Financing a Private Jet
Financing a Private Jet Aircraft
Are you planning to finance your aircraft purchase?
TPJC can help you!
We have formed partnerships with the leading aircraft lenders in the world to assist our clients with financing options. Additionally, we have relationships with independent finance brokers that can assist in securing complicated or challenging offshore structures to fit all clients’ needs. Call us to find out more.
Financing a private jet aircraft purchase is a relatively straight-forward process and at the current very low interest rates in late 2019, financing may be a very savvy acquisition strategy.
Aircraft lenders typically evaluate more than just the aircraft buyer’s income and credit history. The following factors may also be taken into account:
- Aircraft age
- Material condition of the aircraft
- Equipment status
- Maintenance status
- Damage history if any
- Intended usage will also determine which institutions will consider financing the acquisition and under what terms.
Generally, the older the aircraft and the higher the forecasted annual usage, especially if the aircraft is acquired for chartering, the fewer the financing options.
Aircraft finance interest rates and terms will vary depending upon the aircraft model, date of manufacture, intended use (personal or charter) and the overall condition of the aircraft.
A down payment ranging from 20% to 30% (and potentially as high as 50%) is typically required. The down payment will affect the interest rate, payment and amortization schedule.
In late 2019 available loan terms are 5, 7, or 10 years. The loan amortization can be as short as 8 years or as long as 25 years, but is typically 10 – 12 years.
Banks vs. Independent Aircraft Loan Brokers
There are a number of large banks with dedicated aircraft finance teams. If the buyer has an established banking relationship with a specific the banks with a specific bank with an aircraft finance team, that will always be the best source to consider first for financing.
Independent aircraft loan brokers are also well established and can be a valuable resource for sourcing aircraft financing for buyers whose credit profile, target aircraft or intended aircraft usage falls outside the underwriting criteria of the traditional bank lenders.
Aircraft loan brokers typically have many lending alternatives ranging from smaller regional banks to private equity lenders. This enables them to work with borrowers and understand their requirements and terms that meet the borrower’s objectives.
Traditional Credit Based Financing vs Asset Based Financing
There are many credit-based aircraft loan options available. Finding the best loan option that matches the borrower’s circumstances and needs is the key to a capital efficient financing structure of any aircraft acquisition.
These are some of the most frequent questions when investigating financing options:
- What is the monthly loan payment budget for the particular purchase?
- How many years will the aircraft be utilized?
- What kind of down payment is going to be made?
A fully amortized, fixed rate loan with the longest possible term might be ideal for buyers intending to own an aircraft for a decade or more.
A balloon loan with an amortization period longer than the actual loan term might be ideal for a buyer looking for the lowest loan rate or for a shorter loan term designed to match a charter lease term.
Floating or adjustable rate finance terms might be ideal for other buyers.
Certain financial institutions will also consider Asset-Based financing. This non-recourse loan, requiring no financial disclosure and no personal or corporate guaranty finance option may be ideal for an aircraft owner seeking to refinance an aircraft.
For Asset-Based financing the borrower typically provides the lender with security interest in the borrower’s interest in the financed asset.