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Slow GoingSmall loans to businesses, in billions*$800600 400 200Total loans outstanding, in trillions$86 4 2NashuaNASHUA FLIGHT SIMULATORCustomized & Personalized Recurrent Training Turbo-Prop & Piston TwinsFlightKing Air 90-100-200Cheyenne I &IISimula-Cessna 425Piston TwinsBaron 55/58, 58P, 58TCtorCessna 337, 335/340, 414, 421Piper Chieftain, NavajoSixth“I will be back next year. The instructors atNashua Flight Simulator were great. Thetraining for my Cessna 414A was top notch.” Philip Davidson, Cessna 414APage“Nashua Flight Simulator has a greatrecurrent ground and flight King Airprogram at an unbeatable price.” Carl M. Ziegler, Raleigh, NC- C904/C AdSyllabus Insurance Company Approved866.505.0077 www.nashuaflightsimulator.com0––01Q 2Q 3Q 4Q 1Q 2Q 3Q2009 1Q 2Q 3QQ12010*Loans with an initial amount of $1 million or less.down payment or security deposit is coming from.There is no mystery how a bank makes money. They start with what their product costs – cost of money. That can be in the form of what they have to pay for deposits or what they pay to raise money. Even if a bank seems to be using no interest deposit money like that which they hold in checking accounts, there is still a cost in maintaining those accounts and keeping those depositors. Then, a bank will look at historical losses and add a percentage factor to its cost of money. The bank has to apportion its cost of operation and tax liability to establish its rate.If the transaction is for a fixed rate then the bank has to hedge against rate volatility over the term and that costs them something. This cost can be mitigated if the bank makes a floating rate loan tied to LIBOR or prime. In the case of a lease, a bank gets the time value of money advantage offered by depreciation and uses that, plus an expected residual value, to arrive at its rent rate.Finally, banks tend to compare themselves to their peer group on a return on assets basis. A good return is in the 1 percent to 1.75 percent range. Historically, cost of money ranged in the 6 percent range (rates that high are unheard of today). Using 6 percent as a base, we could add a loss reserve of 0.5 percent; operations and tax expenses of 1 percent and our desired return on010Source: Federal Deposit Insurance Corp.2009 2 20assets of 1.5 percent and come up with a rate of 9 percent. Since cost of funds today can run from 1 percent to 3 percent, we can assume that a bank today would want a rate of between 4 percent and 6 percent either in a loan or a similar return from a lease and all its benefits.So the money is there, you just have to qualify. In 2008, aircraft lending was like a community college, almost everybody got in! Today, banks are more like an Ivy League school. If you are new to aviation borrowing or want to window shop, check out National Aircraft Finance Association, www.nafa.aero.When looking for a loan or lease, be ready to discuss your finances, and rem•ember that the banker you know may be your new best friend! T&THillaero Modifica- tion Cen- terSixth Page 4/C AdDavid Wyndam is a vice presi- dent and co-owner of Conklin & de Decker, a consulting firm that helps the customer manage the total picture of what it costs to own and operate aircraft.Joe Dini is currently president of an aviation finance consult- ing company, Air Credit Alli- ance, Inc. and sits on the boards of several aviation related enti- ties including Massachusetts Air And Space Museum. He has been directly involved in the aviation finance and leasing in- dustry for more than 40 years.MARCH 2011TWIN & TURBINE • 31