Spring Fever – purchase and finance a new airplane!

It’s Flying Season!

Spring has arrived and across the country, people are gearing up (or at least daydreaming about it while they’re digging ou134399-stock-photo-green-dark-freedom-spring-flying-umbrellat!) to jump back into their airplanes.  Whether to  get out and see those clients you haven’t met with all winter, take the family to your favorite spring break destination, or just enjoy seeing the earth come alive from above, each of us start getting the itch after a long, cold season, to take flight.

AirFleet has seen some positive signs of the economy warming despite record low temps across the country this year.  With tax incentives extended to 2013 and the ability to still buy an airplane at a great price coupled with our low, fixed financing rates – this first quarter has been the busiest we’ve seen since 2008!  We have high hopes that the momentum will continue and increase as buyers with Spring Fever begin making purchase decisions.

Please contact AirFleet Capital to get an aircraft loan quote on that airplane you’ve been eyeing.  With flying weather and all the holiday bills paid off, it’s a great time!  You can call to discuss options with a financing specialist at 800.390.4324 or you may request a quote online.  If you are considering a purchase anytime this year, it is always good to get pre-approved for a dollar amount while you shop.  Approval is free and it allows us to be ready to close quickly once you find “the one.”

Get out there and enjoy – safe travels!!

AOPA Wrap-Up and Stratus Winner!

Our high hopes were realized at the AOPA Summit 2012 in Palm Springs.  With attendance up a substantial amount over the 2011 event in Hartford, we spoke to almost triple the people this year.  It was a breath of fresh air as we are in full 4th quarter swing and the majority of the customers were ready to move before the year-end deadline.  Palm Springs was a great venue last time and did not disappoint this year.  With the Parade of Planes from KPSP to the Convention Center, having the static display and exhibit hall in one location is perfect for attendees… and of course, the weather doesn’t hurt!

We would also like to announce the winner of our show giveaway – Congratulations to James McLaughlin of Brookfield, CT on winning the Stratus: Portable In-Flight Weather for ForeFlight!  Thank you for coming by our booth and we hope you can put this to good use in your new airplane!

Thank you to everyone who stopped by our booth, it was great to meet you all (and see old friends too!).  We are looking forward to seeing everyone at the new location in Ft. Worth, TX for the 2013 Summit.  Since the show historically alternates coast to coast, this will provide easier access for pilots in the middle of the country.

2010 Year-End Deadlines to Finance your Aircraft Purchase

Another December is upon us, and this tends to be a very busy time of year in aircraft sales.  If you are interested in financing a purchase before year-end, please keep these dates in mind to prepare for a closing in 2010:

December 15: Last day for complete credit application submissions for loans above $1 Million to arrange financing before year-end

December 20: Last day for complete credit application submissions for loans below $1 Million to arrange financing before year-end

*Please note: applications can still be submitted/closed after these dates, but meeting year-end goals may be in jeopardy.

December 24: Christmas Eve (FAA closed)

December 30: Last day to close on an aircraft purchase in 2010

December 31: New Year’s Eve (FAA closed)

Plan ahead and note that weather can impact the best-laid plans (Oklahoma City has been known to get weather this time of year – 3 years ago, the FAA offices were shut down for two days due to an ice storm).

Please contact AirFleet Capital at 800-390-4324 or http://www.AirFleetCapital.com for details on our financing programs.

Financing in Today’s Market – yes, you can get an aircraft loan!

There has been a lot of talk recently about the lack of financing availability in the market, especially for the larger, older, business jet buyers.  However, it is noteworthy to point out that there’s a gap in how the bizjet market and how general aviation (owner-flown) financing is faring.  That said, there is a bias toward newer aircraft, but in our market we are financing piston singles and twins aged 1970 and newer.  For turboprop and turbine aircraft we finance starting 1980 and newer, but have made exceptions for strong credit transactions that are older.  Note that our market is the owner-flown market up to $5MM in purchase price, so our market differs a good bit from the larger bizjet market referenced in the article.

