aircraft financing

  • 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
    Citi Reiterates 'Cautious Optimism' for Bizjet Market see more

    NAFA member, Ford von Weise, Global Head of Aircraft Financing for Citi Private Bank, shares his thoughts on the current state of the business jet market.

    Ford von Weise, global head of aircraft financing for Citi Private Bank, termed the overall atmosphere last week at EBACE as “benign” during a conference call earlier this week hosted by Citi Research addressing the current state of the business jet market. Participants on the call were also cautious about macro factors and trade war risks that could negatively affect the certainty the market thrives on.

    “That said, there’s still some optimism behind that caution based on stabilized pricing/values and new products driving demand,” Citi Research aerospace analyst Jonathon Raviv said. “It’s also worth remembering that the market is in a better spot than it has been for several years, which could provide some cushion if macro weakens significantly.

    “In our view, business jets are showing signs of life, with legacy orders supporting stabilized or modestly higher legacy production rates. But we do sense some jitters…which in our view means [aircraft manufacturers] are still reticent to raise rates meaningfully.”

    Citi Research noted the business jet market relies on “aircraft need, liquidity, and confidence.” While it said the first two are currently in good shape, “confidence could falter, which could be coincident with aircraft need. Confidence is very important for the high-net-worth crowd, which our expert suggests comprises 50 percent of buyers. A sentiment swoon can freeze their purchase decision.”

    This article was originally published by Chad Trautvetter in AINonline on May 30, 2019.

  • Tracey Cheek posted an article
    What are the Aircraft Financing Trends in 2019? see more

    NAFA members Martin Ormon, President of Aircraft Finance Corporation, and Dave Labrozzi, Chief Operating Officer of Global Jet Capital, talk with freelance writer Rohit Jaggi about the condition of the aircraft financing market.

    What's the condition of the aircraft financing market? 

    Who is seeking aircraft financing in 2019, and how are they obtaining it? Have the financing trends changed - and what's the outlook going forwards? Rohit Jaggi gets insights from financiers Dave Labrozzi and Martin Ormon.

    Business jet sales tend to follow the money. And the US economy performed unexpectedly well in the early months of 2019. Yet Business Aviation growth is slowing, in the US and the rest of the world, and business jet sales are being hit by a number of factors.

    Sales of new and used jets saw an uptick in 2018 as US tax cuts and changes in the rules on accounting for airplanes took effect. Increasing demand and steadier prices for used jets also signalled the return of some big banks and financiers to the sector, after having their fingers burnt following the financial crisis of 2008.

    But does that mean financing private jets is becoming easier for buyers? And are specialist lenders being frozen out by competition from the big players? Two companies that play to their strengths in different parts of the business jet financing market illustrated the challenges.

    Dave Labrozzi is chief operating officer of Global Jet Capital, which focuses on aircraft aged 15 years and younger.  He says that the big finance corporations are focusing on their high-net-worth clients and the biggest corporate names, but their interest flags when it comes to complicated deals, or anything other than loans secured on the value of the aircraft.

    Martin Ormon, whose Aircraft Finance Corporation services a US market for older aircraft with loans of $1m to $7m, is more scathing. “[The big bank lenders] believe their model is the best model – and it puts a noose around the customer’s neck.

    “They still want to make it an asset-based loan. An aircraft is not an asset – it depreciates from the second you step in the door and fire the engines up. Far more so than an automobile.”

    Playing to Strengths

    Ormon’s niche is credit-based, 20-year loans that keep the cost of payments down and are based on the customer’s ability to pay. Offering the example of a customer for whom he refinanced a loan on a Bombardier Challenger 605, Ormon reveals the customer had been paying a bank $70k a month.

    “With us that became $29k a month,” he illustrates. “Who is going to default first? A guy with a $29k monthly payment, or a guy with a $70k monthly payment?”

    It’s also true that those who don’t really need to borrow can do so more easily. “The high-net-worth individuals we do business with can dig into their pockets for the $50m-$60m cost of a jet,” says Labrozzi.

    “But they don’t – they prefer to put their money into their business and get double-digit returns.” The leasing deals Global Jet Capital can put together allow them to do that and have a jet.

    What’s Different About Today’s Aircraft Financing Market?

    Labrozzi is confident that there is not too much froth in the market. That was part of what happened after the financial crisis where lenders were spooked by falling asset prices into calling in their loans.

    That helped produce a cycle of further price deterioration and an increasing number of repossessions. “I don’t see that perfect storm,” says Labrozzi. “What is different this time is that the major manufacturers are building significantly fewer airplanes.” And that should help maintain values.

    But another factor helps here: A shortage of high-quality used/pre-owned jets. “Low-hour, clean airplanes are hard to find,” Ormon notes. “In the pre-owned jet market the products are not as high-quality as they were just a couple of years ago. The really great airplanes are out there, but they’re hard to find.”

    Was the US Tax Cuts Impact on Aircraft Sales Limited?

