Private Jet Financing

Private Jet Financing

Financing a private jet purchase can be a fairly complicated process. There are many lenders to choose from. They are all interested in your business, but may not be interested in the type of aircraft you want to purchase.

Interest rates and terms will vary depending upon the model, date of manufacture, intended use, and the overall condition of the aircraft. We recruited an expert in aircraft financing to help with the details of this article, Dave Cribbin of Tailwind Capital Group.   When deciding how to go about financing your aircraft, you can choose to call the lenders directly or hire a finance broker to advise you. The decision depends on the type of private jet you will purchase, how much time you can (or want) to devote to researching which lenders to call, calling those lenders for proposals, determining which of their proposals might best suit your needs, and assembling a loan package for them to underwrite.

The Big lenders have a tendency to want to handle the big deals; holding especially true for new (2000 or later) private jets. If you are interested in purchasing a large private jet, such as a Bombardier Challenger or Gulfstream, the aircraft financing companies will continuously compete for your business. What’s important though, understanding exactly what terms you are looking for when speaking with them. This is a sizable transaction, ending up with a financing package that you want not what they want to sell you is the crucial component.

While not for everyone, finance brokers may be best if you are not sure of what terms you need or which lender might be right for you. Furthermore, every lender has their niche. They may refuse to deal with acquisitions that fall outside their range of expertise — some do only part 135 or part 91, for example.   A finance broker has many lending alternatives. This enables them to work with you and understand your requirements and terms that meet your objectives. This is important before representing you to the companies they know will be most competitive for your specific type of loan.   If you are interested in financing a private jet with a purchase price between $1 and $3 million; it may be best to work with a finance broker. Brokerage companies have generally already done the research on who to call for the best terms on any particular aircraft. Not to mention they are almost always willing to work on small private jet acquisitions.   Regardless of who you choose to finance your jet, the actual terms of the loan will be very similar. The rates are dependent upon the aircraft being financed and the credit quality of the client. As of the date of publication, March 2007, you can expect to pay a rate of between 6.5% and 7.25% for a purchase of $4-6 million. Smaller purchases ($1 million or lower) fall into the “prime plus” category, with a going rate of 8.25%.   Standard loan terms are 5, 7, or 10 years. The loan amortization can be as short as 8 years or as long as 25 years, and is determined by the private jet’s age and number of flight hours. Pre-payment penalties are also included in most transactions. They will typically range from 0% to 3%. Standard legal fees apply to any purchase.   In short, there are many variables in a loan. The acquisition of a private jet is not a decision to be made without researching your options.