer pays to re-position the aircraft for the pre-buy, and the seller pays for correcting any maintenance issues relating to airworthiness. 

    Set Up Escrow and Review Fees

    AOPA members pay no broker fees!  Members will, however, need to open escrow with a lender approved title and escrow company to ensure proper closing and will include a title search. Normally, fees are based on the aircraft’s sales price and are split by the buyer and seller.

    Lender closing costs are based on the aircraft and purchase price and are used to cover hard costs such as background checks, credit bureaus, overnight fees, loan documentation, and legal review.

    Obtain Insurance

    Hull and liability insurance coverage is required by lenders, AOPA members can get discounted rates through AOPA Insurance. Your account executive will gladly refer you to an agent for a quote.

    Prepare for Closing

    Once you have selected a closing date, be prepared to find a notary to notarize documents and leave time for overnight packages to be sent back and forth as some documents require a “wet signature”.

    This article was originally published by AOPA Aviation Finance Company on August 5, 2019.

  • Tracey Cheek posted an article
    What Are The Benefits Of Title Insurance For An Airplane Purchase? see more

    NAFA member Adam Meredith, President of AOPA Aviation Finance Company, answers your questions about title insurance when purchasing an airplane.

    Question: I’m planning to purchase a used airplane in the next 6-months. I’ve heard some owners talk about not needing title insurance? Wouldn’t this be required by a lender? I’m familiar with title insurance for a home purchase, but what exactly are the benefits of title insurance for an airplane purchase?

    Answer: Surprisingly, no, many lenders do not currently require title insurance on every transaction. 

    Similar to a home, your aircraft also has a title history which should be reviewed before buying. While most AOPA members know the importance of this and perform a title search prior to buying an aircraft, many may not know there are numerous scenarios where a lien or claim can end up in the FAA registry and/or otherwise “clouding” your ownership interest. By obtaining title insurance, the title insurance company will defend you legally against any bogus claims.  

    Question: I would like to purchase my first airplane this year. My price range is about $50k.  I’ve been looking at your website and the list of financial documents you will require, especially for a business owner like myself, seems daunting. Are there any other options for someone like me? I have good credit and good cash flow.

    Answer: While providing the full list of financial documents gives you the most lending options, some of our lenders do offer low doc products. The underwriting guidelines tend to be more constrained, however, for well-qualified borrowers all that is needed is an application. Because this product does not require supporting financials rates will average .25-.75% higher than our most competitive options. If you are interested in more details about this low doc option, please give us a call and we can give you a more specific rate quote.

    This article was originally published by AOPA Aviation Finance Company on May 3, 2019.

  • Tracey Cheek posted an article
    An Overview of Aircraft Loan Structures see more

    NAFA member Adam Meredith, President of AOPA Aviation Finance Company, discusses how to determine which aircraft loan package is right for you.

    The best way for an AOPA Finance expert to determine the right loan package for its members is to ask them the right questions, starting with, “What’s important to you?”

    Most have the same answer: “The lowest interest rate possible.” From experience, we know they really mean “lowest rate possible for their specific situation”. Three questions help us frame their specific situation:

    1. What have you budgeted for a monthly payment?
    2. How long do you want to own this plane (and keep financing in place)?
    3. How much are you looking to put down?

    How the member answers determines whether a fixed, floating or a hybrid financing structure fits best. Their financial complexity might require us to recommend an asset-based approach.

    A fully amortized, fixed rate loan with the longest possible term might be ideal for somebody intending to own the plane for a decade or more. The risk is the interest rate locked in at the beginning of the term might be higher than the going interest rate at the end. But the trade-off in peace of mind knowing the guaranteed monthly note is compatible with one’s long-term spending plan makes the extra cost worthwhile. For example, for non-commercial use, there are lenders who will execute fully amortizing, fixed-rate loans with 15 or 20-year terms for turboprops still in production.

    When it comes to length of ownership, many of our clients answer, "about ten years.” Data AOPA Finance has collected shows the typical length of ownership is actually no more than five. That's why floating, balloon or adjustable rate (ARM) loan structuring might make more sense.