    A natural question is whether the effects of the US tax cuts and accounting changes, signed into law at the end of 2017, have already fed through?

    “The tax law change did give the industry a shot in the arm,” says Labrozzi. But it wasn’t the benefit that many thought: “People bought a jet before the end of the tax year, but then found it was a lot more difficult to deploy the tax benefits.”

    As a result Global Jet Capital has done a lot of sale and leaseback deals, because, as a leasing specialist that turns over a lot of aircraft, it can utilise the full tax benefits. “The bottom line is that it’s helped our business,” Labrozzi says.

    According to Ormon the buying ability of his customers and potential customers has not been significantly dented.

    “These guys are buying Hawker 850 for $16k a month. They’re putting $400k down. Sure, you could pay first class for $16k a month, probably non-stop around the world, but that’s not their mentality. Our clients have the cashflow, they’ve got the cash, and that’s what they want to do.

    “So – with $200k a year in payments and another $700k a year to maintain the airplane and fly it (pilots and everything) – that’s less than $1m a year to own a Hawker.”

    Looking Ahead for Aircraft Financing

    Global Jet Capital’s Q1 2019 market briefing points to trade tensions and fears of market volatility, but sees demand for new business aircraft rising at the same time as a shortage of high-quality used jets impacts the number of used aircraft sales.

    Labrozzi expects a steady market over the next couple of years. His customers are responding to economic and trade uncertainty by putting the tools in place they need to do business (including private aircraft).

    He also believes that the sector is in a trade-up replacement cycle. “A lot of my customers are getting ready to take delivery of an airplane they ordered two years ago and it’s time to move their existing airplane,” he says.

    Moreover, some highly desirable airplanes (such as the Dassault Falcon 7X) were undervalued recently when there were a lot on the market. Now the market is absorbing them quickly, Labrozzi says – they are likely to be on the market for only an average of six months.

    Ormon paints a slightly different picture. “I’d say that lending is down 15%. The aircraft sales are there – there are a lot of people paying cash for $2m and $3m airplanes, because interest rates have been low for a while and companies have just received a tax cut. Companies are awash with cash that they are not necessarily putting back into the business.”

    So the number of deals Ormon is doing is down. “Our biggest year, 2017, was 56 deals, with an average value of about $3.2m,” he says. “Our 2018 average was $2.9m, and today we’re probably doing around 35-40 deals a year. I don’t see anything changing unless we have a major financial crisis. I think this is the new norm.

    “The outlook for my sort of financing is good,” Ormon concludes. “The Hawker 800 is becoming a thing of the past and now we’re getting [better-quality] Hawker 850s and 900s that are in that price range.”

    Labrozzi is also optimistic. “There’s always plenty of business to go around,” he concludes. “I just want to get my unfair share of it…”

    More information from www.aircraftbanker.com or www.globaljetcapital.com

    This article was originally published by freelance writer Rohit Jaggi in AvBuyer on June 5, 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
    Enhance Your Chances of Aircraft Financing see more

    NAFA member, Greg Holst, President of 1st Source Bank's Aircraft Financing Group, discusses what prospective borrower's should know when it comes aircraft financing in an interview with Matt Harris, Commissioning Editor with AvBuyer.

    There are some obvious points and some less obvious ones a prospective borrower should know with regard to getting aircraft financing. What are these, and what do they all have in common? We asked Greg Holst, President, 1st Source Bank’s Aircraft Financing group.

    When searching for a financier to provide a loan for your next aircraft purchase, the natural thing would be to scrutinize the lender – and rightly so… Often, though, prospective borrowers fail to check their own expectations and commitments, which can lead to disappointment.

    With this in mind, Greg Holst spoke with us to offer more insight into what a borrower can do to send the right signals to a finance provider.

    AvBuyer: What are the basics that a borrower can expect all creditors to be looking for before approving an application for financing?

    Holst: There are various items that allow the lender a basic understanding of the loan request, a background and credit check, and some indication of the financial capacity and trends of the borrower. These include the following:

    • The name, address and State of organization, along with the date of birth and tax ID of the borrowing entity and any guarantors;
    • Information on who the principals of the primary borrowing/operating entity are, with brief bios;
    • Three years of financial statements and tax returns for each borrower/guarantor; and
    • Some details on the aircraft you wish to purchase, its purpose, and any loan structure preferences.

    AvBuyer: Presumably the ‘basics’ differ slightly from one lender to another. Where can borrowers get the information that will enable them to approach a preferred lender prepared?

    Holst: The best place to get the specific items a lender will be seeking is to go to the lender’s website or, better yet, call them and ask by phone.

    Each borrower’s situation is different. A conversation with an aircraft loan officer can help you learn specifics needed to properly evaluate your unique situation without unnecessary document production.

    AvBuyer: Moving beyond the basics, what are some of the less well known items someone seeking aircraft financing could do to enhance their chances, and make a lender’s decision easier?

    Holst: Most folks prefer to keep the activity of borrowing money as simple as possible. Actually, most lenders have this same goal too.

