Page 31 - Volume 15 Number 3

Banks have money for aircraft purchases; you just have to know how to get it.ALSRecent news reports state that banks are more liquid now than they ever were. You just have to know how to get them to let loose with some of that liquidity. After all, even banks cannot create profits without investing.One thing we do hear from buyers is that there is no money for aircraft deals. That statement is only partially true. There is money out there, but not for crazy aircraft deals. Crazy aircraft deals are as follows:• No 100-percent financing. Aircraft values took a beating the past two years. Don’t ask the bank for 100-percent, non-recoursefinancing. You will get a quick no to interest-only loans or loans with a big balloon payment. Banks today think of balloons as those things that make a loud pop followed by the sound of escaping air when stuck with a needle such as a bad economy.• No “trust me, I’m good for it” loans. You may know someone famous, or rich, or rich and famous. It will take more than your word and an unpledged bank account for the bank to lend money. How good would an under-collateralized loan be today if it was made to Bernie Madoff or Charlie Sheen?• No old airplanes. There is still a glut of used aircraft on the market. The last ones moving generally are the oldest aircraft. Rule of thumb: the aircraft age at the end of the deal must not exceed 20 years. So if you want a five-year loan, the aircraft must be no older than age 15 at the start.As the saying goes, “There are old pilots and there are bold pilots; butthere are no old, bold pilots.” The same can be said for your bank.When we use the term “bank” we mean that to cover all financial institutions that are (still) in the market of leasing and loaning money for business aircraft. Regardless of the size of the institution, they are saying the same things. What youneedforaloanoraleaseofan aircraft are the good old-fashioned banking requirements: Credit, Capacity, Character, and Collateral.Credit – You need to demonstrate that you have a history for repaying loans. You need to show that your assets exceed your liabilities and that your net worth will survive an economic downturn.Capacity – You need to demonstrate that you have cash flow or available liquidity to pay not only the aircraft loan but all other loans; the expenses related to operating an aircraft and all your other bills.Character – Who are you/your business/your shareholders?by David Wyndham, Conklin & de Decker Joseph Dini, Air Credit AllianceMARCH 2011­TWIN & TURBINE • ­29hE