    A floating rate loan has no fixed interest rate, while an adjustable rate (ARM) loan starts out fixed but then changes (to either a new fixed rate or a floating rate). Following the initial period, an ARM floats, based on a benchmark reference rate like the Federal Home Loan Bank (FHLB). The initial period is typically three to five years. Another term for an ARM is hybrid. In the current interest rate environment and forecasting into the foreseeable future, these financing packages can offer better savings compared to fixed rates with similar amortizations.

    Balloons are another option; however, the amortization period is longer than the actual loan term. An example might be financing a turboprop on a five-year term with a "balloon" and a 15 to 20-year amortization. That package might work best for members who a.) are looking purely for the lowest rate possible, and b.) know they’re going to own the aircraft (and/or keep the loan) less time than the normal average.

    Balloons allow the borrower to delay paying the principal until the very end, thus keeping the monthly outlay low. At the end of the term, the entire unpaid balance comes due. That small monthly note balloons into one large final payment.

    Sometimes members come to us comfortable with the complex structures of floating or ARM financing, but the complexity of their own finances prohibits them from using those options. Take for example, a real estate entrepreneur who owns 30 different properties. Each property is a separate ownership entity. They have partners on some of these properties and are a majority owner, or half owner or some variation of percentage, across the entire real estate portfolio. Despite the positive cash flow, there are lenders who will not do a deal without them putting a guarantee on all the entities they have equity in, as well as a personal guarantee from themselves. Even if they aren’t restricted by covenants from doing so, the cost in money and time is frequently not worth it. The financial complexity surrounding their business might mandate a simpler, asset-based loan configuration.

    In fact, asset-based deals can be further simplified if the client can increase their down payment. The more you put down up front, the more options lenders have available. A loan on an older airplane or one with higher-time engines becomes doable if the borrower can afford a higher down payment. Whereas a newer plane might be approved with a 15% down, 20-year amortization, the same situation for an older turboprop might go from “no deal” to “deal” with 30% or 40% down. Likewise, a relatively mainstream turboprop that has been produced in significant numbers might normally see a 15-year amortization. Without a larger down payment, older or rarer turboprops might cause lenders to shorten the amortization period, or even refuse to make the loan.

    Jet financing has its own unique requirements which might also necessitate a higher down payment. That’s because the frequency of engine advancements and avionics upgrades as well as new products tend to render those aircraft obsolete faster than others. That’s why asking the right questions of our members allows AOPA Finance to give them the best picture when it comes to securing the best financing package for their unique situation.

    This article was originally published by AOPA Aviation Finance Company on April 12, 2019.

  • Tracey Cheek posted an article
    Why Does Usage Matter? see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, discusses how the use of your airplane affects your financing.

    How are you going to use your airplane? It's a question AOPA Finance asks its clients early and often. The airplane’s intended mission determines which finance companies will lend to you and the terms of the deal.

    It could be said that there are only two types of airplanes to a lender—a “nice-to-have asset” or a “working asset.” Personal use planes—shuttling company employees or the family for travel—are examples of “nice-to-have assets.” The expectation of the lender is the aircraft will fly a normal number of hours per year. An aircraft put on a Part 135 charter certificate or on leaseback with an FBO, however, will fly significantly more hours per year. They are considered “working assets” because of their high usage. The risk profiles of the two are very different.

    From the lender’s perspective, should the borrower go into default or the business into bankruptcy on the former, the airplane can be parked, turned over and sold without adversely impacting any creditors. The employees and the boss can return to flying commercial airlines. That’s why it’s called a “nice-to-have asset.” It’s not essential to the function of the business.

    The depreciation trajectory for these planes is less steep and more predictable. No lender can predict the absolute future value of an aircraft. But for this type of financing, lenders can predict a worst-case scenario of a reasonable return on the asset should they need to turn the airplane over. That’s an acceptable loan risk for many aircraft financers. An example of that acceptable risk is a 20-year amortization with 15% down on a relatively new plane. This is typical of what AOPA Finance helps its clients get.

