If financing an aircraft is on your horizon, now is the time to secure your loan. The end of the year is fast approaching, and that means many individuals and businesses will be looking to finalize large purchases for tax offset purposes.

Getting preapproved in August or September is the smart move if you want to miss the hassle of buying during the holidays. As with any financial decision, timing is key.

Why Is There a Time Crunch?

According to Keller Laseter, Chief Commercial Officer at FLYING Finance, the answer is simple: holidays.

“The holidays are the biggest factor to our time crunch,” Laseter said. 

There are multiple bank holidays in the fourth quarter, and that significantly bottlenecks the process.

“When the banks are closed, we lose a lot of valuable time and your loan does not move forward,” Laseter said. 

While some salespeople and lenders may still be eager to close with you no matter the season, it’s an unavoidable fact that many banking and financial professionals will be planning vacations and focusing on family from October to early January—which means they won’t prioritize getting your loan closed. 

“The best way to avoid the busy season is to beat the crowd that’s late to the game,” said Laseter. “Being responsive, communicative, and having your ducks in a row will put you very high on the list.”

Why Start Shopping in August and September?

Waiting until Q4 can lead to delayed closings, aircraft being sold to cash buyers, and worse options and terms.

Typically, clients buying an aircraft for business reasons have complex financial documentation, meaning it takes time for lenders to underwrite them. The savvier and more prepared a client is, the more questions banks and lenders need to clarify. 

With many buyers going through this process at the same time, it can take longer for loans to be completed and can push some finalizations into the next year, which may not be ideal. 

Likewise, inventory is much more limited at the end of the year, with fewer options available for late buyers. The earlier you decide to take to the skies in a new plane, the more variety you’ll find and the more sellers and brokers will be willing to negotiate on terms in order to make those sales.

Can Both Corporate and Personal Aircraft Owners Benefit?

 Absolutely! Actually, securing your aircraft loan early is the surest way to reap the benefits of depreciation and minimize your tax burden. 

“There’s always a rush of clients who approach the finance team in mid-December looking to complete a loan on a large purchase before the end of the year,” Laseter said. “That’s our busiest time, so while we do our best to satisfy this request, it can be difficult.” 

Both corporate and personal buyers can get ahead by submitting the necessary documents as early as possible. Once approved, it’s simple to get reapproved if any time lapses.

Why Have Financing Preapproved in the Fall?

Two of the biggest factors that prolong the financing process are submitting all financial documents in a timely and accurate manner and finding the right deal on the aircraft that suits your needs. Completing the financing side of the equation means you can focus on shopping with confidence in your financial situation. 

The bigger and more complex the airplane, the more in depth the process has to be. Pre-buy inspections, appraisals, logbook review, and other factors mean you’ll want to line up your loan as early as possible so you can be satisfied with a thoroughly vetted aircraft. 

Without preapproval, the time, energy, and money spent on choosing and inspecting the right aircraft can be wasted.

“Just like with buying a house, someone who has an approval in hand when making an offer on an aircraft will be taken more seriously than someone without,” said Laseter. “If you have an approval and the aircraft of your dreams pops up for sale, you can move quickly on the sale and have less risk of the seller going with a cash buyer.”

How to Get Started 

Depending on how your finances are arranged, it’s a good idea to reach out to any investment brokers, accountants, or wealth management firms you work with to get a complete picture of your assets and liquidity. Likewise, make sure you know the details on any existing loans or liabilities so you can go into the pre-approval process with realistic goals. 

If you aren’t sure what documents you’ll need, the FLYING Finance team is here to help you with any questions. Getting started today will get you into your dream aircraft sooner. 

Instead of spending the holidays struggling to finalize details, you can be flying and enjoying the skies.

The post Beat the Holiday Time Crunch: Get Preapproved for an Aircraft Loan Now appeared first on FLYING Magazine.

Helping clients navigate the intricacies of airplane financing, FLYING Finance acts as an intermediary between buyers and lenders. The group creates competition in the loan market, explains key concepts like TBO (Time Between Overhauls), and guides clients through the entire buying process.

• READ MORE: AVweb, Firecrown Debut New Aviation Storytelling Show

The episode also addresses the question of whether it’s ever financially sensible to own an airplane compared to flying commercially. While acknowledging the convenience and time-saving benefits of private aviation, Holland uses the example of limited commercial air service from Chattanooga, Tennessee (KCHA), to various destinations to illustrate the potential advantages of owning an airplane for frequent regional travel.

Holland also explores various aspects of financing an aircraft while debunking different myths and stereotypes about private aviation. 

Market trends: The show discusses a shift in the market due to rising interest rates and the potential impact of the proposed reinstatement of 100 percent bonus depreciation on airplane purchases.

Client demographics: While some clients are first-time buyers, a significant portion are upgrading from previous aircraft models, says Holland. Business owners and high-income individuals are often the primary clientele.

Credit application process: FLYING Finance offers a streamlined online application process, requesting information like debt, income, and liquidity. Depending on the purchase price, a more thorough financial evaluation might be required.

Factors lenders consider: Beyond financial standing, lenders assess factors such as pilot ratings, insurance rates, aircraft location, and international travel frequency.

Tune in to the entire episode to see Holland break down popular TikTok videos, including why empty legs are like Bigfoot and flying private for free. 

