Aircraft financing??

N2124v

N2124v

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N2124V
Anyone one have a recommendation for aircraft financing that deal with non typical situations? I'm a 1099 employee, plus have my own business. My usual banker just does not like airplanes.
 
Well, if I had the cash, I wouldn't be asking question.... :)
 
If you have areas able record of earnings, and a decent down payment so there's a good loan-to-value ratio, you should be fine. With which banks have you engaged?
 
I recently made a casual inquiry at my local "regional" bank that I use for both my personal and buisness activity about if they would do an aircraft loan. Turned out the guy in charge of loans for all of the branches was there and I got a chance to talk to the main decision maker.

A quick summation was that he was interested but a bit out of touch of of the deals like AOPA/BoA and other major aircraft finance sources would do. But when I shared what I knew (higher valued aircraft are eligible for longer periods and that I would only do financing with a bigger down payment) he responded that he would entertain making a competitive offer.

So the smaller local banks might have some interest in the deal (pun intended), but be ready to educate and shop a bit. Also seek out the bank and loan officer that will employ actual manual underwriting methods (aka actual review our situation and make the real judgement on if you are a good risk) versus just plugging in numbers to a computer program and interpreting a "score".

As always with debt, do your due diligence of soul searching to determine if you should really be doing debt and you really have the eventual where with all and stability to dispose of the debt in short order. Like automobiles, paid off airplanes can never be repoed and fly better when your banker isn't sitting in the back seat.

And plan on enough of a liquid cash reserve so that if life hands you a bunch of bad lemons, the note and fixed costs of ownership don't pull you over the edge of the cliff. Remember the lessons of 2006-2008 and the sub-prime where many got into more house than they needed or could afford with no reserves when things went bad and one of the wage earners lost their big income. Don't be doomed to repeat it.
 
AggieMike88 said:
I recently made a casual inquiry at my local "regional" bank that I use for both my personal and buisness activity about if they would do an aircraft loan. Turned out the guy in charge of loans for all of the branches was there and I got a chance to talk to the main decision maker.

A quick summation was that he was interested but a bit out of touch of of the deals like AOPA/BoA and other major aircraft finance sources would do. But when I shared what I knew (higher valued aircraft are eligible for longer periods and that I would only do financing with a bigger down payment) he responded that he would entertain making a competitive offer.

So the smaller local banks might have some interest in the deal (pun intended), but be ready to educate and shop a bit. Also seek out the bank and loan officer that will employ actual manual underwriting methods (aka actual review our situation and make the real judgement on if you are a good risk) versus just plugging in numbers to a computer program and interpreting a "score".

As always with debt, do your due diligence of soul searching to determine if you should really be doing debt and you really have the eventual where with all and stability to dispose of the debt in short order. Like automobiles, paid off airplanes can never be repoed and fly better when your banker isn't sitting in the back seat.

And plan on enough of a liquid cash reserve so that if life hands you a bunch of bad lemons, the note and fixed costs of ownership don't pull you over the edge of the cliff. Remember the lessons of 2006-2008 and the sub-prime where many got into more house than they needed or could afford with no reserves when things went bad and one of the wage earners lost their big income. Don't be doomed to repeat it.
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This is what I found, the local banker here was seemingly excited to do something new. I needed a loan to bridge the gap until my Cherokee sold, he was interested and willing.
 
in 2008-2009 banks learned a painful lesson about financing airplanes, and some are still suffering the out-fall. A local banker confided that his entire loan portfolio is still under water, but the owners are servicing the debt and the bank is ahead by continuing to carry the notes rather than call them and take possession of the planes. The examiners have required him to write off or classify all of the aircraft loans, but he's keeping the ones that are paying regularly.

I did a number of appraisals for lenders after the crash, and was astounded by some of the decreases in value. One bank had loaned more than 2 mil on a very nice Gulfstream that appraised for $600k. The ultimate sales price was ~equal to the value of the remaining life of the engines. A late-model G-III that appraised for $2.7 mil in 2007 sold for less than $1 mil in 2009, again the approximate value of remaining engine time.
 
My usual banker will do a loan, just his terms aren't great and the monthly carrying cost is higher than I am comfortable with (5yrs, 6%, 2%down), which isn't a bad monthly payment, but didn't leave a lot of wiggle room. I'd rather have a longer term and lower monthly debt service that I can throw chunks at. I talked with Airfleet Capital and their minimum loan amount is $50k. I've got 20% down up to about $65k, but really don't want to go that high because the bank requires it. FYI, I'm looking for a C182.
 
