• Aviation financing isn’t like financing a car because for one thing; most lenders don’t understand aircraft, whereas just about any lender is happy to lend money on a car – that’s because most lenders just don’t understand aircraft.

• It’s always best to engage an aviation finance expert to help find the best aviation finance package for you; in the same way you would engage an expert aviation insurance broker to help you obtain the most suitable aviation insurance coverage.

• The first thing you and/or your finance broker will have to do is work out what type of finance structure best suits your needs – hire purchase – a commercial lease – or an interest only loan – it all depends on what you’re planning to do with the aircraft, for instance:-

• If you’re planning to cross-hire the aircraft for a rental return and; from time-to-time use it for business purposes, then it’s pretty obvious that you’ll be looking for a finance structure to support the commercial uses & applications in a way that best delivers you tax and accounting advantages. ‘probably a commercial lease’ would be best.


• If however you’re purchasing the aircraft purely for private use, then you could look at a hire purchase arrangement which will usually require you to pay a substantial deposit (up to 25%) in order to secure finance for the balance. Generally, these loans are taken over a five (5) year period.


• If you’re looking to purchase an aircraft to fulfil a commercial contract ie; for a 12 month period, then you might consider an ‘interest only’ loan which lets you keep the payments to a minimum during the period of the contract at which time you might expect to sell the aircraft and use the proceeds to repay the original sum borrowed.


• You can even borrow money:-
  • for purchasing aircraft engines and parts;
  
  
  • to pay for a substantial rebuild or upgrade of an aircraft;
  
  
  • to meet the costs of major aircraft maintenance;
  
  
  • to pay your aviation insurance premium.

• Once you’ve established the best finance structure to suit your needs, you’ll have to work your way through the lenders to sort out which lenders really are in the business of providing aviation finance, and those who just play on the sidelines.

• The aviation lenders will usually always offer the best aircraft finance packages at the lowest interest rates; and on the most flexible terms – you don’t want to have to mortgage your house, to borrow money to buy an aircraft.

• Applying for aircraft finance – it’s like applying for an ordinary car loan however, lenders are always a bit more concerned about lending money on aircraft because for one thing values are not always certain; and there are only a limited number of buyers for a repossessed aircraft if that were to occur, whereas there are many, many more buyers of cars thus, a lender can quickly dispose of a car and recover their outstanding loan but, it’s not that easy with an aircraft. Additionally, aircraft can be difficult to track down and recover should it become necessary to do so because, let’s face it aircraft can be flown away and left anywhere; hidden in a hangar for instance. Sadly, this is not uncommon.

• In other circumstances, aircraft might not have been maintained properly thus, if an aircraft has to be repossessed then, without the correct compliance with AD’s and ordinary maintenance requirements, the aircraft’s value could have dropped considerably, leaving the lender exposed to a substantial loss.

• Pre-purchase finance approval – in some cases it’s a good idea to find out what your borrowing power is before you set out on the quest of finding your ideal aircraft. Indeed, depending on circumstances it might prove impossible or financially prohibitive to obtain finance for a certain make and model of an aircraft.

• For instance, some aircraft have poor re-sale values or other such things which cause lenders to shy away from them – better to know now rather than later. Indeed, any expert aircraft finance broker worth their salt ought to be able to obtain conditional pre-purchase aircraft finance for you. That way, you can put a deposit on an aircraft to secure it in the knowledge that obtaining the finance won’t be a problem.

• What should an aircraft finance broker do for you – the job of an aviation finance broker is simply to arrange the best and most suitable aircraft finance package for your requirements; including pre-purchase finance approval as mentioned above.

• They should have a track record in successfully arranging aircraft finance and be knowledgeable of aviation, or at least GA if that’s where your flying is at, You will find many aircraft finance brokers that are pilots and aircraft owners themselves giving them some real inside understanding of what you will need.

• Ask for references from previous clients; also ask for details of any professional associations they belong to so you can be assured of their industry standing. It’s good idea to find out if they have Professional Indemnity insurance as well, because if they haven’t they’re not taking the job seriously – you need that added protection if they get it wrong and you suffer as a result of their incompetence.

• An expert aircraft finance broker should take time to listen to your needs; not just send you a form and tell you to fill it out and send it back. They should offer you advice and they should be able to state clearly their reasons for giving you that advice. Your aircraft finance broker ought to be able to manage the whole aircraft finance process for you including processing your application quickly and efficiently so you’re are not left in a holding pattern – right through to making the final payment and completing the final paper work.

• Buying an aircraft from overseas - if you're buying an aircraft from overseas an expert aircraft finance broker should also be able to arrange finance in a foreign currency for you; usually always the US dollar ‘USD$’ – often this service will be linked to an Import/Trade aircraft finance agreement ie. ‘Letter of Credit’

• Depending on the jurisdiction where the aircraft is located and the methods for it’s relocation to you, will dictate the type of finance structure required – it will also impact on the insurance factors, which will also include ‘transit insurance’ if being shipped out or – ‘’aircraft ferrying insurance’ if the aircraft is to be ferry flown to you.

• Note: Aircraft Online is sponsored by Civil Aviation Insurance, ‘CAI’ Australia’s leading aviation insurance brokerage. That’s why use of this site is free. But, did you know CAI can also assist you with arranging aviation finance? – they’re expert aircraft finance brokers.
  To find out more about Civil Aviation Insurance – Aircraft Finance Services please click here.
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