Companies that don't have the resources to purchase a company aircraft outright are turning more and more to commercial aircraft loans. The structures of these loans are often difficult to decipher and hard to construct. That's why, before you enter into any purchase agreement, be sure you have sufficient aircraft financing education and training. In addition, should you want to enter into the field of private aircraft financing or sales, this training can bolster your career aspirations.

The means to attain training on everything from aircraft loan rates to commercial aircraft loans themselves begins with the basics of the process. You need to understand the financial terms and structure of the business and commercial aviation industry. Training classes and aircraft financing loan conferences are the next step in the educational ladder. Finally, there are the various corporate aircraft finance associations, which offer a wide range of formal and informal training and educational opportunities. However, before you enroll any classes or join an association, there are few items to consider:

1. Study the basics of the aircraft financing rates and loan industry.

2. Register for aircraft finance training and industry conferences.

3. Contact an airplane financing association for additional educational resources.

Action Steps
The best contacts and resources to help you get it done

Examine the essential elements of aircraft financing terms

Before you enroll in a course or join an association, it's important to understand the terms and basics of the commercial aviation financing industry. You'll need to know the length, rate and structure of a typical aircraft loan to determine which is the best for your company. If you're looking for a career within the industry, the basics provide an excellent foundation on which to build an education.

I recommend: Review the legal aspects of purchasing an aircraft at Global Air. Examine the ABCs of aircraft financing from LoansAircraft. Assess the most common types of aircraft loans at AV Fund Source.

Enroll in aircraft loan rates and financing courses

The next level of training available within the industry is through traditional classes and conferences. The classes are more in-depth, while the conferences usually only last for a few days. Conferences are more of educational refreshers than anything else.

I recommend: Enroll in the aircraft finance training at Plane Data. Attend the New York Airfinance Conference to update your knowledge and network with other professionals.

Speak to a business and commercial aviation association

Aircraft industry associations provide the widest range of educational opportunities. Generally, a fee comes with joining these associations. However, they usually offer discounted training, educational seminars and a broad range of networking opportunities.

I recommend: Review the training resources available at the Aircraft Owners and Pilots Association. Evaluate the courses offer at the International Air Transport Association. Contact the National Aircraft Finance Association about their training information.

Aircraft financing isn't just for airlines. Many business owners use private aircraft financing to get their own wings and stop sitting in airport terminals waiting for delayed arrivals and departures.

Some advantages to owning an aircraft for your business are:

1. No need to go through rigorous airport security only to sit and wait in the terminal for your plane to board.
2. Tax breaks for private aircraft financing.
3. The ability to choose your destination and time frame without being at the mercy of an airline company.

If aircraft financing terms aren't right for your business, consider commercial aircraft lease financing.

Action Steps
The best contacts and resources to help you get it done

Know the value of your aircraft for financing and insurance

Getting reasonable aircraft loan rates may depend on how your airplane is valued. Just like a home mortgage, your lender may require an appraisal on the aircraft you plan to buy or refinance. You also will need to know the value of your plane when applying for insurance.

I recommend: Airplane Appraisal offers information on airplane appraisals and the fees involved. Find agents that insure airplanes at 1800miti.

Get the best private aircraft financing rates through a specialist

Having a good relationship with your local banker may prove valuable; however, you will need to know how to deal with the FAA, the risks and the tax benefits to your business. So check on aircraft financing rates through a company that specializes in aircraft finance.

I recommend: Cessna Finance Corporation has been in the aircraft financing business for more than half a century. You may want to consider leasing options if you don't find aircraft financing terms that please you; Business Aircraft Leasing offers several leasing options.

Take advantage of the tax benefits when you apply for commercial aircraft loans

There are tax benefits to business and commercial aviation. Have your CPA research your tax status before applying for commercial aircraft loans because each state has its own standards for aircraft taxes. When your airplane is financed on a 20-year term, it can be depreciated on a five-year schedule. The finance fees, interest and maintenance also may be a tax deduction.

I recommend: Advocate Counseling will help you set up aircraft financing so that you can reap as many tax benefits as possible. Aviation Tax Consultants also will help you with tax questions before you get aircraft financing.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Compare aircraft loan rates between reputable aircraft financing companies before applying.
• •  Have two years of tax returns, your clean credit history and your business and personal financial statements together before applying for airplane financing.

Aircraft financing is, to the first-time buyer, a mystifying field. While it's not terribly unlike financing a vehicle in a general sense, you'll find yourself suddenly face-to-face with unfamiliar terms, mostly relating to the maintenance and overhaul requirements of the aircraft you're about to purchase.

In order to negotiate a successful financed aircraft purchase, you must be familiar with the basic features and characteristics of the aircraft you're buying. You also need to know the building blocks of how the aircraft will be financed and what typical parameters for such a purchase are. The following terms will help to get you started.

