Like the rest of the global economy, the market for financing business jets is evolving. It is becoming more strictly controlled, more traditional, and more international. The banks, who are in a similar scenario, are infamous for preferring to lend money to those who don’t need it, and there are more of them than ever before in the business jet market today. Here is a method for finding the most excellent offer, however, if you’re seeking finance.
1. Find a Great Plane at the Best Price
Even those claiming to be “asset-based,” most airplane financing companies are “credit shops.” The capacity of their consumers to repay the loaned amount is their primary concern. Banks still want to ensure that you are spending less on the aircraft and that the value of their collateral will stay the same as the Titanic, so it doesn’t imply they disregard the plane entirely. You can get the help of companies like Stratos Jet Charters with this.
2. Pay Attention to the Timing
Financing for aircraft used sometimes to be set up quite immediately. Start the application procedure as soon as possible if you desire to fund. Before ever signing a letter of intent to acquire an aircraft, you may get a fair sense of financing prices and conditions by speaking with a general lender about the airplane type, model year, and expected acquisition cost.
3. Decide Who Will Purchase the Aircraft
When purchasing an aircraft may appear straightforward, but it is a complex matter. It is recommended that first-time buyers seek the guidance of aviation legal experts from the outset. The purchaser’s identification is crucial in determining the appropriate financial institution.
4. Decide on a Loan or a Lease
Most purchasers of airplanes will base their decision on the availability of tax incentives. A loan is the best choice if you can utilize the tax depreciation; otherwise, consider leasing, where you can still benefit from tax depreciation via reduced financing expenses. Request both ideas if you need clarification.
5. Select either Asset- Or Credit-based Financing
You will only have a few alternatives if you want your lender to prioritize the value of the aircraft above your creditworthiness; if you wish for non-recourse financing, your options will be much more constrained. A related question is whether you’ll require the most freedom possible when organizing the funding.
6. Think About Relationship-based Lending
The desire to provide so-called transaction-based loans—one-time financings with people the bank might not typically do business with—varies among aircraft financiers. In other words, unless you are one of those clients, you should probably look elsewhere if a bank focuses primarily or exclusively on aircraft financings for existing clients.
7. Solicit Proposals
After completing your research, you can request offers from different financial institutions. You should be able to explore potential aircraft financiers recommended by your purchase consultant. To obtain a comprehensive understanding of the financing options available, it is advisable to inquire about several key factors, including the duration of the loan, the recommended down payment, and the planned amortization.
8. Work Out a Deal
The crucial moment is now. At this point, ingenuity may go a long way, such as when negotiating to include a future option to switch to fixed rates as part of a low-cost floating-rate agreement. Remember that proposals are usually private; thus, avoid sending one lender’s proposal to another to obtain a better deal.
9. Make Your Selection
Don’t automatically assume that the lender with the most outstanding overall financial package is the one you should select. Though not the sole factor, it is a significant one.
10. Close the Deal
The aircraft, the underlying purchase agreement, you and your business, and your lender will all be the subject of due diligence by your lender. It can also call for a written evaluation. Verify that your aviation attorney has reviewed the finance documentation.
Bottom Line
You must complete the transaction before you may assume ownership of the aircraft. This often entails taking a few more procedures, registering the aircraft, obtaining insurance, and completing the required documentation.
Ensure your aviation attorney reviews the finance documents. Attorneys specializing in aviation transactions carry out these tasks frequently and more swiftly than expensive financial lawyers.
