Jet financing: 3 ways to finance a private aircraft purchase

Buying a jet isn’t something most people can afford to do in cash. Private jets cost anywhere from $3 million to $90 million on average, according to Honeywell data, so it’s easy to see why jet financing is necessary for most consumers who want their own jet.

Keep reading for more insight into how jet financing works, some jet financing options, and how to get jet financing.

• How jet financing works
• 3 ways to finance a jet
• Where to get jet financing
• How to choose a jet financing lender

How jet financing works

It can be challenging to pull off, but if you want to finance a jet, you can find a lender to help you make your dreams of owning one come true. The reason securing jet financing is so tricky is because you’ll need to borrow a lot of money (think millions of dollars) to purchase a jet, whether it’s used or new. Because you’ll have to borrow such a high amount, it can be helpful to work with a lender you already have a relationship with, such as a bank who’s already familiar with your financial situation.

In some cases, you may be able to take out a secured personal loan backed by personal assets that lower the lender’s risk level. Some lenders even specialize in jet financing and offer loans specifically to purchase jets. Take note that jet financing often requires making a minimum down payment of 15% to 20%.

3 ways to finance a jet

When it comes to jet financing, you’re most likely to come across these three borrowing options:

1. Traditional loan

Similar to traditional personal loans that you might use for smaller purchases, such as cars or boats, traditional aircraft loans come with fixed and variable interest rates. In some cases, jet financiers will offer hybrid interest rates that allow you to lock in your rate, benefit from early repayment, and avoid interest rate increases.

Aircraft loans can have repayment terms that range from 30 months to 120 months, with amortizations as long as 240 months. Keep in mind that the longer the term you choose, the higher your interest rate will likely be.

2. Asset-based loan

Asset-based loans are a convenient jet financing option because you won’t be required to submit years’ worth of tax returns or K-1s to qualify for financing. Asset-based loans require limited personal guarantees, and sometimes no personal guarantees, which is a big perk if you’re purchasing a jet for business purposes. Asset-based loans are also a non-recourse form of financing, so if you default on the loan, then the lender has the option to repossess the jet but it can’t pursue further compensation from you.

3. Aircraft lease

Leasing instead of buying a jet may be a more reasonable financing option, especially for businesses looking to buy a jet. Leasing instead of buying can help with cash flow issues and has some tax benefits. You’ll find two main types of aircraft leases:

• Non-tax leases — In this case, you (the lessee) own the jet for tax purposes, which can be beneficial when the jet depreciates in value.
• Tax leases — For this type of lease, the private aircraft owner (the lessor) is the one who owns the jet and reaps the tax benefits when it comes to the depreciation of the aircraft. For this reason, you can usually get a more favorable interest rate.

Where to get jet financing

You have a few options for jet financing. Many jet purchasers start with a financial institution they have an existing relationship with, but that isn’t a requirement.

• Traditional banks — Your current bank is a good place to start your search for jet financing, as it already has a complete portfolio of your financial information, which can make the loan process more efficient.
• Banks with aircraft finance groups — Not all banks offer jet financing, but your bank may be able to put you in touch with another bank that has a dedicated aircraft finance group with a vested interest in private jet financing.
• Private lending groups — This type of lender raises capital within equity markets to support their portfolio growth and offer jet financing. This option is less common, but it can be a better fit if you don’t want to work with your primary bank to obtain financing or if your bank doesn’t offer jet financing.

How to qualify for jet financing

Qualifying for jet financing, such as a large personal loan, is similar to qualifying for more common types of financing. You’ll need to meet lender requirements surrounding a down payment, your credit score, and income. You may also need to show proof of funds for future payments in the form of available liquid assets and provide the lender with tax returns, business financials, and personal net worth information.

How to choose a jet financing lender

When selecting a jet financing lender, ask these questions during the process:

• Do you have an existing relationship with the lender? While a lender you already have an existing relationship with isn’t guaranteed to offer you the best rates and terms, it may be easier to secure financing through them.
• Is the lender familiar with FAA requirements? You want to work with a lender who’s up to date with Federal Aviation Administration regulations.
• Does the lender have a specialty in aircraft financing? While not a must-have, working with a lender that has credentials with key trade associations — like the National Business Aviation Association (NBAA), International Aircraft Dealers Association (IADA), or National Aircraft Finance Association (NAFA) — can be helpful.

If you need additional assistance navigating the jet financing process, you can work with an aviation consultant or a jet financing broker who will help you find the right lender and financing option to meet your needs.