Action Steps
The best contacts and resources to help you get it done

Time Between Overhaul (TBO)

TBO is a common aviation acronym that stands for Time Between Overhaul. This represents the amount of time an engine can be in service with normal maintenance before it must be overhauled; literally, it must be stripped to its component parts, inspected and rebuilt. You'll want to take the manufacturer-specified TBO for all aircraft parts into account when selecting an aircraft to finance.

I recommend: NOVA Online discusses the significance of how the TBO extended greatly when jet engines were first introduced, and why this had such an impact on aviation safety.

Piston engines vs. jet engines

Piston engines were the earliest form of aircraft engines. All aircraft were powered by some form of a piston engine until the first gas turbine, or jet engine aircraft, took off in 1939. Piston engines continue to be used in a variety of aircraft today, and may affect the value of your aircraft during its financing appraisal.

I recommend: The National Business Aviation Association gives details about the types of piston aircraft you're likely to encounter.

Professional engagement period

The professional engagement period is defined by how long you retain a specific accounting firm's services to help you evaluate, negotiate and obtain financing for your aircraft.

I recommend: The Journal of Accountancy offers a detailed explanation of the professional engagement period.

Escrow service

An escrow service or agent may be an attorney, a financing agent or almost any trusted third party that is contracted to hold the title to a particular large purchase until both buyer and seller have met the terms of the financing agreement. Using an escrow service to help you negotiate the purchase or sale of a financed aircraft, especially when you're not familiar with the other party in the transaction, is highly recommended.

I recommend: Investopedia defines what services an escrow agent or service will provide in relation to large purchases, such as aircraft or homes.

Pre-purchase inspection vs. aircraft appraisal

A pre-purchase inspection in an aircraft transaction is much the same as getting a vehicle inspected before purchasing it. The pre-purchase inspection offers you an impartial evaluation of the functioning capacity and mechanical quality of the property you're looking at purchasing. An aircraft appraisal, on the other hand, is an impartial appraisal of the aircraft's monetary value.

I recommend: LoansAircraft.com offers a detailed explanation of the differences between pre-purchase inspections and aircraft appraisals.

Index based loans

Index based loans are a common type of loan you may encounter when considering aircraft financing options. Index based loans are variable rate loans based on the current Prime Interest Rate (PIR). As the PIR changes, so does the interest rate on the index based loan.

I recommend: AV FundSource gives a detailed explanation of the pros and cons of various common types of aircraft financing, including index based loans.

Private aircraft financing has a lot of similarities to automobile financing, just on grander terms. Things like taxes, loan document fees and a potential borrower’s credit history all come into play. Also, much like car or home loans, aircraft loan rates are forever fluctuating.

Take the time to familiarize yourself with the process of private aircraft financing so that you'll know what to expect while going through the process. Here are some resourceful links to help get you started. Think of this little tutorial as aircraft financing for beginners.

1. Learn about aircraft financing rates that you'll come across when financing an airplane.

2. Utilize an aircraft loan calculator to calculate the cost of commercial aircraft loans.

3. Educate yourself on the insurance required when securing private aircraft financing.

Action Steps
The best contacts and resources to help you get it done

Educate yourself on aircraft loan rates and how they are calculated

Aircraft loan rates are calculated in a similar fashion to that of a car loan. However, the price of the aircraft is usually significantly more than a vehicle; therefore, the time line for purchase can be considerably longer. But most aircraft financing loans are structured on a monthly basis with interest rates comparable to the current cost of money. (Meaning they'll be in the neighborhood of current car loan rates based on the credit and financial history of the borrower.)

I recommend: Visit the website for US Aircraft Finance for additional information on aircraft financing rates. Warren West, another aircraft financier, also discusses interest rates in terms of the current libor and prime interest rate.

Use a loan calculator to calculate aircraft loan rates and how much you can afford

When it comes to airplane financing, one must determine how much airplane you can afford. Using a loan calculator will help determine that amount. By plugging in the cost of the plane, any applicable taxes, loan processing fees, sales tax and any other pertinent information, one may calculate how much plane you can buy. This is similar to how a home mortgage or car loan is figured.

I recommend: Go to the website for E-Aircraft Loans to utilize a free cost calculator. The company AV Fund Source also provides a loan calculator for potential clients to utilize.

Learn about the insurance required when securing commercial aircraft loans

Much like the purchase of a home or a car, aircraft financing terms stipulate that one must carry a certain amount of insurance along with the plane. Because private aircrafts can be quite pricey, the monthly payment on the insurance can be quite significant. Be sure that you factor in insurance costs along with your purchase, operational and tax costs when buying a private aircraft.

I recommend: Visit the website for Rukavina Aircraft Insurance to learn more about the many forms of aircraft insurance they offer. Also check out the website for Aircraft Banking Insurance. They detail the costs and coverage associated with private aircraft insurance.