If you’re pursuing a dream of obtaining aircraft financing for a particular plane, then you probably have some questions that need to be answered with regards to obtaining an aircraft finance package. Knowing as much as you can is essential to obtaining good aircraft financing rates, whether you are taking the commercial route, choosing financing for a personal plane or even venturing into the arena of experimental aircraft financing.
Documentation
What types of paperwork are needed to facilitate any type of general or commercial aircraft financing? You should produce an aircraft spec sheet for your lender when you apply for your aircraft finance loan along with two years of tax returns as well as returns that have been prepared by a professional preparer if you’re self-employed.
Loan Limit
For any aircraft financing package, generally how much can be borrowed? Normally you can obtain up to ninety percent of the fair market value or sales price of the chosen aircraft, or the lower amount of these two valuations.
Types of Aircraft Financed
Are there any restrictions as far as age or the type aircraft that is financed? Generally, all kinds of aircraft can be financed, including single engine and twin engine planes, corporate turbines, war birds, experimental planes, and VLJs (very light jets). Financing can also be provided for engine and avionic upgrades. Age is not considered a criterion in consideration for a loan.
Essential Paperwork
What are some of the documents needed before a loan can be put through for approval?
If you register your plane as an LLC, it’s required you supply a copy of the “Articles of Organization,” a “Certificate of Good Standing” from the state in which your plane is incorporated, a tax identification number and operating agreement. You also should supply proof of insurance which contains a 30-day notice and a “Breach of Warranty” listing the lender as the loss payee.
Pre-Approval
If I’m accepted for pre-approval for loan financing, how long does it generally last? Typically, pre-approval stays in force for 60 days.
Loan Criteria
What are the main criteria taken into consideration by a lender in approving an aircraft loan? Usually the lender will critique your application against 2 years of your tax returns if the loan amount is over $100,000. Also your DTI or debt-to-income ratio is scrutinized. Should it be over 40%, you’ll probably have to resort to “flying the friendly skies.”
Other Considerations
What other considerations must be made before a loan is approved? An aircraft valuation will be made by the lender and also a check of the aircraft’s history of damage. In addition, a title search has to be facilitated in order to finance the aircraft. If you want to obtain the best aircraft financing rates possible, it’s important that the preceding steps be taken.
It’s good to be prepared and organized when applying for such a “high” ticket item as an airplane. If you are you can be assured that you will attain significant rewards in the pursuit of your dream.
photo credit: HarshitSekhon