Best Way to Finance A Small Aircraft – Top 5 Aviation Lenders (2021)

AeroAvion

Best Way to Finance A Small Aircraft - Top 5 Aviation Lenders (2021)

Aircraft Financing

Best way to finance a small aircraft

Buying a new aircraft can be an exciting endeavor, however, in order to purchase the aircraft of our dreams, we may need to explore financing options. We have created this guide to help you specifically with Smaller Single Engine or Multi-Engine aircraft financing. If you are a new pilot or an experienced pilot this guide will share the best options to get into aviation financing.

In this article we will go over:

  • Understanding Budget Limitations
  • Financing Terms and Rates for Small Single and Multi-Engine Aircraft
  • Best Lenders in the Aviation Industry
  • Documents needed before approaching a lender
  • Other options to reduce costs of financing

Are There Budget Parameters for Your Purchase?

One of the most universal questions to ask is what are your budget parameters. This can be a huge determining factor when choosing the category and class of your aircraft. It’s important to understand the extensive financing opportunities or leasing arrangements available to us as pilots.

Here are a couple aircraft options we have available so you can understand what to expect:

Partnerships are also a factor in choosing a budget parameter. Many pilots decide to co-operate their aircraft with a friend or business partner. If you decide to go 50/50 on an aircraft ownership this may increase the category and class of the aircraft you select.

AOPA offers an amazing aircraft loan calculator that should give you an idea of where you stand.

Check it out here https://finance.aopa.org/loan-calculator

Financing a Small Aircraft

Aircraft financing is not too different than financing any other type of vehicle. You have a principal amount, with a loan term, interest rate, and all of this depends on the initial down payment.

Generally speaking, Aircraft financers want 15-20% down and loan 5-6% rates! Keep this in mind when searching for the best option.

 

Length of Term

The standard length of a term for aviation is different than what you may be used to. Usually, you can expect to see term lengths for up to 15 to 20 years. Now this is not to say you cannot get a term for a shorter period however these lengths are standard for smaller aircraft.

However, keep in mind, the longer the term is the higher the interest rate. So you may benefit from either an early payoff or a shorter term. Keep this in mind when discussing with your aviation lender of choice.

Best Options for Aviation Financing – Finding a Lender

Finding a lender can be one of the most critical parts of your aircraft buying process. Making sure you select the right lender can make a world of a difference in making the right deal. One of the key items is making sure your lender is apt and current with general aviation information. It’s the worst to contact a lender just to find out they have no background or experience within the aviation industry.

General aviation industry knowledge is an important consideration when choosing a lender for private aircraft.

Questions you should ask yourself:

  • Is my lender current with FAA regulations when it comes to aviation financing?
  • Does my lender understand general FAA requirements?
  • History of experience with aircraft financing?
  • Endorsements from key aircraft ownership groups (NBAA, AOPA)?

Documents Needed (Source: banterraaircraft.com)

Before approaching an Aviation Financer ensure you have the following documents readily available for negotiations.

  • Personal Financial Statement Document
  • Two Years Personal 1040 Federal Tax Returns with all Schedules
  • Aircraft Specification Sheet Listing Avionics & Optional Equipment
  • Liquidity Verification (Copies of most recent bank/brokerage statements)
  • Two Years Business Tax Returns with Interim P&L with Balance Sheet (if applicable)
  • (For S-Corporations): Articles and Certificate of Incorporation
  • (For Limited Liability Corporations): Certificate of Formation, Operating Agreement, Articles of Organization
  • Clear/Legible Copy of Driver License

List of AeroAvion Suggested Lenders

Lucky for you we have compiled a list of some of the best Aviation lenders – These lenders meet the requirements we set forth above.

1. LightStream Aircraft Financing

Light stream aircraft financing offers really attractive rates and options. LightStream offers a unique lending solution that allows customers with strong credit to borrow funds for purchases that had previously required collateral, or that fall into categories where few or no loan options exist.

Light stream offers to finance for many different ranges of aircraft and generally cap at around $100,000

 

