Global Aircraft Financing

Global aircraft financing is a niche part of the market, but there are enough lenders in the space to ensure borrowers have plenty of choice. 

Every aspect of aircraft finance needs to be personalised and optimised for the borrower. As well as securing the best deal, lenders and borrowers need to be a good match, especially when borrowers repay the loan over many years. We view the lender and the borrower as entering into a partnership as well as a business transaction. Good feeling and a mutual understanding between borrowers and lenders are just as important as getting the best loan. 

We start the brokering process by working with the borrower’s advisers. Here, we want to understand how finance needs to be structured. When we’ve grasped this, we will consider what kind of lender will offer the best deal. We will consider the type of aircraft involved in the transaction, where it will be registered, how the aircraft will be used (leasing, etc.) and the borrower’s financial situation and liquidity. We’ll also need to understand how the borrower wants to repay the loan and what they are looking for in a lender. We will broker the best aircraft financing deal, also considering the lenders that will best match the borrower and best meet their needs.

While aircraft ownership is complex in terms of structuring, jurisdictions and agreements, the financing mechanism is simple. Lenders will offer the owner (via a corporate entity) finance to buy the jet. Borrowers will need to provide a deposit or assets as a downpayment. They will then repay the loan over several years. The length of the loan will depend on how the owner wants to finance the aircraft and how they plan to repay the loan. The shorter the loan term, the more expensive monthly repayments will be. 

Lenders offer lump sum aircraft finance for second-hand jet purchases. When a borrower commissions a jet, the lender releases aircraft finance in stages, as each part of the build is completed.  

Aircraft loans are a niche type of finance. Advisers will start by working out the best structure for the owner. This will either be a company or an individual that owns the jet via a corporate entity. The ownership structure will depend on what type of aircraft the borrower wants to finance, how much they will borrow, where the aircraft will be registered, if the owner will lease the aircraft, and so on. 

The bottom line in any aircraft financing deal: the loan needs to fit the best ownership structure rather than the structure being adapted to fit the finance.

Every lender will offer a different loan-to-value ratio for global aircraft finance. Usually, the owner will need to pay 50% of the purchase price in cash, and lenders finance the other 50% of the sale. There are exceptions to this rule, and some lenders can offer a higher LTV, but only for the best and most liquid borrowers.  

Sometimes, lenders will also require that borrowers put forward additional security to finance the purchase, including personal guarantees.  

Lenders will also look at how the borrower will pay back the loan. Demonstrating liquidity, not only net worth, is the most important element in global aircraft financing. Lenders will usually want to see that the owner has enough liquidity to make a year or more of repayments easily. In other words, lenders want to see that the borrower is not constantly disposing of assets to make loan repayments. 

Aircraft financing terms can vary in length. The length of the loan will depend on how much you want to borrow. Owners buying the most expensive jets usually opt for a more extended repayment period than cheaper aircraft. Commissioning a plane or helicopter is usually more costly than buying second-hand, and these loans are also repaid over longer periods – sometimes with twenty-year terms. Borrowers usually repay smaller or less expensive aircraft over five to ten years.