Corporate and private aviation is back on track with rising financial markets, better corporate earnings, and increasing consumer and business confidence. The crowded airports and flight delays are causing the settled corporates to move towards private aircraft. However, to carry out the purchase you have to decide the source for aircraft financing. In this article, we have shortlisted three options that you can pursue to carry out the purchase. They include,
Traditional Loans
Just like the loan for small purchases like houses, boats, or cars, the aircraft loan can also be fixed and floating. However, some financial institutes also offer hybrid loans. This means you’ll have a floating loan rate with an option to get a ‘swap’. In simple words, you have the option to lock the rate. It will allow the businesses to take advantage of the early pay-offs and increased interest rates. With the rise in aircraft loan rates, this option isn’t bad at all.
If the businesses take the traditional loans for aircraft, they can get the financing structure of 30 to 120 months. This is along with the amortization of 240 months. Remember, the longer the terms are for the loan, the higher will be the interest rate.
Asset-Based Loans
For over a decade, this loan type has become popular for individuals and businesses to buy aircraft. This way, they do not have to disclose or guarantee their financial status. However, only a few organizations offer asset-based loans. It usually includes,
No Disclosure of Finances
This commercial aircraft financing option is truly hassle-free. You won’t have to provide any information on tax returns or any financials of your privately owned company.
Minimum to No Personal Guarantees
This factor is beneficial for the companies that have either bonding requirements or agreements that restrict the number of guaranties. Many businesses are shared among multiple partners, and not all of them show a willingness to guarantee the debt for another partner.
Non-Recourse
In the case of a buyer default, the lender can possess the plane. However, they cannot seek out the borrower for compensation anymore.
Air-Craft Leases
Some individuals or businesses often chose to lease the aircraft rather than purchasing it. The reason to choose this aircraft financing structure includes the cash flow considerations, the income tax considerations, the accounting treatment, or the sales tax. Regardless of whatever the reason is, there are two types of aircraft leases available. They include,
Non-Tax Lease
The entity offering the lease owns the asset for tax purposes. This is usually to off-balance the sheet treatment. Furthermore, the organization taking the lease can use the plane for business purposes. Also, they get the appetite for tax depreciation as well. Therefore, they can enjoy the tax benefits.
Tax Leases
In this option, the entity taking the lease has ownership of the aircraft. They can have the tax benefits including, the depreciation of the aircraft. As the tax benefits are in the favor of the lessor, the lessee will get to set a favorable interest rate.
Often, the businesses will reach out to their current bank for aircraft financing. However, this isn’t the best option in all cases. General knowledge of aviation should be taken seriously when it comes to choosing the lender. The finance companies like Air Fleet Capital can prove to be a better option when it comes to purchasing an aircraft