    However, having a few added details on you or your business can greatly benefit the processing speed of your request and may improve the terms or rate for which you qualify. Some topics to address or share may include:

    • The history/background of your business.
    • A business forecast, information on recent expansions or new contracts.
    • Detail on any previous whole aircraft ownership, fractional ownership or charter experience.
    • Reviewed or audited financial statements.
    • A synopsis of the pedigree/maintenance history of aircraft being purchased.
    • A pre-buy inspection or independent appraisal.
    • Detail on whether the aircraft is a beneficial business tool – and if so, how? Will it be required to generate revenue of its own?

    Borrowers should also research which lenders are leading activity in the aircraft category they’re pursuing financing in. Reputable dealers and brokers should be able to offer at least a couple of names that are knowledgeable and consistent lenders, and will provide good service - not just in the good times, but year-in, year-out.

    The bottom line is to seek a relationship, not just a rate.

    AvBuyer: With the used aircraft market picking up at this time, presumably there are plenty of lenders looking for opportunities. How can a borrower distinguish one seeking to cherry-pick opportunities in an up-market, versus one they can build a relationship with? What are the tell-tale signs a borrower should look for?

    Holst: This is difficult to determine at best. In favorable times most lenders are aggressive and put their best foot forward.

    A phone call to multiple lenders may tell you little about who is who in this field. Your best resource, however, is a seasoned dealer or a reputable aircraft broker. They will know who was doing business when the markets were on their knees and which lenders consistently work with their clients through challenging business cycles.

    Borrowers who expect to be long-term aircraft owners should seek a relationship with a lender that carries them through their successes and their setbacks with a minimum of pain.

    Essentially, experience and transaction volume are strong positive indicators.

    While rate-driven lenders may be inclined to cherry-pick opportunities, a relationship lender should be there for the long-haul, even in a down-market when you may need to renew your loan, or finance an engine or an upgrade.

    In Summary

    It’s clear that a prospective borrower should be thinking not only about their immediate need for financing, but for the longer-term. A good business plan for buying and operating an aircraft will also include a forecast on when it may be necessary to sell the aircraft and upgrade into something more capable.

    You can use that plan to assess whether a potential lender could also help with your projected need for your next purchase beyond the current one.

    The more prepared and open you are with your lender as to your present and future needs, the higher the likelihood both you and your lender will be able to develop a mutually beneficial relationship that can keep both parties happy for many years to come.

    More information from www.1stsource.com/business/specialty-financing/specialty-financing/aircraft-and-helicopter

    This article was originally published by AvBuyer on June 4, 2018.


  • Tracey Cheek posted an article
    Financing: Which Aircraft are Most Likely to Qualify? see more

    NAFA member Vivek Kaushal, Chief Risk Officer with Global Jet Capital, discusses financing tips on ways to maximize your chances when selecting your next aircraft.

    Is the goal of getting financing for a used aircraft really so difficult in today’s Business Aviation marketplace? Global Jet Capital’s Vivek Kaushal discusses, offering tips on ways to maximize your chances when selecting your next aircraft…
     

    If you’re thinking about financing an aircraft, you’ve probably heard that it’s relatively easy to obtain funds for a new aircraft but that financing used jets is a thornier proposition.

    That’s mostly true, but even for a new aircraft, there is no guarantee of securing funding. It’s important to remember that not all new aircraft are created equal. Lenders will always wait for a new model to prove its performance and demonstrate some trading history before going ‘all-in’.

    Existing models with a solid installed base and performance history are usually acceptable, with a few exceptions.

    While it’s mostly true that financing for new aircraft can be more easily obtained than for used, within the used realm there’s significant variation in what lenders look for and what kinds of risk they’ll tolerate. Generally speaking, a used aircraft can indeed be trickier to finance.

    Some lenders, especially those that don’t specialize in aviation financing, won’t finance aircraft over five years old, while for others, ten years is the cut-off.

    These are largely arbitrary numbers, and experienced aviation lenders know that there are more important considerations than arithmetic based on model year.

    Useful or not, some banks rely on these simple weeding-out measures because they’re constrained by conservative credit risk policies or by a lack of knowledge. Neither is conducive to a holistic approach to used aircraft financing.

    Thus, if you’ve got your eye on a used aircraft that’s got a little more history between its wings than some lenders are comfortable with, don’t despair. Older aircraft can qualify for financing, but obtaining it would typically mean engaging a specialized aviation financing partner who can work with you and navigate some of the industry particulars.

    Following are three major factors that will make a difference as to whether a specific used aircraft qualifies for financing or not…
     

    1. A Robust Installed Base/Model Performance History

    The more performance history that’s available for an aircraft model, the better. Models that have been well-accepted in the market will almost always be more likely to qualify for financing.

    For each cabin class, some models demonstrate better-than-usual value retention. These will typically have been in production at a high volume and will boast a well-documented operational and financial track record.

    Models with short production runs and low trading volume may be viewed more cautiously as collateral for financing.

