How can you get Aircraft Financing?
There are several aircraft finance options when you’re ready to purchase. Choosing the right lender depends on your specific aircraft financing needs.
Aircraft loan calculators can aid in budgeting decisions when considering specific aircraft. The CurrencyAir Aircraft Loan Calculator helps estimate monthly payments for an airplane. The aircraft loan calculator is intended solely for estimation purposes and may not reflect actual loan rates or terms.
Let’s look at your options.
Equipment Loan for Aircraft Financing
An equipment loan is an aircraft finance option that utilizes the aircraft or equipment as collateral. You will need to justify the cost for business purposes. But as long as there is a genuine need, you can use this type of loan.
Using the equipment as collateral usually means higher borrowing amounts and better interest rates. This is known as an asset-based business loan.
Rates typically start around 3.5%, and loan terms range from 1 to 6 years. Equipment loans cap out at $5 million per piece of equipment. If you are considering aircraft that exceed this amount, you will need an alternative aircraft financing option.
To learn more about equipment loans, visit our equipment financing page or contact us to receive a quote today. Aircraft intended for personal use won’t qualify for business equipment financing.
Aircraft Equipment Financing Pros & Cons
Pros:
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Preserves Cash Flow: Spread out payments instead of making a large upfront purchase.
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Low Interest Rates: Often more affordable than unsecured loans due to the equipment acting as collateral.
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Ownership Benefits: You build equity in the aircraft over time.
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Tax Advantages: Potential write-offs for depreciation and interest.
Cons:
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Collateral Required: The aircraft can be repossessed if you default.
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Strict Use Requirements: Must be used for legitimate business purposes.
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High Upfront Costs: Some lenders may require a sizable down payment.
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Depreciation Risk: Aircraft lose value over time, which may affect resale or refinance options.
Aircraft Loans and Aircraft Financing Companies
Aircraft financing companies specialize in funding aircraft loans. Many first-time buyers are surprised to find that the aircraft purchase process is more similar to purchasing a home than a vehicle.
Credit approval for aircraft transactions depends on the aircraft age and the specific aircraft financing program. Lenders typically review bank statements, credit reports, tax returns, and business documentation during the application process.
They are usually subsidiaries of aircraft insurance providers. The typical down payment for loans under $1 million is 15% and 20% for loans exceeding $1 million. Typical aircraft loan rates range from 6.25% to 8.99% with terms up to 20 years.
Working with this type of aircraft lender could be an option if the purchase price exceeds the equipment loan maximum of $5 million. If you pursue this option, consider finding an aviation industry leader, as they are typically the best in terms of service. Global Air provides a list of available companies.
Lenders verify that logbooks are complete during the review process. The down payment requirement typically falls between 15% and 25% of the aircraft value. A larger down payment can reduce paperwork in aircraft financing.
LTV loans streamline the financing process by trading documentation for equity. Simplified financing solutions can lead to quicker aircraft acquisitions. Monthly payments for aircraft can vary greatly depending on the type and usage of the aircraft.
One option for specialized financing is the Airplane Owners & Pilots Association (AOPA). AOPA Finance offers low-document or quick app programs to simplify aircraft financing. Clients can secure funding without having an aircraft under contract at the initial stage.
Business and Personal Loan
Technically, it is possible to purchase aircraft with a personal or business bank loan. However, these carry high credit approval requirements, including an excellent credit score, substantial revenue streams, and optimal cash flow. Due to the high cost of aircraft, another loan option would offer more significant benefits, including higher borrowing amounts.
Several traditional lenders offer airplane financing:
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PNC Aviation Finance provides loans, leases, and dealer floor plans for aircraft financing.
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Bank of America’s Global Corporate Aircraft Finance division provides financing through loans or leases.
Aircraft Leasing
If purchasing doesn’t make sense at this time, you can consider leasing an aircraft. Leasing could potentially lower the monthly payments and might offer the lowest rates.
Lenders typically finance up to 75% of the aircraft value or purchase price for leaseback. Lenders require a minimum 25% down payment for aircraft to be used on leaseback.
How much do aircraft for businesses cost?
Non-military aircraft are listed as either commercial or general aviation. Commercial airlines use commercial airliners. Everything else is general aviation.
The aircraft buying process is similar to purchasing a home. Purchasing new aircraft requires planning the process in advance.
General Aviation Aircraft
The aviation industry offers a range of general aviation aircraft types, each with its own price range. Light sport aircraft start at around $20,000, while intercontinental business jets can go as high as $50 million.
Light Sport Aircraft
Price: $20,000-$400,000
Single and Double Piston
Price: $35,000 – $750,000
Business Jet
Price: $250,000 – $50 million
What are the extra expenses of owning an aircraft?
The cost of ownership goes beyond the purchase price and finance costs. Aircraft ownership costs typically fall into two categories: Fixed Costs and Variable Costs. Fixed costs associated with aircraft ownership include the purchase price, insurance, and hangar or storage costs. Variable costs associated with aircraft ownership include expenses such as fuel, maintenance, and pilot salaries.
There are several additional costs to consider.
Insurance
Just like car insurance, aircraft insurance is a legal requirement. Aircraft insurance can have a wide range, but it typically costs between $100 and $300 per month at the low end.
Inspection and Maintenance
Keeping your aircraft skyworthy is an essential part of ownership. Maintenance and inspection fees range from $300 to $600 per month, with the potential for significantly more expensive repairs if a breakdown occurs.
Fuel
Fueling your aircraft is one of the most expensive aspects of owning or leasing a plane or helicopter. Your exact fuel costs depend on how often you use it and how far you travel.
Hangar Fees
You’ll need to store your aircraft, and general aviation aircraft hangars are the best option for this purpose. Monthly fees range from $40 to $500.
Aircraft Financing – Final Thoughts
Using an equipment loan to purchase aircraft only makes sense if it will truly help grow your business. Before deciding on a type to pursue, consider your purchase options and needs. You could potentially reduce costs by purchasing a used model instead of a new one. You also need to ensure the aircraft can handle the distances you need to travel, along with the passengers and cargo you need to transport.
Once you have answered these questions, you can explore purchasing, leasing, and financing options for aircraft. There are several competitive financing options. We can assist you with an equipment loan, or you can contact a financing company specializing in aircraft financing.
