Part of the leasing subsidiary of PNC Bank, the sixth largest US bank by total assets, PNC Aviation Finance offers customers aircraft loans that do not require customer financial disclosure or personal guarantees.
This flexibility means that it is not surprising that PNC believes it closed more US aircraft finance transactions in 2011 than other lender – although some closed a greater dollar amount.
Wayne Starling, senior vice president of PNC Aviation Finance and his team launched Air Finance Group in 1998 to fund deals through securitisation. In 2004 it was acquired by PNC Bank giving it a balance sheet. During the tough years of 2007 to 2011 it grew its aviation portfolio by 70%. “We have never been given a limitation on growth,” says Starling.
PNC Aircraft Finance is not afraid of being different to other banks. “We are very comfortable with what we offer,” says Starling. “We had a big portfolio going into the downturn and our customer base performed very, very well compared to others that were more credit based. We have been doing this for more than 10 years and we know it works.”
PNC Aviation Finance will only finance aircraft in the US and Canada and will not finance piston aircraft or commercial aircraft. Most of PNC’s aircraft loans are for between $1 million and $15 million, but it will make some exceptions – particularly for existing clients of the bank – and has financed aircraft as large as Falcon 7Xs.
PNC Aviation Finance is keen to support PNC Bank clients but it is a transactional lender and does not expect aircraft finance clients to use its parent bank for other products. “Most of our customers come through referrals,” says Starling.
The bank commonly finances aircraft that are up to 15 years old at the end of transactions and it will also finance aircraft that are up to 20 years old at the end of the loan, admittedly with lower advance rates. This is more flexible than some banks, which have a policy of making sure that aircraft are not over 12 years old at the end of a loan (as an example, the maximum term for an eight year old jet would be a four years loan).
No credit approval
PNC Aviation Finance’s most popular product is what it calls an asset-based loan, where customers do not need to provide any financial disclosure.
“We have found over the years that if we have the right amount of equity and the right type of aircraft, we can offer these terms,” says Starling. “Underwriting is the biggest problem for buyers. Most entrepreneurs have a down year for every one of the last four years and so their financial statements are not as good as they once looked. They may have struggled but still done OK, but they won’t get credit approval. We look beyond this.”
Rather than forcing buyers to prepare statements, PNC insists on meeting borrowers face-to-face to understand them. As a subsidiary of a bank it also complies with all Know-Your-Customer regulations.
“Our loan officers go out and build relationships with customers and underwrite based on character rather than financials,” says Starling. “We only work with the type of people that we and the bank want as customers.”
Whilst it does not ask for financial data it does conduct internet searches on customers. “You can find a lot about someone just using a computer in Boise, Idaho [where the bank is based],” says Starling.
Unlike many other banks, PNC does not require personal guarantees provided customers put in 40% of equity (a 60% loan-to-value).
If they wish to have a higher loan-to-value of 70% they are asked for a 10% guarantee. So, for example, on a $10 million aircraft, the bank would lend $7 million and ask the borrower to guarantee $1 million.
Starling’s advice to aircraft buyers looking for finance is to be flexible on advance rates. “The more money you are willing to put down, the easier it is to find a lender,” he says. “You can get attractive rates at the moment if you are flexible.”
The bank only finances customers looking to buy aircraft for their own use. They are happy for owners to charter their aircraft out but they will not lend to people looking make money from business aviation.
They also make quick decisions. PNC says it typically takes10 days to approve an application. This far faster than the two or three months that many banks now require to approve deals.
Although they are asset-based lenders, they do not require customers to use power-by-the-hour maintenance programmes (“We like to see them and we encourage them,” says Starling) or management companies. In fact many of their customers are owner pilots.
Despite its innovative product, PNC Aviation has an old-fashioned approach to finance. Its loan officers look customers in the eye and then trust them to repay loans and to look after their aircraft.
“Because our customers are buying aircraft they have the pride of true ownership. They have equity in their aircraft and they look after them,”” says Starling. “After all, we underwrite based on character; not financials.”
Brad Hill, Marketing Manager, PNC Aviation Finance