How Does The Business Aircraft Financing Works?

Buying an aircraft for the business, whether new or used, demands a thorough understanding of how the process will work and what factors could affect the purchase. The aircraft financing for businesses can be done through various mediums. However, irrespective of the mechanisms, the lenders will conduct an extensive creditworthiness analysis for a secure financing structure. Also, they will evaluate the aircraft’s condition and the jurisdiction it is intended for. Once done, the lender will put forward a customized financing solution.

What Sources Are Available For Financing?

For business aircraft financing, you can find the following five options:

  • Cash
  • Bank Debt
  • Finance companies, like Air fleet Capital
  • Export credit agencies
  • Capital markets

Additionally, some other non-traditional mechanisms like tax leases and margin loans can also be used to finance aircraft purchases.

How Long Business Aircraft Can Be Financed?

The business aircraft can be financed for five to ten years depending upon the solid production base and history. The lenders usually prefer newer aircraft because of the risk of aircraft obsolescence. Therefore, many lenders apply financing limitations to the pre-owned models. For instance, if you are looking at an aircraft that is over ten years older, then you might not get more than 2-3 years of financing.

What Is The Interest Rate For Business Aircraft Financing?

The interest rate for aircraft loans can vary from 3.5% to 7%. The factors that can affect the rate include:

  • Size of down payment
  • Credit history
  • Jurisdiction
  • Total financing amount

Moreover, the credit with larger risks will require more down payment i.e. around 30% or a better and higher interest rate. On the other hand, credits with low to medium risk will demand a 15-18% down payment in advance.

What Factors Affect The Finance Conditions?

Of course, the terms and conditions for aircraft financing vary with each purchase. As a buyer, you need to be aware of the factors that can affect the terms in your purchase. It includes,

Usage

The financing company needs to know if the company’s acquisition is according to their needs and also the use of the aircraft. The more airplane is used by the business, the more it will depreciate. Hence, this will cause more wear and tears. As the lender, the financing company needs to consider this factor before.

Age & Model

The older the airplane is, the lesser options you will get for financing. Therefore, carefully choose the company that will offer equal opportunities for financing for new as well as used-aircrafts.

Down Payment

It is compulsory to pay some amount in advance. It can vary between 15-20%. In general, the bigger the amount for a down payment is, the longer will be the loan terms.

History

Before approving the airplane financing, the history and the specification for the aircraft will be required. The borrowers will have to submit the photos, maintenance, and damage history (if there are any).

These are the things included in the aircraft financing process that a borrower needs to take into consideration before putting out the application. More so, it will ensure that you get the desired customized plan suitable for your requirements.

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