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!!


2012 Year-end Aircraft Financing

25 Days left in 2012 for customers to buy an aircraft and cash in on the great tax incentives and historically low interest rates this year!  Financing is still readily available for you December buyers out there!2012

As we gear up for a big year-end rush, we know many of you are purchasing before the clock strikes midnight on 2012.  If you are interested in financing that purchase, please see the important dates and recommended deadlines below to ensure a smooth closing before December 31st:

December 14:
Last day for complete credit application submissions for loans above $1 Million to arrange financing before year-end
December 21: 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 25: Christmas Day (Closed)
December 31:  New Year’s Eve
(please note many employees at the FAA and Banks leave early both Christmas Eve and New Year’s Eve, making it more difficult to handle a high volume of late closings these days)

Plan ahead as weather can impact the best-laid plans.  Oklahoma City has been known to get weather this time of year, shutting down the FAA and Title Companies.

Since December is the busiest time of year for many of us (including dealers, banks, title companies and the FAA), response and action can become more sluggish the closer it gets to 12/31.  Getting approved asap and working out the details in advance ensures a smoother transaction.  If you are still deciding between a few different options, get pre-approved for a finance amount today, then finalize your plans with the funds in your back pocket.

Don’t hesitate to contact us and get started today at 800.390.4324 as we quickly approach our suggested application deadlines above.  We look forward to hearing from you and helping you ring in 2013 with your new bird!

Activity picks up!

As we gear up full swing for flying season all over the country now (reality check for our AZ offiice, “wait, it’s not beautiful flying weather all year everywhere?”) we are encouraged by the number of inquiries we have received the past few months regarding aircraft purchases.  Over last year, our leads are up 11% in 2012.  Many of those that we are talking with are getting back into the game after feeling like they’ve been “sitting on the sidelines for too long”.  As things stabilize, those that have weathered the storm are showing signs of increased consumer confidence.  It is certainly still a wait-and-see type mentality for many, but just the noticeable increase in interest has given us cause for anticipation. 

Last week, we attended regional Aircraft Expo shows in both Texas and Arizona.  As opposed to the preceding few years where the crowds had thinned at these events, attendance seemed to be up significantly this year!  We spoke to many more potential buyers and all the other exhibitors seemed to share our sentiment.  If you are one of those buyers who is ready to dive back into aircraft ownership, or looking to refinance at our historically low rates, please give us a call to discuss Aircraft Financing programs to fit your needs!

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!

Innaugural EAA Spirit of Aviation Auction

With AirVenture coming up next week, things are in full swing in Oshkosh.  Along with it’s usual excitement, this year at EAA, there is a new buzz, and it’s surrounding the first ever EAA Spirit of Aviation Aircraft Auction!  EAA has teamed up with industry experts to put on a one-of-a-kind event bringing aircraft buyers and sellers together at the show.

The Auction will be held on Saturday, July 31st in the Jack Mark Hangar at the north end of the field and should consist of over 50 airplanes and hundreds of bidders all hoping to fly away in a new aircraft.

You can bid with confidence knowing that each step of your transaction will be overseen by industry professionals.  Each aircraft has been carefully screened including appraisals, logbook reviews and damage history searches so you know you are bidding on aircraft as advertised.  By staffing the Auction with Escrow agents and our own closing experts, we take care of the details that often go overlooked to ensure a clean Title and a clear transfer of ownership at the FAA.  Throughout the week prior to the event, there will be an Auction headquarters located north of Aeroshell square and East of the new Control tower where customers can register to bid, research the aircraft up for sale, learn about the Auction process, and see how we make it simple for you to bid!

AirFleet Capital will be on hand in the Auction headquarters to assist with all of your financing needs as well as preparing aircraft for closings and helping bidders prepare, should they win their bids the day of the Auction.

To register as a bidder or seller and for more details on EAA’s Spirit of Aviation Auction, visit: EAA Auction Website. For a list of the aircraft up for bid, visit: www.Auction.com.

The New Rules of Aircraft Financing – Podcast

With all of the changes in today’s lending environment, it’s time to set the record straight on what’s really happening with aircraft lending.  From changes in down payment, to bank appetite, to financial information required from you, there are plenty of questions that buyers have regarding the financing process today.

Listen to the recorded interview between Lezonne Hertz of AirFleet Capital and Pat Redmond of Suburban Aviation Aircraft Sales to get all of these aircraft loan answers and more: Podcast: New Rules of Aircraft Financing

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!

Slow Improvement, but Challenges Remain

First the good news – aircraft inventories are starting to shrink.  According to the UBS Business Jet Update distributed on Friday, business jet inventories have declined for the third time in the last four months.  Most importantly, young aircraft inventories (inventories for aircraft built in the past 10 years) have decreased 10% from the peak earlier this year.  In order for the aircraft manufacturers to start cranking up their production lines again, we’re going to need to see the high levels of “young” inventory disappear, which will also help stabilize prices.AOPA 2001d - JetProp

The General Aviation fleet inventory, as represented by one online sales resource has dropped 7% since the high-point in April 2009 – down to its lowest point of the year, with signs that the best of the bargains are disappearing.