On piston singles and twins we’re financing up to 85% of the purchase price, but would agree that 20% down is preferred for the larger or more complex aircraft.  This stems from the additional impact on valuations the market has seen – more pointedly on the older and more complex turbine and turboprop aircraft.  We still finance up to 85% for turboprop aircraft, but then lean toward 80% financing with older jet aircraft.  Again – not in all cases, as we have made exceptions for later-model light jets with 85% financing this year (again, on the lighter end).

We are also still financing upgrades for aircraft.  Paint and interior have always been difficult as the value of a new paint or new interior depreciates so quickly.  However, we’re fully engaged in financing upgraded avionics and other airframe or engine upgrades/ modifications.  This ranges from someone adding a Garmin 530 to their panel, to speed mods or turbine upgrades like a JetProp conversion.

In terms of whether you need impeccable credit to be approved – that’s a tough one, as it is in many cases it is subjective.  Credit requirements have increased, but only marginally.  However, when you overlay tighter credit requirements with poorer corporate financial performance (or personal income), we hit a similar deadlock.  Rather than the banks’ being tighter, however, we would offer the perspective of the changes in the overall financial condition of our buyers.  The buyer group as a whole has deteriorated, so finding buyers who have not been impacted significantly through this downturn can be difficult.  Most potential borrowers have seen a significant decrease in their credit profiles in the past couple years.  It is difficult for a bank to lend on someone with decreasing income and a deteriorating financial condition, without first seeing that their income/ financial condition has bottomed-out and is improving again.  Generally speaking, a lender will want to see that the borrower has stabilized their financial position and that the new position they are at today supports the financing request.

In addition, buyers should be prepared to provide more documentation than they may have a few years ago.  It’s not to the extent of a home mortgage where you need to explain why you had a $200 deposit into your savings account 6 months ago, but with the additional scrutiny banks are feeling from their regulatory bodies, a lot of the assumptions made in the past now need to be verified.  For example, if a client says they have $1MM in their bank account, they now need to prove this with a bank statement.  Also, there are no “no-doc” programs available, so clients need to provide full documentation of income and all income sources (to include personal and business tax returns).

Ending on a positive – some of the larger national banks have seen the greatest impact on their lending capabilities, as the regulatory scrutiny they are seeing is intense.  However, our general aviation financing segment is supported by a mix of these larger national institutions as well as a strong network of regional banks.  In a nutshell, healthy banks have healthy appetites, and we’ve seen this throughout the downturn.  While their appetite may have been lighter at the start of the slowdown, it has been strong and continues to get stronger.

Oshkosh Unraveled – a look back at AirVenture 2010!

AirFleet Capital has returned from a week at EAA AirVenture 2010.  Despite the torrential rains that threatened to turn the World’s Greatest Aviation Celebration into a wash-out, thousands still rallied to Oshkosh, Wisconsin (temporarily coined “Galosh-kosh”) for the event!  The weather during the show was great and with new daily events, a revamped Warbird area, the first-ever EAA Aircraft Auction, and revolutionary indoor plumbing in Hangar C – it was another great year!  AirFleet Capital was there to discuss aircraft financing with customers in our usual Hangar A space as well as “all-hands-on-deck” in the Auction Center helping bidders and sellers prepare for the main Auction event on Saturday, July 31st.  We are looking forward to many more to come!

We spoke with many customers interested in financing a new purchase, as well as those looking ahead to the next year as a purchase time frame.  It is always great to meet our current customers face to face at AirVenture each year, as well as new customers looking to employ our assistance for their aircraft ownership goals.  A big thanks to everyone who stopped by to see us. We look forward to seeing you again next year – Happy Flying!

Helicopter Financing in Today’s Market

We attended the  Helicopter Association International (HAI)  HeliExpo in Houston last week, and found a dynamic and healthy level of energy in an aviation niche that hasn’t missed much of a beat since the economic downturn.  From what we saw, the show  was well-attended from the standpoint of both exhibitor and customer participation.  However, in speaking with dozens of manufacturers and sales professionals, there was a common theme – “Helicopter customers are in need of financing options.”

With the credit crunch over the past 18 months, the hardest hit may have been the helicopter market.  While funds were always readily available for fixed -wing purchases, the number of institutions financing helicopter purchases has seemingly dwindled.  Unlike fixed-wing aircraft, helicopters are a newer asset class for most underwriters.  It has just been within roughly the past 5 years that loan programs have been available and mainstream for helicopter financing. When things started  to tighten, the lesser-known or lesser-understood niches were the first to get constricted.