Also in Episode 2, Cortes and Ewing discuss a handful of other topics in the aviation community. Friday marked 10 years since Malaysia Airlines Flight 370 was lost after departing from Kuala Lumpur. The two also talk about a Delta Air Lines pilot who chartered an entire Airbus A330 for his retirement flight. 

Do you have questions or suggestions for Inside Aviation? Drop us a line at insideaviation@firecrown.com. 

Inside Aviation can be found on AvWeb’s YouTube channel and Facebook page in a video format. The show is also available on all podcast platforms, including Spotify and Apple. 

The post ‘Inside Aviation’: Why Empty Legs Are Like Bigfoot; Flying Private Isn’t Always a G650 appeared first on FLYING Magazine.

As FLYING Media Group expands its portfolio of services to pilots, it recently acquired Sky Allies Capital, a nimble player in the aviation finance market, to help our readers find the path to aircraft ownership. Now, as FLYING Finance, the team we’re bringing on board will assist pilots in transitioning to owners, whether the deal is for a light sport airplane or a super-midsize jet.

We sat down with Josh Colton, founder of Sky Allies, to break through a few barriers pilots may perceive in getting started. Colton comes from a background in marketing and finance, including time at Cessna Aircraft Co.—now Textron Aviation—in a variety of roles in marketing strategy and channel development. Colton holds a Master of Business Administration degree and an airline transport pilot certificate with type ratings in the HondaJet and Citation 525 series.

“First, it’s important to understand that the aircraft you pursue drives to a large extent the kind of financing that will be available,” says Colton. “Whether it’s a light piston single or a warbird or a jet, they all involve different types of financing. For experimental aircraft, you are typically looking at a home equity loan or line of credit, or cash, whereas with a jet, a bank loan is most often the vehicle.”

That’s why having an adviser specializing in aircraft financing can help you to navigate the most likely path to securing the funds for the transaction.

“If you go to your own credit union or bank, most banks don’t understand aviation,” says Colton. “Plus, you may need to hire an attorney to do documentation on the deal and/or ownership structure, hire an appraiser, and help with insurance and closing. If you’re working with a finance broker, they’re going to do a soft pull of your credit, tax returns, etc., and provide you with a path. It’s easier than going it alone, as they can advise the best match.”

And what’s the cost of going through a financial broker? “If we do our job right, it won’t cost any more than going direct to a bank—sometimes it does. Sometimes it costs less,” says Colton.

Financing Options

Aside from cash buyers, there are typically two paths that private owners take and another option for those pursuing assets for commercial operations. Bank loan terms are generally 10 to 20 years, depending on the age of the aircraft and total time on the engine and airframe. Or a buyer could draw cash from a home equity loan. For these loans, Colton says, you’ll need to put 15 to 20 percent down on the personal loan—usually 20 percent—with interest rates floating around 7 to 8 percent at press time.

Another path would be aircraft leasing—and it’s not for private operators, normally, according to Colton—but if you’re looking at conducting Part 135 operations or running a flight school under Part 141, you might pursue this direction. For example, Colton has had another business that leases a Cessna 172 to a school.

“It has to be for a business’ essential purpose,” he says, “so if you’re flying Cessna Caravan for cargo ops, that makes sense, but if you buy one to get to your lake house and you want to lease it, that probably won’t work.”

The advantage to a leasing arrangement is that you may be able to get 100 percent financing for the deal, putting no money down as part of the transaction. The downside? There’s often a 10, 12, or 14 percent rate on that, according to Colton.

Taking Care of the Customer

Colton credits one of his mentors at Cessna, retired senior vice president of sales and marketing Roger Whyte, as inspiration for how he approaches financial brokerage.

“Whyte’s credo was always to treat your customers well, so they would come back,” he says.

In order to ensure that, the idea is to keep the timeframe no longer through a broker than the process would be through a bank.

“It’s like hiring a real estate agent—if they are a pro, they save you time and money,” Colton says.

Brokers can also offer creative ways to access capital, including using cars, rental homes, or other assets to get to the desired line of credit. If someone has been declined by their bank, “we can go do creative deals as well,” mitigating the effects of having a B- or C-grade credit—as opposed to the A or A-1 credit most financial institutions look for in conventional loans. Pilots are typically a good risk.

“There are very few losses in aircraft finance, if the banks do their market research,” says Colton.

Finally, just like on the flight deck, having a procedure mapped out ensures preparation and that no steps are missed.

“We have a checklist to follow with those seeking financing for an aircraft,” he says. “We consider the prebuy [inspection], damage history, getting an airplane with a mid-time or less engine if it’s going to be financed, or structure the loan that way. If it’s a jet, finding an airplane that’s on an engine program of some kind…it dramatically cuts into the universe of lenders available if the jet is not on a program, so be prepared for the process to take longer and cost more.”

All of the information Sky Allies has collected over the years “flows back into the type of loans that we do,” says Colton. “An asset—the airplane—on the other side could be 60 years old or brand new, an SR22, or a warbird. We have that all in our database to match people with the right lender and loan structure. As a result, we usually work with our top 10 lenders out of a large pool, and that’s what we bring to the table along with industry specialization.”

This story first appeared in the September 2023/Issue 941 of FLYING’s print edition.

The post What Are Your Options When Financing an Airplane? appeared first on FLYING Magazine.