Do you need the place for revenue generating purposes, eg have a mission for it that makes you more money than the payment will be? If not, you are best not to finance. That said, The Bank of The Great Satan aka BoA ( which began as Bank of Italy in SF) used to do considerable small plane financing, but I don't know anymore. I used to repo for them and they had stupid high notes out there on C-150s.
 
5years is what the guy I spoke with said too. But I sorta learned that his view was more akin to a higher valued luxury car than a more durable asset. He wasn't aware that all the depreciation was already done and there wasn't that much risk of a major value loss over a longer time.

I sota remember an AOPA webinar about ownership that occurred earlier this year and them having one of their BoA contacts speaking for a few minutes. It might even be available for watching the recorded version. What she said is that there are loan programs that could have terms of up to 10 years if not longer.

As with anything, get a good education about how this aspect works before you pull any triggers, then shop the lending institutions to find the right deal for you.



A question to those who act as buyer representatives (like Wayne). Can providing assistance in finding in what were discussions be part of the services you offer? Or could that create a potential conflict of interest situation?
 
Maybe someone more knowledgable can comment, but my concern would be a major repair like an engine coming up while I was still paying the note. In the past those kinds of things could be financed and added to the loan, now I don't know?

I also am not a believer in financing an aircraft for pleasure use, but to each their own.
 
I can't see how I could provide any value in this area.

Borrowers should understand that the bank is making a credit judgement more than a a collateral judgement on airplane loans. They leared a few years ago that a 20% down payment isn't nearly enough when the the market craters, so even though they want the airplane as collateral they're still looking at your ability to service the debt as the big question they must answer.

My advice is to be sure you're dealing directly with the lender rather than with one of the fronting companies who claim to be airplane lenders but are instead only in the loan origination business and place all of their loans with third-partiy lenders. Numerous buyers have been promised a loan at very attractive rates and terms, only to find that the financing wasn't there after they had committed to the purchase and spent a bunch of money on inspections, non-refundable deposits and the like. The prior owner of Dave's King Air can tell you all about those deals. Oops.

AggieMike88 said:
A question to those who act as buyer representatives (like Wayne). Can providing assistance in finding in what were discussions be part of the services you offer? Or could that create a potential conflict of interest situation?
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It's a valid concern. Both the owner and the bank are in a pickle when it happens. The bank can't loan any more moeny without violating loan-to-value formula, and the guy's airplane isn't worth jack if it's not flyable and he doesn't have the whip-out to buy a new engine without borrowing the money to do so.

Alexb2000 said:
Maybe someone more knowledgable can comment, but my concern would be a major repair like an engine coming up while I was still paying the note. In the past those kinds of things could be financed and added to the loan, now I don't know?

I also am not a believer in financing an aircraft for pleasure use, but to each their own.
Click to expand...
 
Guys, I'm looking for a recommendation on a bank to do some financing with, not a philosophical debate on debt.
 
Thank you Wayne. Interesting info and insight.
 
Well, in that case it appears that you may have come to the wrong place. :wink2:
N2124v said:
Guys, I'm looking for a recommendation on a bank to do some financing with, not a philosophical debate on debt.
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N2124v said:
Guys, I'm looking for a recommendation on a bank to do some financing with, not a philosophical debate on debt.
Click to expand...

Wonder why I PMed you :D

The guy I know, will probably be comparable to your banker. Try these.

http://www.1st-of-pryor.com/
or here
http://airloan.com/

There's a bank near Tulsa, but i hear their rates are ~8%

Walk into a Wells Fargo branch, they do em'

I talked to the VP of US Bank for our area (he's one of our customers) he just loaned out some serious cheese for a heli and said they do plane loans too.
 
Did I miss it or have you checked with the AOPA loan section?

I called last week to get idea with my new purchase. For $100,000 loan on 2002 turbo 182 I was told 5.35% for either 15 or 20 year am. the aircraft had to be younger than 20 years old though.

My own bank was aggressive and got me good quote, I would be happy to share with you if you would like. I'm sure it helped that I use them for everything.
 
N2124v said:
Guys, I'm looking for a recommendation on a bank to do some financing with, not a philosophical debate on debt.
Click to expand...

