WHAT ARE COMMON RED FLAGS FOR AIRCRAFT LENDERS?

By Adam Meredith

There are roughly 5 common red flags lenders see the most. 

The most common red flags for lenders are:

  • Missing or incomplete logs
  • Abnormally high airframe hours
  • An airplane that is close to or past the recommended time for engine overhaul (TBO)
  • A history of damage
  • Obsolete or aged turbine aircraft

With missing logbooks, if a borrower is in a strong financial position and what’s missing isn't significant, there may find be little or no impact on the loan. Still, it’s good to plan on the structure of the loan being affected.

We’ll address high airframe hours in another article, but the short answer is, unless you’re acquiring a turboprop or jet, it will be an issue. At or close to TBO? Plan on extra reserve requirements, a lower LTV analysis or a higher down payment.

If there is damage, there are mitigating factors—for one, if the damage is relatively insignificant. It also depends on whether there’s been a fair amount of time since the damage occurred and it’s documented. And finally, has the airplane been repaired by a very reputable service center? If all these things are true, a lender may be more inclined to offer financing but may value the airplane for less, want you to put more money down, or they’ll shorten the amortization. Those are typically the most common ways lenders will structure loans for problematic planes.

By their very nature, there are certain aircraft that are just going to be problematic. In the turbine world, that would be obsolete or aged equipment. For example, a Westwind would fit into both those categories. An Eclipse might also fit into the obsolete category. While the brand is not too old from an avionics and airframe perspective, it remains a storied brand—a lot of hype initially, problems getting to production and several company ownership changes. Some might call it a “10-foot pole” brand, as in most banks wouldn’t touch it with a…

The beautifully designed, Italian-made, rear engine-mounted turboprop Piaggio is an example of a storied brand that has become an “orphan” aircraft. Too few, too specialized and too non-standard to not raise red flags.

The Adam A-500 is a good example of a piston aircraft model with fewer than 10 airplanes on the active registry, and therefore potentially difficult to get financed.

Great advice. Great rates. From helpful and responsive reps you can trust. Three good reasons to turn to AOPA Aviation Finance when you are buying or refinancing an airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (800.627.5263), or click here to request a quote.

 

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