Aircraft Financing: How Long Does it Take?

With interest rates at historic lows, buyers are increasingly turning to finance as a way to manage expenses and preserve liquidity, when buying business aircraft. But how long should it take to arrange financing for a business jet?

Following, NAFA members answer the most frequently asked questions about the financing timeline, including when you need to start, what you need to accomplish (and when), and the factors that could delay the process.

How Long Does the Process Take From Start to Finish?

“Unfortunately, there’s no short answer to this question, as it depends on several factors,” says Michael Smith, President of Scope Aircraft Finance. “I’d say the biggest factor for timing is how complex the financial picture is for the applicant.”

However, as a safe bet, both Adam Meredith (President of AOPA Aviation Finance Company) and Keith Hayes (Senior Vice President and National Sales Manager of PNC Aviation Finance) advise 3-4 weeks from initial inquiry to funding — with select exceptions in our current environment of limited inventory.

Dave Labrozzi and Andrew Farrant, Vice Chairman and Chief Marketing Officer of Global Jet Capital, respectively, echo that same sentiment.

“When a client should start thinking about their financing options is typically tied to market conditions. In a slow market with plenty of inventory, getting out in front of the financing question may not be so critical.

“On the other hand, in our current market — where we have limited inventory — successfully moving on a desirable aircraft that suddenly comes to market may be directly tied to having strong financing partners in place who are ready to act on your behalf.”

What Does the Financing Process Look Like...
(and When Does Each Step Need to be Completed?)

“Essentially, it’s a two-part process,” says Meredith: Approval, and Closing (assuming you’ve already determined what person or entity will own the aircraft).

Approval Process - 30 days out:

• Collect and submit financial documents (tax returns, pay stub, W2, personal financial statements, etc…)
• Choose a specific aircraft, and provide a spec sheet for valuation 
• Provide answers or additional documentation to any follow-up lender questions

Funding:

• Obtain aircraft-specific items (purchase agreement, logs, photos, clean title search, signed inspection report, etc…): 1 week prior to closing
• If registered to an LLC or corporation, send lender organizational documents: Immediately upon approval
• Execute loan documents and send to lender/escrow: 2-3 days in advance of closing
• Provide escrow with documents/authorizations/wiring instructions needed to close

For an easy way to remember the process, Smith recommends mnemonic devices — “a play on the aviation acronym, CTAF”.

Call:

• Reach out to the lender, learn about their program, and obtain a quote.
• Timing: As soon as you know you want to finance the purchase.

Turn in:

• Turn in the application and required financials.
• Timing: As soon as you are comfortable with the lender.

Approve:

• Answer any follow-up questions to ensure a smooth approval process.
• Timing: At least two weeks before closing.

Fund:

• Provide details needed for closing.
• Timing: Plan on 1-2 weeks to allow time for all parties of the transaction to co-ordinate paperwork and communicate efficiently.

What Common Errors or External Factors Could Delay the Financing Timeline?

There are a few common errors and external factors to be aware of and avoid (where possible) that could delay the financing timeline. The main ones are as follows:

• Aircraft Inspection Results & Issues
  “If the financing company finds damage history when doing its due diligence, they could request a modification to the structure,” Hayes explains. “So if you’re buying an airplane that has damage history you are aware of, but you’ve done your research and are comfortable with it, then be sure to share that with your finance partner early on.”
  
  
• Not Providing Organizational Information Early Enough
  “Over the course of my career, I have always said...come early and come often,” explains Hayes.
  
  “In other words, the longer you wait, the more difficult the process can be. In order for your bank to be as aggressive as possible with the highest level of confidence that they’ll be able to close the deal, the buyer should be prepared to provide the financials upfront.”
  
  “Remember,” adds Smith, “we as a lending institution can only work as efficiently as we are provided answers and information. So it’s important to provide the details and transparency necessary to make a lending decision.”
  
  
• Issues with Obtaining a Clean Title, Lien Release, or Other ‘Clouds’ Needing Resolution
  
  The most common aircraft title issues include unreleased liens/security agreements (many of these liens can be 20+ years old, which means locating the parties involved can be difficult, resulting in a cloud that is difficult to remove).
  
  Moreover, document errors (which can be as minor as a missing or incorrect signature, or inconsistent owner information on a bill of sale), and break in ownership (caused by a missing bill of sale or missing signature of one of the previous owners of the plane, or an incorrect title in the signature line of a bill of sale anywhere in the chain of title) are among the fairly common issues.
  
  
• Internal Legal Issues
  
  “If something unique is going on within the business — whether it be a lawsuit or change of ownership — it will eventually come out,” says Hayes. “So be sure to share it upfront. Even if you don’t have concerns about it, your financing partner might.”
  
  
• International Deals
  
  “US financing tends to be fairly straightforward and predictable,” explain Labrozzi and Farrant. “On the other hand, international deals can run into a multitude of complex issues related to aircraft import and tax regulations, regional operating requirements, and regional registration.
  
  “The common error in all of this tends to be not getting out in front of the client’s objectives and mission profile early enough to clear these potential roadblocks.”
  
  
• Improperly Executed Loan Documents
  
  In order to prevent this from happening, it’s important to work with a lending institution that specializes in aviation finance. “This is not like financing real estate, which is a fairly common department in any bank,” warns Hayes. “It’s important to partner with someone who understands the documentation and filing process unique to aviation. This will also be a partner that you can grow with as you progress through your aviation life.”

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