I went to our local Farm & Ranch bank and asked them and he was keen but I never ended up buying that one as the contract to work it fell through. He said he didn't care if it was a plane, tractor or barn I needed, he'd lend me the money. It seems to me that most places will write you a plane loan based on your credit viewing it more as a personal loan or a business equipment loan rated against your worthiness rather than than the aircraft itself.
 
Henning said:
I used to repo for them and they had stupid high notes out there on C-150s.
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Henning, I was going to ask how many different types of jobs you have had, but maybe it would be easier to ask you to list things you haven't done.:lol: I continue to be impressed.
 
JOhnH said:
Henning, I was going to ask how many different types of jobs you have had, but maybe it would be easier to ask you to list things you haven't done.:lol: I continue to be impressed.
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Shoot, Henning grew up on a used car lot, been repo man long time yeah...:rofl:
 
I had paid down my home mortgage so with the equity, I refinanced, took the cash, and bought a plane. It extended my mortgage by a few years but the result was the plane was free and clear and the interest was off the taxes.
Prior to the refinancing going through, I checked with Bank of America. Same $ amount, higher interest, and no tax advantage.
 
I got a plane loan from Victoria Bank in Victoria, Texas. Never been there, I've heard it is a small town but for some reason they do plane loans :D It was totally painless getting the loan.

I paid it off as soon as I could though, I just don't like paying interest for anything. And it I have to, I want to pay as little interest as possible. As someone else said, it may be better to get a lower interest loan on a house loan, then use that cash to get the plane.
 
Borrowing money to buy a non business asset plane is risky business.
 
It really is and it's at the core of our national economic problems, the house always wins.

Airplanes can eat money really fast though and if you have to finance the purchase, I hope you do so to keep a sufficient cash reserve for a $25,000 repair.
 
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AggieMike88 said:
5years is what the guy I spoke with said too. But I sorta learned that his view was more akin to a higher valued luxury car than a more durable asset. He wasn't aware that all the depreciation was already done and there wasn't that much risk of a major value loss over a longer time.

I sota remember an AOPA webinar about ownership that occurred earlier this year and them having one of their BoA contacts speaking for a few minutes. It might even be available for watching the recorded version. What she said is that there are loan programs that could have terms of up to 10 years if not longer.

As with anything, get a good education about how this aspect works before you pull any triggers, then shop the lending institutions to find the right deal for you.



A question to those who act as buyer representatives (like Wayne). Can providing assistance in finding in what were discussions be part of the services you offer? Or could that create a potential conflict of interest situation?
Click to expand...

Anything can drop in value these days which is why I've aggressively paid off all debt but my house. Saving the $10,000 to get my private now with goal of paying cash for a plane near retirement.

Not trying to pile on OP - wish i'd had follks be aggressive when I bought a home in 2009 that yes houses can keep falling even after 30-40% drop
 
Henning, that is very true, you can have huge repair bills unexpectedly, but to say you need $25,000 cash reserve is ridiculous. You should know that's a possibility and anticipate it, but not fear it.
 
N2124v said:
Henning, that is very true, you can have huge repair bills unexpectedly, but to say you need $25,000 cash reserve is ridiculous. You should know that's a possibility and anticipate it, but not fear it.
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I don't think you have to have $25K in cash reserve, but if the magical $25K repair pops up, can you handle it, should be the question.;) If all your cash is tied up and you can't borrow the cost of the repair, you can get in a bind real quick.:mad2:
 
True, you should have a plan if that does come up. I've been around aviation for 20 years and have always heard stories of the $20k repair, I've just never seen it happen. Yes, engines being replaced early, but they were always high time engines so in the end it was a good thing.
 
Next time you're in Dallas, stop by and I'll show you the invoice for $19,700 in first-month repairs that a guy incurred on his supposedly nice A-36 with a new interior (that didn't fit exactly right but the seller said it was because it was new and the leather just needed to "set." Yeah, right.

N2124v said:
True, you should have a plan if that does come up. I've been around aviation for 20 years and have always heard stories of the $20k repair, I've just never seen it happen. Yes, engines being replaced early, but they were always high time engines so in the end it was a good thing.
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Many and varied. Structural issues with wing and fuse, gear, interior from different model, (nothing fit) stuff that could (IMO) could be considered criminal, such as screwing the alt air door closed.

N2124v said:
Ouch.... What was the issue?
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Damn, did he do any type of pre buy inspection on it?
 
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