That being said, AirFleet Capital  has the capability, appetite and desire to support financing for the helicopter market.  Though older (pre-1995) and commercial-use helicopters  present a challenge and require unique structuring, there are  exceptional financing options available for late-model, private-use  helicopter  buyers.  Outside of normal financing considerations like liquidity, credit score, and cash flows, a few factors including type of helicopter and utilization will affect the finance terms offered.

Please call us for financing details on your particular purchase.

NBAA Convention – a Vendor Perspective

AirFleet at NBAAThe NBAA Convention held in Orlando, Florida last week was ultimately a success given the challenging market conditions.  As reported by NBAA (www.nbaa.org) attendance was down roughly 25% this year, with just under 23,000 attendees at the event.  But our observation was that vendor and exhibitor space rental was down an equivalent percentage, reflective of the current market of overall activity and fewer buyers.

For the most part, gone were the extravagant booths of the past 10 years, the exceptional give-aways, the “place an order today for a 2013 delivery”, and the overconfidence in the market.  But as compared to 2008 when the stock market was in a freefall during the show (the Dow Jones Industrial Average dropped nearly 1,874 points during the week of NBAA 2008), the attendees were serious prospects making serious offers.

Also notably absent was the Very Light Jet segment (VLJ) as had been coined by Eclipse Aviation over the past 8 years.  With Eclipse’s challenges and bankruptcy well documented in the past year, the remaining entrants in the small jet segment have turned away from the VJL moniker, opting for “personal jet” or some other variant.  The dream is still alive, with Cessna and Embraer offering exceptional entry-level jets in the Mustang and Phenom 100 respectively, but the smaller cabins of the truly personal jets won’t start entering the market until Diamond starts production of the DJet (projected for 2011), Cirrus starts production of the Cirrus “Vision” jet, or Eclipse emerges from Bankruptcy and restarts production.  Nonetheless, the “buzz” of the VLJ era was clearly missing at this year’s convention.

From a finance perspective, the field has dwindled to just AirFleet and four other major aircraft finance firms to support the business aviation community, as exhibitors at the convention.  Overall, the market has lost alot of finance capacity – more than a dozen aircraft financiers have either pulled away from supporting aircraft financing or merged/ closed.  However, as business remains slow for new buyer activity, it didn’t appear that any of the remaining finance firms were overtaxed with the burden of picking up a larger share of the market.

In a nutshell, there was a reasonable amount of positive dialogue at the show, but it seems that buyers themselves continue their sabbatical – holding off their desires for modernized aviation equipment until our economy solves it’s nasty case of the swine flu.

The Benefits of Pre-Approval

The Benefits of Pre-Approval

Pre-approved for aircraft financing is an often misunderstood term.  Most people think it’s like a pre-approval for a home mortgage.  For a house, the bank has run some basic numbers, but not really started digging yet.  At first blush, things look good so, barring negative discoveries in the future, you are approved before they have really taken a look at your financial information.potw01_1508

Pre-approvals for aircraft financing are actually the same process as the approval that every applicant goes through with their aircraft loan.  The only difference is whether or not the customer has settled on a specific N# plane yet.  With an approval, you are approaching the underwriting certain of an aircraft choice; specifically stating the flying machine you want to buy.  With a pre-approval, you are getting approved for X number of dollars in a certain category of aircraft (single engine pistons, sport, commercial, helicopter, etc).  You want to be able to buy an aircraft of that type that costs X dollars or less and take the pre-approval to potential sellers to show the seriousness of your intent.  As well, you want to shop with confidence knowing that you have financing in-hand.

When a customer finds that special aircraft, its purchase price and valuation are submitted to the bank.   As long as the aircraft books out, the underwriter simply fills in the holes in the various forms that pertain to specific aircraft.

There are a few advantages to pre-approvals.   First, customers have greater bargaining power when they go to sellers.  They can show them the approval, indicating their seriousness.  This ups the buyer’s commitment to the deal and shows the seller that the buyer is a serious prospect.  A sale in hand is worth two in the bush, after all.  In addition, it simplifies the closing process.  The biggest obstacle to a timely closing is the customer’s ability to get complete documentation for their approval.  Since the pre-approval is the same thing, it is already taken care of and a non-issue.