    Unfortunately, AOPA Finance has worked with a number of clients who allowed a well-meaning accountant or friend suggest that additional use of the asset might have tax benefits and midway through the deal, they informed us that they’d changed their mind. We recently had a client who did just that.

    Well into the financing process, he decided he wanted to now leaseback the aircraft for rental. The financing had been structured around normal usage. Once the client decided on a high usage scenario, AOPA Finance was left presenting him with a worse loan package for the altered scenario than originally submitted. Had AOPA Finance known sooner about his leaseback intentions, a better option from a different lender could have been negotiated.

    The higher number of hours flown per year increases operational wear, which speeds up diminution of the airplane’s value, which accelerates the loss in equity. If the buyer gets a loan like the one above based on personal/business use but then puts the plane on a charter certificate, the likelihood of them being upside down on the equity of that plane within four years could be significant. When the time comes for them to sell and upgrade they can’t without bringing money to the table. Alternatively, should they go into default, the lender would be stuck, unable to recoup the loan amount.

    It's also harder for a lender to step in and turn over a high usage aircraft put on a charter certificate. That business exists to fly planes. In the case of a bankruptcy, a bankruptcy judge may acknowledge the revenue-generating potential of the airplane as a working asset. The judge could then rule that the airplane must remain in service. The plane would continue to fly, its value would continue to decline, and the lender would be forced to stand by while its asset continues to lose money from the additional use. That’s an unacceptable risk profile for many.

    Knowing which lenders will finance working asset aircraft is part of AOPA Finance’s expertise. Lenders that do these particular deals do so because they have an intimate knowledge of the makes and models of aircraft used for such operations. They know financing high usage aircraft is more akin to financing a business loan for a business. That’s an acceptable risk to them.

    That’s why it’s important to know early in the process how you intend to use your airplane and to stick with that decision. It's far better to know up front if the plane is a nice-to-have or a working asset rather than being inadvertently misled into thinking you can do something which will end up costing you dearly.

    Great rates. Great terms. Helpful and responsive reps. Three good reasons to turn to AOPA Aviation Finance when you are buying an airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (75263) or click here to request a quote.

    This article was originally published by AOPA Aviation Finance Company on March 28, 2019.

  • Tracey Cheek posted an article
    Tax Requirements on an Aircraft Purchase see more

    NAFA member Adam Meredith, President of AOPA Aviation Finance Company, answers your questions about tax requirements when purchasing an aircraft.

    Question: I purchased a plane last year utilizing AOPA.  One thing I was not made aware of until later in the process is that required sales tax (I live in TX) could not be included in the loan so I had to give up almost $7k which I was going to use ADS-B compliance.  No one seems to talk about that. Is that normal?

    Answer: The tax requirements on an aircraft purchase can vary drastically from state to state. Since lenders do not roll taxes into the financing, AOPA Aviation Finance does not typically get involved with tax questions. Often times the selling broker will account for sales tax but we always recommend consulting your CPA or a tax attorney. AOPA’s Pilot Protection Services has attorneys on staff and panel attorneys throughout the country that can assist members with such questions. Members of the PPS plan receive a free 30-minute consultation annually along with a number of other benefits.

    Have questions for Adam? He is happy to answer them. Submit your questions here. Great rates. Great terms. Helpful and responsive reps. Three good reasons to turn to AOPA Aviation Finance when you are buying an airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (75263) or click here to request a quote.

    This article was originally published by AOPA Aviation Finance Company on March 28, 2019.

  • Tracey Cheek posted an article
    Airplane Acquisition Checklist Series: Part Two: Purchase and Delivery see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, follows up with part two of the Airplane Acquisition Checklist covering Purchase and Delivery.

    In Part 1 of this series on airplane acquisition, we discussed the most efficient way to approach buying an aircraft by using three checklists—Pre-purchase, Purchase and Aircraft Delivery. We also detailed the Pre-purchase Checklist.