    Data on a model’s installed base and recent trading history (number of pre-owned aircraft on the market/average days to trade) is typically available on AMSTAT or JETNET.
     

    2. Fleet Average Usage Levels

    An aircraft is more likely to qualify for financing if it’s at or below fleet average usage for its make and model. Bluebook and other guides can provide this information, which is a key indicator of how much service life an aircraft has left.

    If the aircraft’s usage level is significantly higher than average, lenders may get concerned about the aircraft’s remaining useful life because of heavy usage. A heavily used aircraft will tend to sell more slowly.
     

    3. Airworthiness is Non-Negotiable - Maintenance Status Matters

    To qualify for financing, an aircraft must be in very good operational condition with no history of material damage. Damage to the aircraft will be assumed to affect its reliability and value, regardless of how comprehensive the repairs. All avionics have to be up to date, with no doubt over airworthiness. All technical upgrades must be in place as well.

    One major maintenance-related consideration that may affect a lender’s decision is whether the engine is cared for under a power-by-the-hour (PBH) program or not. Most lenders consider PBH programs to be a favorable approach to mitigate the risk of expensive engine repair costs.

    Another consideration is when the next major inspection is going to take place. An airframe inspection can be expensive and take a significant amount of time. A thorough review of the aircraft’s logs and maintenance history will help to flag such issues.
     

    The Real Issue With Used Aircraft Financing

    In a nutshell, the main obstacle to financing used aircraft is the complexity of the deals themselves. Some lenders struggle with the complex considerations that go into evaluating the risk of financing a used aircraft, especially if they don’t have robust aviation knowledge.

    Those that rely on a simple exclusionary process may rule out perfectly airworthy and viable aircraft in favor of preserving a cautious risk posture. All too often, a traditional lender will ask for other forms of collateral, such as significant amounts of assets under management which it has a right of set off, rather than rely on the value of the asset or the credit of the borrower’s business.

    Someone with domain knowledge can engage with the industry’s complexity and structure a transaction that works for the aircraft, even helping clients navigate the inspection process.

    As an example, Global Jet Capital was about to close on financing an operating lease for a ten-year old Bombardier Challenger 605 when a problem was identified with the aircraft’s APU requiring it to be sent to Honeywell for an estimated eight-week repair.

    A lender unfamiliar with aviation might have considered this a “red flag,” and its policies may have also precluded it from holding its financing commitment for that length of time, leading to an end to the deal and possibly a lost deposit if the right contingencies weren’t in place.

    Instead, our understanding of the space meant we understood the need for the repair and were able to work through the delay seamlessly. Once the overhauled APU was installed, the deal closed successfully.
     

    In Summary…

    So which jets are most likely to qualify for aircraft finance? A lot is possible when you find the right partner for your Business Aviation financing and understand what matters to lenders.

    Used aircraft continue to represent terrific value for savvy buyers. Keeping in mind the three major considerations relating to a used aircraft’s finance-worthiness, you should be able to find a used aircraft that suits your business goals and save yourself the disappointment of a rejection.

    More information from www.globaljetcapital.com

    This article was originally published in AvBuyer on May 4, 2018.

     

     

  • Tracey Cheek posted an article
    Financing: Which Aircraft are Most Likely to Qualify? see more

    NAFA member, Vivek Kaushal, Chief Risk Officer with Global Jet Capital, discusses the challenges of getting funding for used aircraft in today's market.

    Is the goal of getting financing for a used aircraft really so difficult in today’s Business Aviation marketplace? Global Jet Capital’s Vivek Kaushal discusses, offering tips on ways to maximize your chances when selecting your next aircraft…

    If you’re thinking about financing an aircraft, you’ve probably heard that it’s relatively easy to obtain funds for a new aircraft but that financing used jets is a thornier proposition.

    That’s mostly true, but even for a new aircraft, there is no guarantee of securing funding. It’s important to remember that not all new aircraft are created equal. Lenders will always wait for a new model to prove its performance and demonstrate some trading history before going ‘all-in’.

    Existing models with a solid installed base and performance history are usually acceptable, with a few exceptions.

    While it’s mostly true that financing for new aircraft can be more easily obtained than for used, within the used realm there’s significant variation in what lenders look for and what kinds of risk they’ll tolerate. Generally speaking, a used aircraft can indeed be trickier to finance.

    Some lenders, especially those that don’t specialize in aviation financing, won’t finance aircraft over five years old, while for others, ten years is the cut-off.

    These are largely arbitrary numbers, and experienced aviation lenders know that there are more important considerations than arithmetic based on model year.

    Useful or not, some banks rely on these simple weeding-out measures because they’re constrained by conservative credit risk policies or by a lack of knowledge. Neither is conducive to a holistic approach to used aircraft financing.

    Thus, if you’ve got your eye on a used aircraft that’s got a little more history between its wings than some lenders are comfortable with, don’t despair. Older aircraft can qualify for financing, but obtaining it would typically mean engaging a specialized aviation financing partner who can work with you and navigate some of the industry particulars.