Loan amount

24 – 36 

37 – 48 

49 – 60 

61 – 72 

73 – 84 

$5,000 — $9,999 

24 to 36 months at 5.99% – 9.99% 5.99% – 9.99% 

37 to 48 months at 7.14% – 11.34% 7.14% – 11.34% 

49 to 60 months at 7.29% – 11.49% 7.29% – 11.49% 

61 to 72 months at 7.69% – 11.89% 7.69% – 11.89% 

73 to 84 months, rates not available for this amount. N/A

$10,000 — $24,999 

24 to 36 months at 4.29% – 7.99% 4.29% – 7.99% 

37 to 48 months at 5.84% – 9.84% 5.84% – 9.84% 

49 to 60 months at 5.99% – 9.99% 5.99% – 9.99% 

61 to 72 months at 6.39% – 10.39% 6.39% – 10.39% 

73 to 84 months, rates not available for this amount. N/A

$25,000 — $49,999 

24 to 36 months at 4.49% – 8.49% 4.49% – 8.49% 

37 to 48 months at 4.99% – 9.84% 4.99% – 9.84% 

49 to 60 months at 5.29% – 9.99% 5.29% – 9.99% 

61 to 72 months at 5.49% – 10.39% 5.49% – 10.39% 

73 to 84 months at 5.29% – 9.99% 5.29% – 9.99% 

$50,000 — $100,000 

24 to 36 months at 4.49% – 8.49% 4.49% – 8.49% 

37 to 48 months at 5.84% – 9.84% 5.84% – 9.84% 

49 to 60 months at 5.99% – 9.99% 5.99% – 9.99% 

61 to 72 months at 6.39% – 10.39% 6.39% – 10.39% 

73 to 84 months at 5.49% – 9.59% 5.49% – 9.59%

 

Even though these options are directly from light stream, this gives you a better baseline when looking through the entire industry.

 Check them out here

2. US Aircraft Finance

A Veteran-Owned Business. An Industry Leader in Aircraft Finance Since 1998. Finance your aircraft purchases, upgrades, and more. Low Rates. Free Quote. They also offer Insurance coverage: Liability Coverage, Hull Coverage, Medical Coverage.

Check them out here

 

3. PNC Aviation Finance

PNC Aviation Finance has a full menu of aircraft lending capabilities and solutions including loans, leases and dealer floor plans. PNC aircraft financing offers up to 20-year amortization schedules designed to maximize your cash flow.

Check them out here

 

4. Banterra Aircraft Financing

Banterra’s competitive aircraft financing program offers many aviation industry exclusives including reduced customized down payment options for qualified applicants. Banterra is also one of the leading aircraft financiers in the industry with years of experience.

Check them out here

 

5. National Aircraft Finance Company | NAFCO

NAFCO is an affiliate of Pilot Bank, a Tampa Bay Community Bank that has operated successfully since 1987.  When you finance your aircraft with NAFCO, you have access to personal and commercial business banking, treasury management, health savings accounts, and mortgage services. NAFCO services all types of aviation financing from Single Engine Piston, to Multi-Engine Turbo Props.

Check them out here

Aircraft Lenders

Aircraft insurance

Pretty much every aircraft financer we have introduced on this list also does some form of aircraft insurance offerings. There are many different types of aviation insurance that you should be aware of. Each of these options adds to the total cost of your aircraft. Check out our guide to aircraft insurance here.

Other Options

There are many other options if you are looking for an economical way to finance an aircraft.

Aircraft Partnerships

You don’t necessarily have to buy an aircraft for the full price when you have a financial partner who shares a stake! Aircraft partnerships are often a really great way to get into finding the aircraft of your dreams. Often times it may be too expensive to buy an aircraft right out, however, imagine if you could buy 1/3 or 1/4th the cost.

Aircraft partnerships are usually an arrangement between 2-5 individuals over the costs of one aircraft. These smaller arrangements are more limited than a flight club however they offer the most exclusive rights to an aircraft. Generally, these relations are bound by contract meaning you have a legally vested interest in all operating costs and finances of the aircraft. However, it comes with the benefits of open scheduling, reduced costs, and the opportunity to access higher-end aircraft.

Frequently Asked Questions

How many years can you Finance an Aircraft?

Aircraft financing terms usually extend around 15-20 years. Keep in mind, however, the longer the term usually means a higher interest rate. You may benefit from early payoffs or shorter-term lengths.

What Credit score do I need to buy an aircraft?

In order to purchase a small plane, you will more than likely need a credit score of above 750 to get a competitive rate. This is because an aircraft is a luxury purchase which makes lenders more discretionary when choosing clients.

Can you Finance an Experimental Aircraft?

Yes, you can get experimental Aircraft financing and there are many programs to do so. Additionally, lenders offer to finance in Kit form and completed so you can do it at any stage of your build. The requirement is that there are at least 25 of the same make and model registered with the FAA.

What is the best first airplane to buy?

Choosing the right airplane can be a very subjective process. There is no right answer to the perfect aircraft however we can direct you. Check out our article on Questions to Ask When Buying an Aircraft.

The Bottom Line

Aircraft financing is undoubtedly one of the most critical parts in purchasing an aircraft. Making sure you choose the right lender and the appropriate terms can help you in the long run. Ensuring that your financier has experience with general aviation, Understands FAA regulation, and has appropriate endorsements can ensure you are going down the right path when choosing a lender.

Make sure to do your due diligence when searching, compare your options, and get multiple rates to ensure you get the best option.

Overall, make sure you are choosing the right aircraft, Check out our Aircraft Buying Guide Here to ensure you understand the full process of purchasing.

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Comments

  • B.Rathod
    at

    Hi am interested in aircraft finance and ownership ..share more details on my mail ..wisha grt day..
    Thank you

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