    You're now staring at your ideal airplane on your screen. Time to run the Purchase Checklist:

    • Escrow, Letter of Intent and Purchase Agreement
    • Notify Lender
    • Pre-purchase Inspection
    • International Registry (if applicable)
    • Insurance
    • Title Search and Background Checks

    Escrow, Letter of Intent and Purchase Agreement. Escrow appears in all three checklists. Before it was a reminder to get your down payment together. Now it triggers you to move money into an escrow account that you set up through your escrow agent. If you're unfamiliar, AOPA has a strategic partnership with Aerospace Reports and as a member you’ll get discounted pricing and we can help get things set up. Likewise, if you’re working with another escrow company AOPA Finance can help coordinate that too. Plan on a deposit of 5%-10% of the aircraft's asking price.

    The letter of intent puts a clock on the deal, enables you to withdraw from it without penalty under certain conditions you and the seller negotiate, and establishes the parameters for the final price.

    This is also time to have your aviation attorney to draw up a detailed purchase agreement. If you don't have one, AOPA has a sample purchase agreement you can view here. You may want to consider signing up for Pilot Protection Services which includes consultation with an attorney regarding your purchase of an aircraft specific to your state and the legal requirements there. What it covers includes, but is not limited to, purchase amount, refund terms, deadlines for the process, representations and warranties, even the location of aircraft delivery.

    Notify Lender. The sooner you notify the lender, the sooner the lender can convert the pre-approval into an approval. Your lender will conduct background checks, damage history queries, etc. If the aircraft is missing logbooks, that may affect the stipulations of the pre-approval with the lender. Each has a set of tolerances for missing logbooks. Ask before you commit to a particular lender. AOPA Finance may be able to help.

    Pre-purchase Inspection. Even before you go to the airplane, have the logbooks sent to you. Nowadays, most sellers have their airframe and engine logbooks scanned into PDF format for ease of emailing. Get your mechanic started perusing those logs. You and your lender will want to know whether the logbooks are complete as soon as possible. An incomplete set can frequently impact the final price, and it may also affect the plane's insurability.

    In most instances, it's best that a mechanic other than the regular mechanic for that airplane perform the pre-purchase inspection. That may mean flying your assigned A&P to the airplane's location, with a hotel stay.

    International Registry. If your plane is subject to the Cape Town Treaty (see here for more info), you should begin the International Registry process simultaneously with contacting your escrow agent. It's complex and time-consuming and may affect the timing of your closing date. Subject to some exceptions, an aircraft must be registered with an appropriate aviation authority before it can be legally operated in any country. Suffice it to say, better to have your team of experts handle this checklist item.

    Insurance. As far as your lender is concerned, typically, they’ll require you to maintain full ground and flight insurance, as well as "Breach of Warranty Coverage" for the amount of the loan with a carrier acceptable to the lender.

    The lender must be named as "loss payee" and be protected by a "lien holder's endorsement." Once you have been placed with the appropriate lender, we will send you the specific insurance requirements for that lender.

    Title Search and Background Checks. Usually, this will be a straightforward process. If a plane has been in an incident, involved in an estate dispute or part of a bankruptcy, though, then things could get complicated. Your prospective insurer, your lender and your escrow agent may all play a part in these searches and checks. We've heard too many stories of airplane deals falling through at the last minute because of lack of due diligence by the buyer, so be thorough.

    All that complete, what's left is to take delivery. There's one last checklist to run—the Aircraft Delivery Checklist:

    • Punch List
    • Technical Acceptance
    • Escrow
    • Closing and Delivery

    Punch List. Here's where the due diligence of your title, escrow or insurance representatives pays off. They'll work with you to clear up any liens or estate claims. Similarly, the list of deficiencies and discrepancies your mechanic delivered will have been either rectified or negotiated into a lower price.

    Technical Acceptance. Once the Punch List is complete, the buyer then executes and delivers a Technical Acceptance Certificate to the seller. This says the buyer accepts the condition of the aircraft, subject to "no material damage and/or total loss affecting the aircraft upon or prior to arrival of the aircraft at the delivery location." The deposit usually becomes non-refundable at this stage.

    Escrow. The remaining purchase price is deposited into the escrow account, and the seller is paid.