    Following are three major factors that will make a difference as to whether a specific used aircraft qualifies for financing or not…
     

    1. A Robust Installed Base/Model Performance History

    The more performance history that’s available for an aircraft model, the better. Models that have been well-accepted in the market will almost always be more likely to qualify for financing.

    For each cabin class, some models demonstrate better-than-usual value retention. These will typically have been in production at a high volume and will boast a well-documented operational and financial track record.

    Models with short production runs and low trading volume may be viewed more cautiously as collateral for financing.

    Data on a model’s installed base and recent trading history (number of pre-owned aircraft on the market/average days to trade) is typically available on AMSTAT or JETNET.
     

    2. Fleet Average Usage Levels

    An aircraft is more likely to qualify for financing if it’s at or below fleet average usage for its make and model. Bluebook and other guides can provide this information, which is a key indicator of how much service life an aircraft has left.

    If the aircraft’s usage level is significantly higher than average, lenders may get concerned about the aircraft’s remaining useful life because of heavy usage. A heavily used aircraft will tend to sell more slowly.

     

    3. Airworthiness is Non-Negotiable - Maintenance Status Matters

    To qualify for financing, an aircraft must be in very good operational condition with no history of material damage. Damage to the aircraft will be assumed to affect its reliability and value, regardless of how comprehensive the repairs. All avionics have to be up to date, with no doubt over airworthiness. All technical upgrades must be in place as well.

    One major maintenance-related consideration that may affect a lender’s decision is whether the engine is cared for under a power-by-the-hour (PBH) program or not. Most lenders consider PBH programs to be a favorable approach to mitigate the risk of expensive engine repair costs.

    Another consideration is when the next major inspection is going to take place. An airframe inspection can be expensive and take a significant amount of time. A thorough review of the aircraft’s logs and maintenance history will help to flag such issues.
     

    The Real Issue With Used Aircraft Financing

    In a nutshell, the main obstacle to financing used aircraft is the complexity of the deals themselves. Some lenders struggle with the complex considerations that go into evaluating the risk of financing a used aircraft, especially if they don’t have robust aviation knowledge.

    Those that rely on a simple exclusionary process may rule out perfectly airworthy and viable aircraft in favor of preserving a cautious risk posture. All too often, a traditional lender will ask for other forms of collateral, such as significant amounts of assets under management which it has a right of set off, rather than rely on the value of the asset or the credit of the borrower’s business.

    Someone with domain knowledge can engage with the industry’s complexity and structure a transaction that works for the aircraft, even helping clients navigate the inspection process.

    As an example, Global Jet Capital was about to close on financing an operating lease for a ten-year old Bombardier Challenger 605 when a problem was identified with the aircraft’s APU requiring it to be sent to Honeywell for an estimated eight-week repair.

    A lender unfamiliar with aviation might have considered this a “red flag,” and its policies may have also precluded it from holding its financing commitment for that length of time, leading to an end to the deal and possibly a lost deposit if the right contingencies weren’t in place.

    Instead, our understanding of the space meant we understood the need for the repair and were able to work through the delay seamlessly. Once the overhauled APU was installed, the deal closed successfully.
     

    In Summary…

    So which jets are most likely to qualify for aircraft finance? A lot is possible when you find the right partner for your Business Aviation financing and understand what matters to lenders.

    Used aircraft continue to represent terrific value for savvy buyers. Keeping in mind the three major considerations relating to a used aircraft’s finance-worthiness, you should be able to find a used aircraft that suits your business goals and save yourself the disappointment of a rejection.

    This article was originally published by AvBuyer on May 4, 2018.

  • Tracey Cheek posted an article
    Top 5 Factors That Affect Your Aircraft Financing Loan Terms see more

    NAFA member Adam Meredith, President of AOPA Aviation Finance Company, explains the top 5 factors that affect your aircraft financing loan terms.

    When it’s time to secure financing for your aircraft purchase, the lender looks at more than just your income and credit history. When financing an aircraft, the aircraft itself determines some of the conditions of the financing. Here are the top factors that an aircraft financing company examines.

    Usage: A financing company wants to know you are buying the right airplane for your needs—not more than you need or can handle. The lender also wants to know how you will use your airplane (personal, business, or commercial). Buying a single-engine airplane for occasional short flights will net different terms than buying a workhorse airplane that will be flown 50 hours a month in all conditions for commercial purposes. An aircraft for personal use will get different terms than an aircraft to be used by a flight school or charter outfit (commercial). That’s because the more an airplane is used, the more it depreciates—there’s also more wear and tear on the airplane, especially with student pilots. The financial institution is your airplane’s co-owner, so it’s important to them that their asset retains its value.

