Aircraft financing

Obtaining an aircraft loan or lease is no different to obtaining most other forms of business finance – preparation is key:

Gather your paperwork

Before applying for aircraft finance, gather the following documentation:

• Personal financial statement – assets and liabilities
• Aircraft specification sheet listing avionics & optional equipment
• Recent bank/brokerage statements – at least six months
• Two years business tax returns with interim P&L and balance sheet 
• Copy of driver’s license or passport

Get pre-approved for a loan

It’s easier to shop for an aeroplane when you are already pre-approved for finance. This means a lender has given you a provisional ‘yes’ and will convert the pre-approval to full loan approval and funding upon sight of the aeroplane you select and the details of the transaction. Having finance to hand can give you better negotiating power when buying an aircraft – effectively giving you the same leverage as buying with cash.

To obtain a pre-approval you’ll need to review different aircraft financing deals before settling on a lender. You can do this by approaching banks, credit unions and online lenders one by one, or you can use the services of a loan marketplace that will introduce you to a choice of aircraft financing deals from different lenders. Some marketplace platforms can also give you advice and help you with the application process. This can be especially useful for borrowers who have never taken out an aircraft loan before. 

Negotiate the purchase and create a sales agreement

Once you’ve found the airplane you want, you’ll need to agree the purchase details and create a sales agreement for the lender to review. The sales agreement must include these key elements:   

• Who the buyer is
• Who the seller is
• The details of the aircraft
• The purchase price

Lenders will use the sales agreement to determine the actual financing they will provide, (which may be different to the sum offered in your pre-approval), calculate the down payment you can afford, and finalize the terms of the agreement.    

The most important element in deciding the financing you ultimately receive revolves around the aircraft’s valuation. While the true value of an aircraft rests  on the agreement between the buyer, seller and lender, having a valuation serves as a good benchmark for estimating the general retail worth of the vehicle. A valuation will review a range of factors, such as the model’s availability, its damage history, maintenance records and refurbishments and upgrades. Hiring a professional aircraft valuation service can help determine an accurate valuation for the aircraft you are considering.  

Get insurance

Lenders will typically insist on insurance as part of the financing arrangement. You’ll need both motion and not-in-motion coverage to fully protect the aircraft in all ‘on-ground’ and ‘in-flight’ scenarios.    

The closing

To close the transaction and make the aircraft yours, most lenders will use a title and escrow service.     

The title company will conduct a comprehensive title search on the aircraft, verifying there are no encumbrances or title discrepancies. This ensures the lender maintains a first lien over the aircraft. The title company can also navigate the complex and often challenging FAA paperwork process to ensure the documentation meets agency standards. 

The escrow service assumes the important role of transferring funds for the purchase, acting as an impartial intermediary and benefiting both buyer and seller. 

During closing, make sure you have all the major aircraft documentation:

• Aircraft log book
• Maintenance records
• Annual inspection records

Lender and broker fees, legal fees, inspection costs, title search fees and any other closing costs are usually added to the final purchase agreement during this stage of the transaction.