    Closing and Delivery. The title is transferred and the aircraft is registered to the new owner, once the new owner insures it. Finally, the aircraft is turned over or delivered to you. Congratulations.

    Considering aircraft ownership? AOPA Aviation Finance will make your purchase experience as smooth as possible. For information about aircraft financing, please visit the website (www.aopafinance.com) or call 1-800-62-PLANE (75263).

    Click here for The Acquisition Checklist: Part One

    This article was originally published by AOPA Aviation Finance Company on March 5, 2019.

  • Tracey Cheek posted an article
    Aircraft Age Restrictions for Financing see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, answers the aircraft financing question regarding aircraft age restrictions.  

    Question: Is there an age of airplane or number of airframe engine hours that is off-limits for financing?

    Answer: For piston aircraft, our lenders do not have any age restrictions. Aircraft manufactured prior to 1960 may require a larger down payment and/or shorter term. Airframe time is restricted to less than 10,000 hours. Lenders prefer mid-time engines or less, however, financing an overhaul into the purchase is always an option for those with higher times. If you are looking at a few different airplanes and would like help, our Account Executives are available to help with valuations and can provide rate and term quotes for each airplane. Please give us a call at 800.627.5263 or contact us through our website at aopafinance.com

    Have questions for Adam? He is happy to answer them. Submit your questions here. Great rates. Great terms. Helpful and responsive reps. Three good reasons to turn to AOPA Aviation Finance when you are buying an airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (75263) or click here to request a quote.

    This article was originally published on AOPA Aviation Finance Company on February 21, 2019.

  • Tracey Cheek posted an article
    The Airplane Acquisition Checklist Series: Part One: The Pre-Purchase see more

    NAFA member Adam Meredith, President of AOPA Aviation Finance Company, shares his pre-purchase airplane acquisition checklist.

    Did you resolve to upgrade your current aircraft or to buy your first airplane in 2019? Congratulations!. With low inventory and high demand, how you approach the buying process may be the difference between getting your first-choice or settling for an also-ran.

    Buying an airplane is like flying an airplane. It’s all about planning, crew resource management and checklists. Your “crew” includes your lender, your insurer, your maintenance contractor and AOPA’s Aviation Finance Group. AOPA Finance can match you with the right lender, and our extensive experience can also provide you the additional leverage you may need in a tight market, at no cost to you.

    Like flying, how well you plan, manage your crew and follow your checklists help determine how well the purchase process goes. We’re not talking about pre-flight, flight and post-flight checklists, though. We mean these checklists:

    1. Pre-Purchase
    2. Purchase
    3. Aircraft Delivery

    Let’s start with the Pre-purchase Checklist:

    • Ownership—personally or through a company or LLC?
    • Use—personal or commercial?
    • Loan Pre-approval
    • Escrow
    • Private hangar or shared?
    • Aircraft maintenance contractor

    Ownership. Are you going to own the airplane yourself or through your company? Will you create an LLC, a partnership or some other type of corporate body? Iron out those details first. They guide which lender can pre-approve you and may also influence the length of the pre-approval process. There are advantages and disadvantages to all ownership scenarios.  What’s important to know is that if you decide to change structure at the last minute, it’s a bit like telling your building contractor you want to move a door. At a minimum you know there’s going to be delays in the process and it may completely change the structure.

    We’ve seen too many situations where potential buyers got a loan pre-approval based on one ownership scenario (like a partnership), only for them to change the scenario (like dissolving the partnership). That kind of change will negate the pre-approval process and will force the buyer to start over. It may also necessitate finding a different lender.

    Use—Personal or Commercial? Part 91 transport for you alone, for your company’s employees or leaseback to the local flight school? Decide how you intend to fly your aircraft and commit to it. There is no advantage in telling your prospective lender and insurer it’s for personal use, only to conduct commercial operations once purchased. Should the discrepancy come to light because of an accident, incident or investigation, it could trigger a steep default interest rate, or worse. Transparent communication is the best way to keep this complex transaction simple.

    Now it’s time for:

    Loan Pre-Approval. Getting pre-approved confirms what you can afford and enables you to move quickly on an aircraft, both essential in this seller’s market.