    Age, make, and model: Generally, the older an airplane, the fewer the financing options. Age is much more limiting when buying a turbine airplane or piston twin and will affect your loan terms. Because turbine airplanes and piston twins depreciate more quickly than piston singles, the length of these loans is typically shorter, and more money down is typically required. When you have selected an airplane for purchase, the lender will examine the specs of the airplane and compare it to the value stated in one of two pricing digests, Vref or Aircraft Bluebook (similar to Kelley Blue Book for cars). In most cases, lenders will lend on the airplane’s purchase price or the pricing digest value, whichever is lower.

    The aircraft’s panel is an added factor. Avionics equipment drives value of existing airplanes more than ever before. A good airframe with vintage avionics is hard to sell and thus hard to finance. Preparing for the Automatic Dependent Surveillance-Broadcast Out mandate can be expensive. If the airplane being considered has not had updated avionics installed, its value is lower, and the lender must account for that. Engine time and condition has always been a key value, and still is, but the expense of avionics renewal is of equal importance now in establishing lending value. And avionics depreciate quickly in value so the updates must be recent. Values usually depreciate on new avionics to zero after three years.

    History: The more comprehensive information you can supply the lender about your airplane, the better your chances of securing good terms for your loan. For example, you need to know all the specs of your airplane, be able to supply photos, and show its maintenance history and damage history, if any. Being able to supply a well-documented, timely maintenance history will help you. If the seller is unable or unwilling to provide you with this history, that should be a red flag—reconsider your purchase. Also, many lenders will not lend on aircraft with certain types of damage history or incomplete logs, thus limiting your financing options.

    Down payment: When financing an aircraft, a down payment is required. Most common is a down payment ranging from 15 percent to 20 percent. If you have exceptional credit, you may be able to provide a 10-percent down payment. There are no zero-down payments in aviation. The higher the down payment, the longer term of the loan (if you so choose).

    Loan amount: Lenders are interested in loaning a minimum of $50,000 for an aircraft purchase. While there are options for borrowing less, the loan will usually require more down and shorter terms as well as a higher interest rate. Conversely, the higher the loan amount, the more options available and thus the lower your interest rate should be.

    AOPA Aviation Finance works with a group of lenders who are all a bit different to fit the various financing needs of members. Rather than working with a commercial bank with no knowledge or appreciation of airplanes, the team at AOPA Aviation Finance can help. 

    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 in AOPA Finance news on September 6, 2018.

  • Tracey Cheek posted an article
    Essex Aviation Private Aviation Case Study - Private Equity Investor - May 2018 see more

    NAFA Member, Essex Aviation has done a case study on how private aviation can meet the various travel needs of a private equity investor at different stages of his business development. 

    The Challenge

    When you run a finance company that specializes in capital solutions and financing for the energy industry, it’s crucial that you be able to meet face-to-face with clients, regardless of where they are in the world. That was the challenge one private equity investor encountered that motivated him to work with Essex Aviation. With his own clients spread out across the continental U.S. and Canada, often in remote locations with limited commercial airline options, it soon became clear to this client that flying commercial was an impractical solution.

    After a friend recommended Essex Aviation’s aircraft acquisition and advisory services, the client began to work closely with Lee Rohde and Thomas Mitchell of Essex to determine which service best suited his travel needs. When asked about the most important factors driving his decision, the client cited cost, quality of service and quality of aircraft, but listed time as his chief concern. At the time, the client was preparing to sell his company and found that the amount of hours he spent flying fluctuated significantly from year to year. Based on this information, Essex helped the client come to the conclusion that charter services would most closely meet his aviation needs.

    The client, as well as his assistant, mentioned that they were particularly impressed by Rohde’s honesty.

    “[Lee] could have pushed us toward fractional service or toward signing an agreement, but he never did that,” said the client’s assistant. “He encouraged us to go for the charter because it made the most sense. It left us with a good feeling, which is why we went back to [Essex] time and time again.”

    After a few years of chartering, the client’s needs changed once again. Between founding a new business, moving to a new location with inconsistent airport service and sending one of his children to school out of state, the client found that he regularly exceeded his 50-hour charter cards. It became clear to the client that it was time to go back to the drawing board — and back to Essex for further assistance.

    The Solution

    With the help of Essex, the client realized that the recent tax reform bill would enable him to depreciate a significant portion of the cost of a private plane during the first year of ownership (depending upon its utilization), making it more financially practical to acquire a plane than continue to use charter, fractional or regional services. According to the client, Essex’s team of experts walked him through every step of the acquisition process by providing accurate cost assessments, building operating cost models, helping him choose the right aircraft model, helping him hire the right lawyers and accountants, and leveraging their connections in the manufacturing industry to negotiate a very competitive price for the aircraft.

    “I don’t know how I would have bought this thing without these guys,” said the client. “It would have been ridiculously hard because in the normal course of business you don’t run across these things. Lee and Tom have very detailed experience and knowledge to fall back on, and they’re really good at listening to you and making recommendations based on that.”

    The client noted that Essex continued to go the extra mile long after the acquisition was complete by overseeing post-delivery aircraft renovations, helping him identify potential charter clients, and even offering to help train the client’s new assistant when his current assistant goes on maternity leave.

