With the recent turmoils in world banking systems, securing finance for your next aircraft acquisition may not be as straightforward as in the past. Banks are getting tougher and credit is generally harder to come by. So it can pay to have a specialist finance broker on your side with a proven history in aircraft finance. Here are a few guidelines you should be aware of as you embark upon your journey.
In the vast majority of cases, the principals that apply to sourcing finance for aviation is the same as applied to any other robust asset whether they be for business or recreational purposes.
Let’s look at security for the loan. Any financier considering aircraft funding need only concern themselves with the ‘true’ exposure on the asset, that being the difference between the amount owed and the ‘realisable sale value’. So don’t feel obliged to commit personal assets like residential real estate. If so, you may want to look for alternative financiers as in the majority of cases, even in today’s difficult climate, the financier should be able to use the aircraft itself as security.
Look at your ability to service the loan. In the case of commercial aircraft, the additional income generated by the aircraft will assist in your capability to make repayments. So it’s worth taking this additional income into account rather than purely considering your current income stream.
When deciding on a finance solution that would best suit your circumstances, consideration must be made to factors including cashflow, GST and tax deductions. Your finance broker or accountant should advise you on which mechanism will mesh with your current accounting structure, particularly with regard to how you report GST, along with finance solutions that can optimise tax deductibility.
If you’re considering importing an aircraft, try to avoid the requirement of most financiers to secure the aircraft against real estate. A good finance broker should be able to provide mechanisms which avoid such restrictions and can advise you on the advantages of such solutions and commitments you should be aware of.
Down the track you’ll also need to consider repowers and rebuilds. These expensive facts of life are almost unique to the Aviation Industry. From the financier’s point of view, such expenses need only be seen as financing a refurbished aircraft which in turn will become a significantly more valuable asset.
As you can appreciate, providing safe passage through such a process is an area for the guiding hand of a finance broker with proven expertise in aviation finance.
Would you like to know more about Aviation Finance? It’s easy, contact Amit Choksi, the aviation finance specialist at Finlease on 1300 FINLEASE (346 532) or visit www.finlease.com.au
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