2023 Adam’s Answers – Aviation Finance

Question: I am looking at financing a light sport\experimental plane. I believe at this point. It’s almost impossible. I have tons of equity, but because I live in my means. Never had a credit card. I’m curious if you have a program that will help?

Answer: We work as a broker and have many different lending options to consider. While each lender has slightly different capabilities or requirements, most of them focus on three main things: Income, Credit, and Liquidity. If an applicant doesn’t meet the minimum requirements in each of these three areas, it is often difficult to get an approval. Aircraft lenders are focused on making sure you can service the debt with your existing income sources, handle known expenses like the down payment, up-front insurance costs and maintenance reserves for unforeseen expenses like an unexpected overhaul, and that you have a well-established credit history showing a history of paying various debts on time. Getting approved for an aircraft loan is often unlikely if you haven’t had other types of loans for similar amounts in the past. Credit history that includes years of on-time payments for mortgage or auto/recreational vehicle loans is the most likely way to ensure your credit will meet the minimum qualifications for an aircraft lender. Please give us a call at 800.627.5263, we would be happy to discuss your situation in more detail.

Question: Hello, my name is Roger. I had a 172 financed by AOPA, I’m semi-retired and travel to Brazil frequently with long stays now. Is it possible to get financing for an aircraft in Brazil. I’m a (US) citizen. I have a business in the United States. 

Answer: The aircraft lenders we work with are all US-based and require that the aircraft be registered with the FAA and based in the US. There are some exceptions for aircraft based in Canada, but these exceptions are typically limited to purchases of business-class aircraft. If you want to fly back-and-forth from a foreign country, lenders would require specific insurance to be in place, and the airplane would still need to be based and registered in the US.

Question: Will using the request a quote on the AOPA site show as a ding or history on my credit?                                                                                                                       
Answer: The online inquiry to request a quote is a great way to get in touch with AOPA Aviation Finance. From the information provided in the inquiry, we will be able to assess the financing possibilities for your selected aircraft, and let you know what the most likely terms will be. There is no credit check that results from submitting an online inquiry. Once you are ready, we’ll send you our finance application and gather a complete financial package from you, at which time a credit inquiry will be made. Unlike other types of brokers, we will not send your application to multiple lenders, but rather to the one lender that will be the best fit. This way we limit the number of times your credit is checked. Feel free to send us an online inquiry today and you can decide if you would like to procced with an application or not. We look forward to hearing from you.

Question: I’m in the process of forming a co-ownership divided into 4 shares. I have everything planned out but the financing part. I’m not sure if financing can be done under the LLC and bill each partner a monthly loan payment four ways. I’m wanting to find a simple way that will be attractive and easier for the other co-owners.

How many different ways are there to set up financing for a co-ownership? What is the best way? Can the whole aircraft be financed under the LLC and loan payments split 4 ways to each co-owner?

Answer: As a broker, we have many different lenders to consider for aircraft financing. With partnerships, many lenders have a limit on the number of partners they will allow to be involved. Four partners is often the maximum lenders will allow. Lenders will require that each of the partners qualify for and provide their personal guarantees on the loan. The loan will not be divided between the partners, so each partner would need to qualify as if they were the only one buying the airplane. This method provides assurance to the lender that any one of the partners could continue to service the debt if one or more of the other partners is unable to. Lenders will not divide the loan payment between the partners, so the decision of who pays how much is up to the partnership. It is common for partners to create an ownership entity, such as an LLC, for the purposes of the loan and aircraft ownership. It is also common for partnerships to create a new bank account for the partnership to handle any financial transaction associated with the airplane or the loan. Because each partner will personally guarantee the loan, any change in partners would require the loan to be refinanced. Please give us a call at 800.627.5263, we would be happy to discuss your situation in more detail.

Question: Hello Adam, I have been an AOPA member for about thirty years. I am building a kitfox ss7. I paid cash for the kit about $51,000.00. I am looking for an engine and Propeller est $30 to $35k as I get further down the road. Do you finance those items that would be new? Just curious.

Answer: We have multiple lenders that can finance experimental aircraft, however, at the current time none of our lending options will finance an incomplete aircraft. The best option for financing is to complete the aircraft using your own funds or some type of short-term financing you have available. Once the aircraft is completed and airworthy, our lenders would be able to provide a reimbursement loan for your cash expenses, or refinance your short-term loans into a standard aircraft loan.

Question: When I finance a plane, may I finance a hanger with it? or would they be separate loans?

Answer: We work as a broker and have multiple lenders to consider, all of which are specialized and experienced in aircraft financing. These lenders all use the aircraft as collateral for the loan, and they are unable to include financing for the purchase of a hangar. In rare circumstances, we have been able to get a lender to lend against an airplane for the purchase of a hangar, but if you purchase both at the same time, there wouldn’t be sufficient equity in the airplane to provide a loan for both. I often recommend checking with a local lender that has commercial real estate experience if you need hangar financing.

Question: My 1967 Mooney sat idle in a hangar for over a decade. There is pitting on the cam and a full overhaul is recommended. At the same time, the legacy avionics will get upgraded to GPS Nav, Xpdr w/ADSB Out, ADSB-In, ADAHRS, Engine Monitor, 406-ELT and PFD. There will also be some maintenance items: mainly IRAN of the landing gear. Is AOPA working with a single lender or will the application be shared to more than one lender?

Answer: We do have multiple lenders to consider for aircraft financing, but all our lenders use the aircraft as collateral so there isn’t an option to finance part of the airplane with one lender and another part with a different lender. Most lenders will consider financing for avionics upgrades and engine overhauls, but none will finance maintenance and repairs. The airplane having sat for so long will likely limit the number of lenders we would be able to consider, as many require the aircraft to be within annual and airworthy at the time of financing.

The lending options we would be able to consider would be limited to financing a maximum of 80% to 85% of the aircraft’s post-upgrade value, or value added by the upgrades, whichever is less. In most cases, lenders can finance up to 85% of the actual unit cost for avionics. The remaining 15% of the cost, plus labor and any other ancillary costs associated with the work cannot be financed. The engine overhaul will add a fixed value to the airplane based on the average overhaul cost for that engine. Up to 85% of this value could be considered for financing.

At the time of financing, the lender would disburse the available funds to an escrow account until the funds are required by the shops. Any costs not included in the financing will be paid first, and the lender will typically settle-up with the shop once the work is completed. Please give us a call at 800.627.5263, we would be happy to discuss your situation in more detail.

Have questions for Adam? He is happy to answer them. Submit your questions here. Great rates. Great terms. Helpful and responsive reps. Three good reasons to turn to AOPA Aviation Finance when you are buying an airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (75263) or click here to request a quote.



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