    “Lee is my best friend,” joked the client’s assistant, adding that the entire Essex team is always available and has made a concerted effort to foster an excellent working relationship over the years.

    When asked what stood out to him the most about his experience with Essex Aviation, the client said that throughout the acquisition process, “they treated it like it was their own plane. Any time they say, ‘We can get it done,’ I feel good about it.”

    The Aircraft

    Prior to the acquisition, the client was already familiar with the Bombardier Challenger 300 and 350, having used both during his years of charter and fractional service. The client originally intended to acquire a Challenger 350 but, also looked at the Challenger 650 and decided to head in a that direction.

    The client was impressed by the Challenger 650’s spacious additional cabin volume and recognized its value on the chartering market for potential third-party charters. The client also considered the Gulfstream G280 but ultimately settled on the Bombardier Challenger 650. Once the client had made his decision, Essex Aviation stepped in to handle the purchase of the new white-tail  aircraft  from  Bombardier closing on the aircraft in just a few weeks.

    The Essex team provided comprehensive representation for the client throughout the acquisition process. Essex helped the client evaluate the various aircraft options to determine which one most closely met his defined mission, arranged trips for demonstrations and to view available aircraft, negotiated the Letter of Intent and Purchase Agreements, and provided on-site management for final review, acceptance and closing on the aircraft.

    Essex continued to provide support post-delivery, guiding the client and his assistant through post-delivery work on the aircraft, including exterior paint striping and XM Weather and 4G internet system installations at Bombardier’s Wichita (Kansas) Service Centre. The aircraft is managed by Meridian Jet and will be placed on the company’s Part 135 charter certificate; Essex will continue to assist the client by helping him identify potential charter clients and providing on-going review of the management statements.

    To download the full case study click here: Essex Case Study

    This private aviation case study was published by Essex Aviation in May 2018.

     

  • Tracey Cheek posted an article
    Making business aviation work for your organization see more

    NAFA member, Alex Overstrom, Head of PNC Aviation Finance, writes about the impact business aviation has on your organization.

    World’s Top Companies Use Business Aviation

    A recently released study of U.S. corporations found overwhelming evidence of the ubiquity of business aviation at America’s leading firms. The study, undertaken by NEXA Advisors, looked at top corporations across a variety of dimensions, including innovation, customer service, brand value, corporate citizenship and financial performance, and found that in each case more than 90% of the firms recognized for excellence in these areas utilized corporate aviation assets.

    • 92% of the Forbes’ 50 Most Innovative Companies use Corporate Aviation
    • 95% of Fortune’s 100 Best Places to Work use Corporate Aviation
    • 97% of Zagby’s 50 Best Customer Service Organizations use Corporate Aviation
    • 92% of Interbrand’s 50 Best Brands use Corporate Aviation
    • 98% of Fortune’s 50 Most Admired use Corporate Aviation
    • 95% of Forbes’ 50 Top Performing Global Companies use Corporate Aviation
    • 100% of Forbes’ 100 Most Trustworthy Companies use Corporate Aviation
    • 92% of The CRO’s 100 Best Corporate Citizens use Corporate Aviation

    A True Performance Enhancer

    In addition, NEXA compared the performance of S&P 500 firms using business aircraft against those that do not, and found that between 2012 and 2016:

    • Firms utilizing business aircraft grew enterprise value 70% more than non-users
    • Firms utilizing business aircraft grew revenue 2.4x faster than non-users
    • Firms utilizing business aircraft had average ROEs 1.6x higher than non-users

    In summary, the study confirmed what we have long known: business aircraft are essential tools for driving productivity and performance, and are used by nearly every leading company in the United States.

    What’s more, the value that these aircraft can deliver extends far beyond the largest U.S. firms, and can enhance how companies of all sizes and in all industries effectively compete in the marketplace.

    In particular, business aircraft allow organizations to better leverage what is almost always their most important assets: their people. They do this by saving employee time and creating productive environments in transit, two things that are nearly impossible leveraging other forms of transportation.

    Making Business Aviation Work for Your Organization

    The good news is that transitioning from using commercial aviation to owning a business aircraft is becoming increasingly easy, in large part thanks to attractive market prices for aircraft and a wide range of available financing options.

    Indeed, buyers today can acquire an aircraft and obtain up to 100% financing on the purchase price, allowing them to continue to direct their investment dollars towards their businesses. Moreover, that financing can be structured to the needs of a buyer, with the potential for:

    • Traditional loans and leases up to 100% of the value of the aircraft
    • On balance sheet or off balance sheet treatment
    • Non-recourse or limited recourse loans up to 80% of the value of the aircraft

    And financing can be provided on new or pre-owned aircraft, giving buyers maximum flexibility.

    There has never been a better time or reason to own and finance a business aircraft. Let us help you find the solution you need.

    This article was originally published by PNC Aviation Finance.