    Some think it’s a waste of time to get pre-approved because the pre-approval is time-limited. True, pre-approval is good for anywhere from 60 to 90 days, depending on the lender. That’s generally enough time to find the right aircraft. But, if the search period does exceed the pre-approval timeframe, it may be possible to extend the pre-approval period.

    Even if the lender won’t extend, re-approval is quicker than an initial pre-approval. So you’re still ahead of the competition.

    While waiting on pre-approval, finish the rest of the checklist:

    Escrow. Have cash ready to put in an escrow account. Escrow gives you an exclusive option on an aircraft within a specific timeframe. When entering escrow, ask for generous restrictions. The more time you can negotiate, the better. It gives your lender, insurer or AOPA Finance space to conduct background checks, damage history and title searches. Also consider keeping extra money in reserve to add to escrow should the seller require an additional incentive.

    Next time: The Purchase and Aircraft Delivery checklist.

    This article was originally published by AOPA Aviation Finance Company on February 21, 2019.

  • Tracey Cheek posted an article
    5 Tips to a Speedy Aircraft Approval see more

    NAFA member Adam Meredith, President of AOPA Aviation Finance Company, shares five tips when financing your aircraft.

    1. Be Organized

    Aircraft financing requires documentation similar to mortgage financing. Having easy access to W2’s, tax returns, paystubs, business tax returns and K1’s will help move the process along quickly. The number one reason for delay in approval is missing documents. 

    2. Full disclosure

    Fill out the application with as much detail as possible. You will need to provide documentation in the form of tax returns, bank statements, etc to verify income and down payment.

    3. Understand your credit and financial picture

    Being aware and able to explain any past issues on your credit report will help limit additional underwriting questions. Using free credit tracking services is a good way to understand what might show up on your credit report.

    4. Calculate your ability to afford the loan 

    Make sure you have added the expected monthly payment to your current debt payments. Most lenders are not only going to want to see that you can handle the monthly payment but can also afford the operational and insurance costs on top of your current obligations.

    5. Determine Ownership Structure

    Having an understanding of how you want the aircraft to be registered will help the approval and closing process go smoothly. LLC or corporate ownership adds additional complexities to the closing. Establishing these entities early on in the process helps keep things moving during the final stages.

    Competitive rates and terms. Custom financing options. Helpful and responsive reps. Three good reasons to turn to AOPA Finance when you are buying a turboprop or turbine airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (75263) or click here to request a quote.

    This article was originally published by AOPA Aviation Finance Company on February 5, 2019.

  • Tracey Cheek posted an article
    Adam Meredith, President of AOPA Finance, shares prebuy tips when financing a turboprop. see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, shares prebuy tips when financing a turboprop.

    We highly recommend getting a pre-buy inspection. It could save you thousands of dollars over time. Here we’ve summarized some important points to consider as you move through the purchasing process.

    1. ALWAYS have a prebuy done. No bank should let you finance a plane without it.
    2. The shop doing the prebuy should specialize in the type of airplane you are buying. We also recommend selecting a shop that has no ties to the airplane.
    3. Give yourself plenty of time to get the prebuy done. Typically, they take 1-2 days, however you might want to add a buffer so you don’t end up getting rushed as a closing date approaches.
    4. Typically, the buyer pays to reposition the airplane and the seller will pay for correcting any maintenance issues relating to airworthiness.
    5. Use the Purchase & Sales agreement to define the sales price plus conditions such as the amount of time to complete the prebuy, who pays for what, and who pays to move the airplane.
    6. Don’t forget to ask for a fresh annual during the prebuy. This is oftentimes required by banks unless one has been completed recently.
    7. If you end up with a reduced purchase amount after the prebuy, that doesn’t mean you can reduce your down payment by that amount. Most lenders require the lesser of loan to value OR loan to purchase amount.

    Competitive rates and terms. Custom financing options. Helpful and responsive reps. Three good reasons to turn to AOPA Finance when you are buying a turboprop or turbine airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (75263) or click here to request a quote.

    This article was originally published by AOPA Aviation Finance Company on February 4, 2019.