Lease Back and Financing

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Tex_Mike

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Tex_MIKE
Do any of you guys know of a finance company who is willing to loan on an aircraft that will be used in a leaseback? Finding one to do this has been a challenge. I had no idea this would be a point of contention with a bank.
Bank of America will do the loan but the lease back hours need to be kept under 250. That's not gonna work.
Very frustrating!!:mad2:
 
Have you considered that this might not be the lenders' first rodeo and they know how leaseback deals are likely to end up--as in "in the ditch?"

Tex_Mike said:
Do any of you guys know of a finance company who is willing to loan on an aircraft that will be used in a leaseback? Finding one to do this has been a challenge. I had no idea this would be a point of contention with a bank.
Bank of America will do the loan but the lease back hours need to be kept under 250. That's not gonna work.
Very frustrating!!:mad2:
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But Wayne, don't you see the awesome power of leverage to create wealth out of nothing ?
 
Absolutely. Have I failed to provide you with one of my
"Professional Visionary" business cards?

weilke said:
But Wayne, don't you see the awesome power of leverage to create wealth out of nothing ?
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Come on guys. Just looking for a financing lead from someone who has ACTUALLY been through this. The pitfalls of a leaseback are well known and I didn't intend to go down that road with this thread. Every situation is different and, if done properly, something like this can be advantageous for both parties.
 
What kind of plane is it? How many hours per year do you need the lease to be to break even? Is the number of hours based on your down payment? They are probably concerned about the accelerated depreciation of a plane that is on a lease back. If so you could probably increase the down payment to compensate for that?
 
Last one I heard of going through was with Dorr Aviation, but that was 2 years or so ago -- they may have clammed up also, but worth a quick phonecall.
 
Tex_Mike said:
Come on guys. Just looking for a financing lead from someone who has ACTUALLY been through this. The pitfalls of a leaseback are well known and I didn't intend to go down that road with this thread. Every situation is different and, if done properly, something like this can be advantageous for both parties.
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Unlikely unless you have a high down, then they don't care what you're doing. You're going to have to show ability without the leaseback, and at that point the leaseback is a statistical liability. What you are failing to realize is the answers you were getting were from those with experience....

Just make sure the insurance and maintenance comes from their end. You want a straight up $XX per hour your plane flies, everything is on them outside normal wear and tear and engine set back on return.
 
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I think the fact that obtaining a loan for a personal or business-use airplane is dirt simple and obtaining a loan for a leaseback is very difficult might be the first clue that the bank doesn't share your opinion of the mutual advantages. Just sayin'

Tex_Mike said:
Come on guys. Just looking for a financing lead from someone who has ACTUALLY been through this. The pitfalls of a leaseback are well known and I didn't intend to go down that road with this thread. Every situation is different and, if done properly, something like this can be advantageous for both parties.
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Yeah, right. Trust them with the MX too.

Henning said:
Unlikely unless you have a high down, then they don't care what you're doing. You're going to have to show ability without the leaseback, and at that point the leaseback is a statistical liability. What you are failing to realize is the answers you were getting were from those with experience....

Just make sure the insurance and maintenance comes from their end. You want a straight up $XX per hour your plane flies, everything is on them outside normal wear and tear and engine set back on return.
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wabower said:
Yeah, right. Trust them with the MX too.
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Of course, a lease back is a business deal where I am loaning capital in the form of the airplane. I want a return with depreciable expenses calculated in my cut and they responsible for the direct care and associated costs out of their pocket.
 
What the hell are depreciable expenses?

Henning said:
Of course, a lease back is a business deal where I am loaning capital in the form of the airplane. I want a return with depreciable expenses calculated in my cut and they responsible for the direct care and associated costs out of their pocket.
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schmookeeg said:
Last one I heard of going through was with Dorr Aviation, but that was 2 years or so ago -- they may have clammed up also, but worth a quick phonecall.
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I spoke to Dorr as well about 2 years ago (roughly June 2010), they were willing but required about 35% down. On top of that, the insurance required (spoke to Avemco) also required operating experience by the renter which would have precluded me from operating the plane.

Food for thought.

There's also a great thread on the subject in the Pilot Training forum http://www.pilotsofamerica.com/forum/showthread.php?t=15708
 
wabower said:
What the hell are depreciable expenses?
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Engine set back, hourly wear and tear reduction in value on airframe, paint, and interior. Stuff you can schedule the costs of replacement on reasonably predictable life limits.
 
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Amazing.

Henning said:
Engine set back, hourly wear and tear reduction in value on airframe, paint, and interior. Stuff you can schedule the costs of replacement on reasonably predictable life limits.
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For the bank, giving a loan on a leaseback, is similar to giving a loan for any other business startup.
Try borrowing money to buy a tractor-trailer rig.
 
wabower said:
I think the fact that obtaining a loan for a personal or business-use airplane is dirt simple and obtaining a loan for a leaseback is very difficult might be the first clue that the bank doesn't share your opinion of the mutual advantages. Just sayin'
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Slightly off-topic of leaseback....I've been trying to get financing to purchase an aviation-related retail business with zero success. After 2 years, everyone will give me a business improvement loan, but nothing up front.
 
10%

The first question is whether the bank is making a credit-based loan (CBL)or an asset-based loan (ABL) . The only US company that made ABLs went TU during one of the recent downturns (2008, I think) even though the required down payment on the paper was ~40% vs. ~10% for CBL paper.

weilke said:
For the bank, giving a loan on a leaseback, is similar to giving a loan for any other business startup.
Try borrowing money to buy a tractor-trailer rig.
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Even with a high down payment, the bank understands that airplanes in leasebacks quickly accumulate hours and "flaws" that reduce their value far more quickly than the note is being paid. How long a term are you looking for? Many people get 20 years (or longer) for personal airplanes, and if you're looking at that think about how many hours the airplane would have on it by the end of the term under your scenario. 3 to 5 years, and perhaps you would have a better chance finding financing.

Nevertheless, aviation is one of those "small fortune out of big fortune" industries, and you have to agree that the banks understand this.
 
+1 on all counts. The advent of the fractional programs brought home to lenders the reality of high utilization over short ownership life. Projected residual values based on historical prices proved to be wildly optimistic.

Ken Ibold said:
Even with a high down payment, the bank understands that airplanes in leasebacks quickly accumulate hours and "flaws" that reduce their value far more quickly than the note is being paid. Nevertheless, aviation is one of those "small fortune out of big fortune" industries, and you have to agree that the banks understand this.
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wabower said:
+1 on all counts. The advent of the fractional programs brought home to lenders the reality of high utilization over short ownership life. Projected residual values based on historical prices proved to be wildly optimistic.
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Speaking of which, what happened to those big fractional Cirrus programs?
 
The one in Dallas is still here, but no idee how it's going. They added a PC-12 (maybe two) to the fleet. A fatal accident a few months ago probably didn't help much. I think the other guy is in FL, with a slightly different concept.

Henning said:
Speaking of which, what happened to those big fractional Cirrus programs?
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The cirrus program here in FDK is doing well. They are going to sell their aircraft and buy new ones shortly.
 
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