By all accounts, activity has increased since early this summer, and this is validated by the uptick in sales of both General Aviation and Business Aviation aircraft (and decreased inventories).  However, we have a ways to go to dig ourselves out of this hole.

Banking appetite continues it’s return in support of aircraft financing, however there’s still a deep sense of “the other shoe is about to drop” in the marketplace.  Call it our general appetite for apocolyptical scenarios, but it didn’t take too much “uncertainty” in the markets last week related to unemployment (higher than expected), bank failures (anticipating many more), and manufacturing indices (lower than expected) to rattle the cages and send the baby bulls running for cover.

Most telling of the state of our market, Teledyne Continental Motors, Inc. (TCM) announced a work stoppage and shorter work weeks for salaried employees starting this week (http://tiny.cc/QjCl8).  TCM also announced week-long plant closings in November (Thanksgiving), December (Christmas), and mid-January.  This is a clear sign that TCM doesn not expect new aircraft sales to increase until well into 2010.  Likewise, rumblings of rolling plant closures seem to persist for production into Q1 2010 for many OEMs.

So the good news is that we’re hearing less and less of “the sky is falling”, but we still don’t hear enough people arguing that it’s not.

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:
50% personal, 50% business
Down Payment:
$27,000 (15%)
Finance Amount:
Interest Rate:
6.5% fixed
Term / Amortization:
20 yrs / 20 yrs
Monthly Payment:

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.

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…”

Questions Aircraft Loan Underwriters Ask – Part 3

JetPreview OAK columbiaAs part of securing an aircraft loan, an underwriter will need to review the following: 1.) Credit Application, 2.) Credit Report, 3.) Cash Flows, 4.) Net Worth, and 5.) the Aircraft information itself.

As a part of an educational series, we are addressing each of these components separately and reviewing some of the questions the lender tries to answer through analysis of a client’s credit package.  This should provide some insight into what a loan officer is trying to accomplish by requesting certain information.

In this article, we’ll discuss the evaluation an underwriter makes to determine if an applicant can afford the new monthly payment of an aircraft loan – the applicant’s Cash Flows, often the most important element in underwriting a traditional Aircraft Loan:

1. How much debt does the client currently have (monthly payments)? Step one is to analyze a client’s current obligations, which will subsequently be included with the aircraft loan and compared against the client’s income.  Included in the debt calculation along with the new aircraft loan will be payments for mortgage, revolving debt (credit card), installment debt (auto loans, etc), outstanding notes and any other monthly obligations listed on the credit report or personal financial statement.

2. How much does the client make (income)? This may sound easy, and sometimes it is when evaluating a client who has an annual salary as their sole source of income.  However, in many cases, a borrower will have a more complicated income picture, and may pass-through non-cash losses.  In addition, income may come from salaries, rental properties, royalties, capital gains, businesses clients own, corporate distributions, farming, or other sources.  Lenders will typically need to measure against a historical standard – often the past 2-3 years of the client’s income as demonstrated through tax returns or audited financials.  Depending on the complexity of the financials, the underwriter will add back income where they can in order to get an accurate picture of true income from the tax returns/financials (as oftentimes, customers will expense or depreciate items for tax purposes that do not reflect a true representation of cash-flow).

3. What is the personal debt-to-income ratio? Once the true income and monthly debts have been calculated, underwriters will formulate a debt-to-income (DTI) ratio.  This will compare a client’s historical monthly income versus the total of monthly payments.  Since no tax, aircraft expenses, or other living expenses have been taken out, the underwriters like to see the DTI at 40 – 45% after the aircraft payment to leave extra money for these other expenses.  This means that monthly payments cannot add up to more than 40-45% of total monthly income.  (For example, if you make $1,000 a month and the monthly payments on the items listed in question #1 add up to $400 per month, then you have a 40% debt-to-income ratio).

4. What does the business cash-flow picture look like? Many aircraft buyers are also business owners, so in addition to the personal debt-to-income ratio, the underwriter will also evaluate the business cash flows, also known as Debt-Service Coverage Ratio (DSC).  The DSC ratio is one common manner of evaluating this corporate cash-flow picture, and presents a picture of the cash available to meet the annual debt payments of the company when including the aircraft loan (if appropriate).  A DSC of less than 1 typically means the company is leveraged, and may not be able to meet all of its payment obligations.  Our underwriters generally look for this ratio to be 1.25% or higher to demonstrate the company is able to meet its current obligations with a small excess for other expenses, savings, etc..

5. Are the cash flows growing/ shrinking? 2 to 3 years of personal and business tax returns will be requested from a client in order to take a historical look at cash flows.  Coupled with year-to-date information (interim financials since the tax returns were filed), this allows the underwriter to sense any trends in income.  Is the trend positive, negative, or stable?  In addition to income trends, underwriters look at trends in debt.  Has the customer recently opened a large number of new accounts or significantly increased their financial obligations?