Private Jet Financing Has Changed

Jet sales are down everywhere and we may have the reason why, jet financing has changed and it may be more difficult to be approved for loans.  It was reported by AIN:

With the 2009 credit crisis now abated, banks claim that they’re ready to lend, but business aircraft brokers complain that their clients’ loans are not often approved, according to business aviation analyst Brian Foley. “What every buyer needs to understand,” he said, “is that loans are evaluated very differently now.” Residual values have plummeted, Foley said, “so today’s loans are based more on the borrower’s balance sheet and less on the repossessed asset value of the aircraft, although that continues to play some role. Most banks won’t finance jets more than 20 years old. For some, even 10 years is the cutoff point.” Down payments are also higher, he added. “Gone are the days when a buyer could borrow more than the aircraft’s price–say, 115 percent–with no money down and invest the difference in improvements. Today’s buyer can expect to pay 10 to 20 percent down.” As a result of this tighter lending situation, brokers have told Foley that more than 70 percent of their pre-owned aircraft sales this year have been all-cash, surpassing that of years past. “But with lending more restrictive now, the road to recovery feels like it’s paved with quicksand,” he noted. “Even so, as far as pre-owned buyers are concerned, there is still good financing available, but only to the best credit-risk operators seeking younger, better-quality airplanes.”

It’s good to know your financing arrangements going into the transaction and have a better picture.

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