     

  • Tracey Cheek posted an article
    3 Ways to Finance your own Corporate or Personal Aircraft see more

    NAFA member Keith Hayes, with PNC Aviation Finance, shares ways to finance your own corporate or personal aircraft.

    Corporate and personal aviation has returned, after being grounded, or at least stalled, in the wake of the Great Recession. Rising financial markets, growing corporate earnings, a strong U.S. dollar, and increasing consumer and business confidence are driving demand for private aircraft. Faced with crowded airports, jammed-packed commercial aircraft, and ever-present delays, high-net worth individuals and corporate executives alike are increasingly turning to private aviation to relieve the time constraints and delays of commercial flying and to take advantage of the myriad of smaller airfields located closer to their final destinations.  Before ringing the airplane broker and kicking the tires, consider these financing options:

    Traditional Loans

    No different than your smaller purchases – like houses, cars and boats – your traditional aircraft loan can be fixed rate or floating rate. Some financial institutions offer a hybrid which features a floating rate loan with the option to buy a “swap.” In other words, you can lock in your rate and benefit from early payoff and interest rate increases. Not a bad idea in a rising rate environment. Traditional loans can be structured for as short as 30 months or as long as 120 months with amortizations as long as 240 months. Just keep in mind, the longer the terms, the higher the interest rate.

    Asset Based Loans

    Over the last fifteen years, this type of financing has become an increasingly popular option for individuals and businesses seeking aircraft ownership without making financial disclosures or guarantees. Only a select number of organizations offer this product, but it has a number of benefits, including:

    • No financial disclosure or covenants – Truly hassle-free asset based financing.  No need to forward years of tax returns and K-1’s or to disclose financials of a privately owned company.
    • No or limited personal guaranties – This may be very important for companies that have bonding requirements or covenants limiting the amount of debt or guaranties than a company may incur. There may be partners involved in the ownership and the owners may be unwilling to sign on the other partner’s debt.
    • Non-recourse – If the borrower defaults, the lender can seize the plane, but cannot seek out the borrower for any further compensation.

    Aircraft Leases

    As with other types of large equipment, businesses as well as individuals may elect to lease an aircraft as an alternative to purchasing.  An individual or business may have multiple reasons to lease instead of purchase, including cash flow considerations, federal income tax considerations, sales tax considerations and accounting treatment. There are several types of leases with the choice often determined by how the aircraft will be used:

    • Non Tax Lease – The lessee (the bank or other entity granting the lease) owns the asset for tax purposes. Typically, this option is put in place for off-balance sheet treatment. The lessor will use the aircraft only for business and has an “appetite” for tax depreciation, therefore, can take advantage of the tax benefits.
    • Tax Lease – The lessor owns the asset for tax purposes, realizing the tax benefits such as the depreciation of the aircraft. Because the lessor takes the tax benefit, the lessee is typically offered a more favorable interest rate.

    Where do you start the journey to find a lender? Often, borrowers start their financing search where they have an existing banking relationship. However, that may not always be your best financial option.

    General aviation industry knowledge should be a critical criteria for your lender. For example, does your lender have expertise with the FAA requirements? Are they aware of new regulations on the horizon that could impact your purchase? Does your lender have an established specialty in aircraft financing or only do an aircraft loan every once in a while at the request of a marquee customer? Is the lender credentialed with key trade associations like the National Business Aviation Association (NBAA), National Aircraft Resale Association (NARA), or and National Aircraft Finance Association (NAFA)? If you don’t know, aircraft brokers and dealers, aviation attorneys and aircraft managers are a good source for referrals and recommendations.

    This article was published by PNC Aviation Finance.

     

  • Tracey Cheek posted an article
    It's common for people to misunderstand the differences between co-ownership vs fractional ownership see more

    NAFA member, Adam Meredith with AOPA Aviation Finance shares the differences between co-ownership and fractional ownership. 

    CO-OWNERSHIP

    Co-ownership is frequently what people mean when asking about fractional ownership.  If you are looking to purchase an aircraft with multiple partners, this is more commonly regarded as a partnership loan. The good news here is that there’s a lot more financing options. Lenders are comfortable financing partnerships with up to four members using standard loan structures amortized up to 20 years. Beyond four members, lenders will typically only find comfort if the partnership is operating as a flying club. We have plenty of flying club options as well, however, those typically require a larger down payment and a shorter amortization.

    FRACTIONAL OWNERSHIP 

    Fractional ownership, where there’s a fractional management provider like NetJets or Planesense and the company flies and maintains your “share” of the aircraft, have very limited financing options. The reason for this is that lenders are rarely able to fully secure their collateral interest in these loans. Also, making things challenging is they must assess both your personal financial situation as well as the financial health of the fractional operator. 

    For the strongest fractional providers there are some options, however, financing is limited and you can expect terms of no more than five years. As an aside, if you anticipate flying more than 25 hours annually, fractional ownership can be a very cost-effective way to gain access to larger aircraft…just don’t expect to be able to fly the plane!

    This article was originally published by AOPA Aviation Finance Company on September 6, 2018.