General Sanctioning Procedures for Aircraft Loans for Entrepreneurs

Buying an exclusive business jet is generally a daunting experience for most entrepreneurs running successful companies. Many of them do not have the funds to purchase the assets directly from aviation manufacturers. They have no alternative but to resort to debt financing to acquire the aircraft. Only then can they maintain a sufficiently cash flow to conduct their normal commercial activities in the market.

Fortunately, several commercial banks and financial institutions are willing to offer them a loan. However, they need to know how to choose the right one and secure the best terms for their needs.

What do entrepreneurs need to know about sanctioning aircraft loans?

Entrepreneurs need to understand that most commercial banks consider financing an aircraft purchase to be a risky venture. These financial institutions ask for suitable collateral from them before sanctioning their aircraft loans. Only then can the banks hope to minimize their losses from the transaction. Moreover, the terms and conditions they impose for issuing funds depend on the following factors:

  • The purpose for which the entrepreneurs intend to use the commercial jet aircraft for,
  • Whether the aircraft is brand new from the aviation manufacturer’s production line or a second-hand model?
  • Availability of comprehensive information on the aircraft’s history, flying hours, and specifications if it is a second-hand model
  • The amount of money the entrepreneurs are willing to provide as the down payment, and
  • The total loan amount the entrepreneurs need to secure the purchase deal with the manufacturers.

Eligibility requirements

Most commercial banks maintain stringent eligibility requirements when it comes to sanctioning aircraft loans. Entrepreneurs need to fulfill the conditions mentioned below before the banks consider providing them the necessary funds:

  • They need to have a business and personal credit score exceeding 700,
  • Provide certified financial statements specifying they have sufficient liquid assets in their businesses,
  • Convince the officials of the lending department that they can meet payment deadlines without defaulting,
  • Offer a down payment equivalent to 20% of the cost of acquisition of the aircraft as collateral,
  • Submit the last 3 years’ certified financial statements and tax returns relating to the companies they own,
  • Agree to a pre-buy inspection by experts the banks appoint before finalizing the purchase deal,
  • Provide certified documents relating to the insurance they have taken out on the aircraft, and
  • Fill in and submit all the documents the banks provide to complete the loan application process.

The bank officials will scrutinize the relevant documents and review the necessary paperwork. Only then will they decide on whether to sanction entrepreneurs’ loans.

Applying for aircraft loans is a convenient way for entrepreneurs to finance their business jet acquisition deals. The interest rates on funds under this lending scheme are cheaper in comparison to other modes of finance. These include factoring, line of credit, asset-based, or account receivable financing. However, the entrepreneurs should choose to visit a commercial bank with a good reputation in the market for the task. Moreover, its terms and conditions for sanctioning the loans should be acceptable to them. Only then can they ensure a steady cash flow for their businesses without tension.

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