Thursday, July 9, 2015

Financing An Aircraft

When considering a source to finance your next aircraft purchase, it is highly recommended that you select a lender with aviation financing expertise.  Lenders that specialize in aircraft financing can best guide you through the credit, appraisal, title, escrow, and closing processes.  If an aircraft has not yet been selected, you can obtain a credit pre-approval, subject to final review and collateral valuation.
The first step is to gather up pertinent credit information for the underwriter. Generally the most recent two years Federal 1040 and Business Tax Returns with all schedules, a current Personal Financial Statement, and liquidity verification (recent bank/brokerage summary statements) is all you’ll need in addition to completing the lender’s Credit Application.  An airplane specification/listing sheet should also be supplied in the event an aircraft has been selected.
Underwriters review tax returns for verification of income, consistency and trends, and need the schedules to add back depreciation and carry over losses for example.  Liquidity (cash reserves) as stated on the Personal Financial Statement are verified to confirm that the applicant can meet all “global debt service”, including the aircraft monthly obligation with reasonable reserves after the down payment has been made.  Lenders look at debt to income ratios and obtain numbers from both what was stated on the Personal Financial Statement and what is indicated on the applicant’s credit bureau.
The collateral is also a major consideration when reviewing credit applications for approval.  Financial Institutions use the AircraftBluebook and V-Ref Price Guide as their primary source for values. Aircraft with damage history, missing maintenance logbooks, in poor cosmetic condition, or with high time or run out engine(s) are harder to process than aircraft without any of those types of issues.
FAA documentation includes an original signature FAA Bill of Sale be in escrow at an industry recognized title and escrow company in Oklahoma City, OK along with an original signature FAA Form 8050-1 “Aircraft Registration Application” and any original applicable lien release(s).  The FAA Bill of Sale is produced by the Seller and the 8050-1 Aircraft Registration Application is signed by the buyer, who then keeps rear pink copy as the temporary registration until the FAA sends a post card hard copy to them.  The lender sends a Security Agreement to the buyer for signature and return to the title company also.  Once the title company confirms they are in receipt of all FAA documents, then funds are wire transferred for the closing.

For more information on financing an aircraft, go to