Aircraft and Marine Commercial and International financing is specialized as many who have sought it may have discovered. Many buyers have gone to their local bank to ask for a loan to buy an airplane and marine craft only to be told that the bank does Not lend money on aircraft and marine craft Internationally.


The reason for that is because aviation law is very specialized. It is so because there is always more than one government regulatory agency involved in making law regarding aircraft be it general aviation or commercial aviation. There are multiple International agencies and law making bodies involved because airplanes and marine are things that are made to move.

Even a small airplane or boat can cross into another state or country easily. And when that happens the laws of neighboring states or countries have to enable a lender to secure their collateral, the commercial airplane or marine (ship), in the event it has to be repossessed.


So, how does one go about financing an airplane or marine (ship) and get the

'Best Deal for ME'?


The answer to the 'Best Deal for ME' question is the answer to several questions:


Some do's and don'ts.


First: obtain your own credit report, or secure the services of a broker who can. It's free to anyone once a year. You can find 'Credit Bureaus' on the Internet or telephone book. If there are problems on the report you should take steps to correct them before seeking an aircraft loan. Links to the 3 major national credit bureaus are at the end of this article.


When you ask your personal bank for an aircraft or marine loan it's wise to have a telephone call or lunch with your personal banker. Don't make an official loan application until you determine that they do loan money for airplanes or that they'll loan YOU money for an airplane whether or not it's their policy to loan money for airplanes. I'll explain why you should do this later.



What's a 'competitive' interest rate?


Interest rates for general aviation aircraft or marine loans are not tied to the Prime Rate, the Federal Discount Rate, LIBOR, Home Loan Rates or any other rate you may have heard tossed around in financial circles or the local bar, which are sometimes the same place.



Obviously the 'Term' of the loan has a lot to do with how much the monthly payment will be to repay the loan. A typical 'Fixed Wing' aircraft loan is 15 years. A longer term, 20 years, isn't uncommon but you'll pay a LOT of interest for a small reduction in the monthly payment. Shorter is certainly possible and desirable if you can afford to make a larger monthly payment to pay off the loan faster.


Loans on Rotorcraft are shorter term. You can plan on 3 to 8 years and that's the best you can do (unless your personal banker really loves you). But you'll find that your local bank is less likely to finance a helicopter than an airplane. Banks believe helicopters really are things that are designed to fall out of the sky and, generally, they don't want anything to do with them no matter how much they like you. If you want a helicopter loan from your local bank you'll normally find that having a nice house that's completely paid for will suffice. Or a medium or large company that's very profitable. Either one of those will be good collateral, with or without the helicopter.



Something to consider in selecting the term of a loan is depreciation. We all know that you're going to want a bigger, faster, more luxurious airplane down the road. And that means you'll probably sell the current one. And that means that you'd like the airplane to be worth more than you owe on it. Possibly a lot more to help with the down payment on the next big beautiful bird. How long does it take to get a loan approved?


From 2-3 days to 2-6 weeks. It varies with your credit situation, the aircraft make and model and how busy the industry happens to be at any given time. Most ordinary loan applications that consist of a widely known, popular, fixed wing aircraft and a creditor with a simple one income one employer tax statement will usually receive an answer within 2-3 days from most sources. This can expand to a week or 10 days in busy times. That's just the approval. Closing the loan takes, typically, another 10 days to 3 weeks. Situations that involve special credit situations, aircraft located in a foreign country to be repositioned in the U.S., or visa versa, take longer. Aircraft being financed on sale - lease back take longer. Any extraordinary situation takes longer. From 1 week to 2 months longer. Commercial aircraft (Part 135 is commercial) can take longer. Plan on at least 30 days and up to 3 months if it's for foreign use and/or includes special credit situations.


Do I need a pre-purchase inspection?


Your personal bank may or may not require one. Other lenders will require various types and degrees of inspections. Each one has different requirements that vary with the type and value of airplane. It will vary from no inspection to a thorough, physical inspection by a qualified A&P plus a certified appraisal from a certified appraiser of the lenders choosing in writing. Generally speaking, most lenders will accept an inspection that costs about $350 to $500 from any licensed A&P for a single engine piston powered aircraft. And it can usually be arranged to be done within 2 to 5 days and the report can be sent by fax so it won't hold up the closing process.


The ugly truth in credit reporting!


When that friendly banker says 'Yes Mr. Jones, I'd be happy to take an application from you. Just fill this out and I'll see what we can do for you.' Watch out! Although there isn't a 'Personal Banker' in the world that will admit it they are salespeople! They're trained, especially the newer ones, to GET APPLICATIONS! Banks make money by loaning it out and collecting interest. And to make loans they have to get applications. What they don't tell you is that the first thing they do when you turn in your application they obtain a credit report on you from one or more of 3 nationwide credit bureaus. When they do that the credit bureau records a credit request from them. Three (3) or more of those in a 90 day period results in a 'Warning' being placed on all subsequent requests for a credit report on you.


And you've just submitted an application to 5 other lenders. Each one of them is going to see that you're submitting to each of the others, which not only shows up but results in a 'Warning' being placed automatically on your credit file, and they may well dub your application what's called 'Shopping.' Now you may receive more turn downs and you still haven't done anything wrong. Or the one guy that decides to take your loan decides there's an additional element of risk involved because of all the perceived turn downs and offers you an interest rate of 9% or 10% or more with a 2 year balloon because you're a bad risk.


You need to either figure out what's wrong and fix it or seek professional help.


If you decide to 'surf the net' and do the job yourself talk to the lenders on the phone. Don't submit applications on line without finding out if the lender actually loans money on the type of plane you want to buy. They'll obtain a credit report and you may have a strike against you. Don't blanket the world with an application to every lender in sight. You'll be dubbed a shopper and get strikes against you. 'Shopper' applications go to the bottom of the pile on the underwriters desk (that's the person who approves or rejects your loan).



I can do that, you say. So why would I use a broker?


Clients come to me for a variety of reasons, some of which are:


To save time. They value their time and don't object to paying a small fee to have a professional do the work. Because they want to avoid possible damage to their credit rating.
Because I have the ability to obtain one credit report and submit their loan package to multiple lenders with only the one report, thereby, protecting their credit file rating and beacon score while getting competitive bids in a shorter period of time than they can.
Because I deal with a wide variety of lenders for all the various situations, aircraft and rotorcraft.
Because they have a special credit situation which will require professional assistance to obtain a loan. I've succeeded in obtaining financing for more than one client who is a high net worth individual and has been turned down for an aircraft loan because they have little taxable income.

Fees for services to obtain financing are from 1% to 3% of the amount financed. Variations in fee are caused by the amount to be financed and the work required.


Do all brokers charge a retainer? I do. Once I've received your loan package and have obtained a conditional commitment to financing I collect a retainer to continue working on your project. To be blunt, no pay no work. I'm not an accident and injury attorney who works on contingency fees suing insurance companies who, therefore, know they'll get paid.

There you have it. Aircraft and Ship financing made easy. Well, the basics anyway. I hope it helps you decide which path to take, do it yourself or use a broker, and I wish you good luck whichever you decide.

Call us today at 708-386-4400 OR E-MAIL A COMPLETE EXECUTIVE SUMMARY to     gtcfin@ameritech.net to discuss your commercial and International financing needs.
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