While a good appraiser will inspect the aircraft and examine the log books and
maintenance history of the aircraft, an appraisal is typically not as thorough as a
comprehensive inspection... (read more)
How long does it take to get an aircraft loan approved and
closed? Lenders will vary, but one to three days is fairly routine. Many
offer same-day approval and next business day closing... (read more)
A loan is money and money is personal, and the bigger the dollar amount and the
bigger the collateral, the bigger the opportunity for shouting and fistfights at
the closing. Here’s five tips to keep your aircraft loan closing free of both...
The first time buyer is more likely to get burned because they fall in love with
the first thing they see. Keep your emotions in check, at least until you get back
the pre-purchase inspection report... (read
Aircraft Loans - The ABC’s of Aircraft Financing
© Copyright D. Alan Carter
All Rights Reserved
If your bank holds the note for the roof over your head, you’ve already received the hard-knocks education in
financing that will serve you well when financing a private aircraft. The financing of a home and a private
airplane share a number of characteristics, not the least of which is a case of the cold sweats that inevitably
breaks out at the closing, around the time a signature is required on a promissory note in the 6 digits.
Here’s the ABC’s, a quick summary of the most common steps, procedures and requirements
in airplane financing.
Aircraft Financing ABC’s - Get Pre-Qualified
While not exactly a requirement, we mention pre-qualification as the first step in securing an aircraft
loan because it makes sense. Shopping for an aircraft is time consuming; more so when you've finally narrowed
the field down to one particular aircraft only to discover that you don't qualify for the necessary financing. Shop
the lending field and get pre-approval first. Many aircraft lenders can handle the matter over the phone or online
– and you're under no obligation to use the aircraft loan until (or if) you decide to formally apply.
At the very least, with pre-qualification you know your purchasing ceiling and you've made a contact that should
facilitate processing the eventual aircraft financing.
Find Your Airplane And Make A Deposit
Just like a home purchase, when you find the aircraft you're comfortable with and that airplane is within
your pre-qualification ceiling, you'll want that plane taken off the market. Do this with a purchase agreement and
deposit. The agreement should be conditional upon the aircraft passing a pre-purchase inspection and you – the
buyer – securing financing (you can be fairly certain on that last point, given pre-qualification, but it's wise to
leave it in as a contingency). The purchase agreement and deposit effectively keeps the aircraft from being sold
out from underneath you while you make arrangement for financing, and obligates you to the purchase so long as
everything about the aircraft is as represented.
Some buyers like to add a contingency clause specifying that the aircraft appraisal, should one be requested,
meet or exceed the purchase price. This assures that the buyer is paying no more for the plane than it is
objectively determined to be worth.
Given the price of aircraft, deposits can be significant. Make sure your deposit is refundable if the plane
doesn't meet the inspection criteria, or you don't meet the financing criteria. An escrow service makes sense if
you don't know the seller. The escrow agent may be the title company or the attorney hired to handle the closing,
or someone else entirely. Regardless, make sure you know the fee they charge. And in today's climate
of sudden failures of financial institutions, make sure their services are insured by the FDIC.
Get A Pre-Purchase Inspection
Insist on a pre-purchase inspection of your airplane as a contingency of the purchase agreement. I know what
you're thinking: unless the aircraft is spanking new, the lender (especially traditional financial institutions
like banks) will likely require an appraisal. So why bother with an inspection? Why spend the extra money? You
bother with the inspection, you spend the extra money, because the lender is only concerned with the value
of the aircraft. You, on the other hand, are concerned with value and safety. A good mechanic working on
your behalf (and not the lender's), can provide some peace of mind - at the closing and beyond. Here's further
advice on the Aircraft Inspection.
Apply For Aircraft Financing
This is the sit-down (or telephone, or online) meeting with the lender who will be doing the aircraft
financing. As the borrower, you'll be required to submit personal financial information. If the purchasing
entity is a corporation or LLC, you'll be required to provide copies of organizational documents. You should
receive from the lender an itemized list of anticipated costs associated with the aircraft loan
process . See Top 10 Q&A for Aircraft Loans for more details on loan rates and terms and
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