Finance: Good timing

Financing an aircraft can and should be a straightforward process. According to AOPA Aviation Finance President Adam Meredith, the process broadly breaks down into four steps.

The first step is an initial consultation. What kind of airplane is being financed, how will it be used, and what is the financial situation of the buyer? These general questions will help the financing company better understand the applicant’s needs and help the applicant better understand the options available.

Next comes the application. Meredith said that if the buyer has all his or her documents ready to go, the application should only take a few minutes and the process will be easier. The application will require specific aircraft, personal, and financial information. Typically, the initial financial analysis takes a business day to determine what additional information is needed.

It’s not the complexity of the aircraft that increases the time to funding. It’s the complexity of the buyer’s financials.The next step is the formal commitment. The buyer’s information is forwarded to a lender best suited for the applicant’s specific request. Meredith said the length of time for this step is the most unpredictable. Easy deals involve a single buyer, solely with W2 income, purchasing an aircraft in his or her name. In these scenarios the lender makes a determination in one day. Now, let’s say the buyer is purchasing the aircraft in a limited liability company, or with multiple partners. Or maybe he owns multiple businesses and pays himself through distributions. “The greater an individual’s financial complexity the longer it will take for the lender to make a decision,” Meredith said. Additionally, if there are multiple partners, each partner’s financial picture must be assessed; thus two partners typically takes twice as long.

Interestingly it’s not the complexity of the aircraft that increases the time to funding. Meredith said a turbine aircraft doesn’t add uncertainty to a deal; rather buyers of turbine aircraft usually have more complex financials, making those deals by default more complicated.

Meredith said the best thing a buyer can do is either have all documents ready to go prior to applying for financing or put AOPA in touch with a chief financial officer, accountant, or administrator to coordinate the financial dealings on behalf of the applicant. Meredith said AOPA is always looking for ways to make the process easier.

Visit www.aopafinance.com or call 800-627-5263 to learn more.