Three rules for financing aircraft (or how not to get duped)
There are three points to consider when looking to borrow money to purchase an aircraft.
There are a lot of reasons why aircraft buyers should finance aircraft. And the vast majority of deals work out well for both the aircraft buyer and the financier. So this week it has been concerning to hear of two aircraft buyers who have recently lost significant amounts of money to an entity that had promised to finance their aircraft.
In both cases the borrowers paid substantial upfront fees to the financier before realising that no funds were ever going to be lent to them. They are now struggling to get the cash back.
This is a rare problem, but it is one that can be avoided if buyers remember three things.
First, the business jet finance market is a small one. If a firm does not have a reputation you should ask for references. Credible new entrants will be happy to give you these. (In fact, most new financiers hire aircraft finance specialists with good reputations from other aircraft lenders – and as a borrower you want people who know what they are doing.)
Second, get legal advice before paying any upfront fee. And make sure you hire a specialist aviation lawyer as financing an aircraft is not the same as financing property or buying a company.
Third, as the saying goes, if something looks to be too good to be true, it probably is.