Other than the specific aircraft selection, both processes are the same.  If you have any questions about aircraft loan pre-approvals or anything else finance related, please feel free to give AirFleet Capital a call.  Until Next Time, fly safe!

How Exactly Does Aircraft Financing Work?

sportcub9_lgWe at AirFleet Capital frequently receive the following question when we talk to prospective customers – “how does aircraft financing work?”  It’s a great question because aircraft financing for general aviation (GA) aircraft really is unique.  We have a sample quote below for a typical aircraft that AirFleet Capital would finance.  We’ll use its different parts to serve as the template to guide through the components of aircraft financing.

Sample Aircraft: 1997 Mooney Bravo
Purchase Price:
$180,000
Use:
50% personal, 50% business
Down Payment:
$27,000 (15%)
Finance Amount:
$153,000
Interest Rate:
6.5% fixed
Term / Amortization:
20 yrs / 20 yrs
Monthly Payment:
$1,140.73

Aircraft
AirFleet Capital finances piston-driven, turbo-prop, and jet aircraft.  Piston aircraft manufactured before 1960 get increasingly harder to finance as they get older.  Each aircraft in this age range would have financing offered on a case-by-case basis.  However you will find that aircraft manufactured in 1970 or newer are typically easier to finance.  Older turbo-props and jets have more restrictions, typically with aircraft older than 1980 being harder to finance.  Financing for these aircraft are also offered on a case-by-case basis, but there is a strict 10,000 hour airframe limit.

Purchase Price & Interest Rate
The purchase price is closely related to the offered interest rate.  Unlike other assets (homes, cars, boats) the aircraft’s purchase price and the respective loan amount is what drives the interest rate charged, not the borrower’s credit score.  Relevant thresholds are the $50,000, $100,000, $250,000, and $1,000,000 marks.  Generally, higher loan amounts see lower interest rates, with some exceptions.  The standard rate program is fixed.  There are some variable rate programs available today, but they are not common.  Interest rates will be higher for commercial use aircraft.

Use
Aircraft usage is an important component as well.  Aircraft that are used for personal or private business (part 91) use have lower down-payment requirements, longer terms, and lower interest rates than those used for commercial use (charter, flight school, etc).  This is due to the increased utilization of commercial-use aircraft.  These aircraft often fly a lot more each month; resulting in higher wear and tear which collectively devalue the asset faster.  Loans are structured to compensate and prevent owners from being upside down.

Down Payment
A standard down payment is 15% of the purchase price.  The standard used to be 10% before the financial crisis and the devaluation trend of all aircraft in the past year.  GA aircraft financing does not feature 0% down programs.  In some cases, 10% (with a rate premium) may be available for a client with exceptional credit, but the client may pay a premium rate-wise.  Commercial use aircraft require between 20% to 30% down, depending upon the length of the term desired.  Typically, the higher the down-payment, the longer the term available.

Term & Amortization
Generally terms and amortizations, are for the same length of time.  Some balloon programs exist where you will have amortized payments for a 20-year schedule and a 5-year term – with a balloon coming due on the balance of the term (a principal balance would be due).  Aircraft manufactured from 1976 and on can have terms up to 20 years, while aircraft older than this will have terms between 10 to 15 years maximum.  Commercial use aircraft will also have shortened loan lengths, as the aircraft devalues more quickly in a higher use environment.

Monthly Payment

The monthly payment works just like a mortgage payment, with mostly interest and little principal paid down each month in the first few years.  For example, with a 20-year term, if a client makes the minimum monthly payments they’ll gain about 2% equity (principal paid down) in the first year.  As time goes on, the principal increases and the interest decreases.  Often times with GA aircraft loans, there are no pre-payment penalties, so you can pay the loan down early without incurring additional costs.

This just about covers all of the nuts and bolts to a standard aircraft loan quote from AirFleet Capital.  If you have any questions, feel free to post below or you can contact us.  One of the most common introductions we hear starts with “I have this plane I’m looking at…”