Aircraft Financing: Loans, Leases, and Cash Considerations

Who actually finances private aircraft?

A short list of specialty lenders dominates U.S. private aircraft financing, not your commercial relationship bank. The active names are Global Jet Capital, PNC Aviation Finance, Bank of America Private Bank, JPMorgan Private Bank, First Republic (now JPM), City National, Citizens One, Stonebriar Commercial Finance, and Wells Fargo Equipment Finance. Each has a different appetite: PNC and BofA write paper on late-model Gulfstreams and Globals for established flight departments; Global Jet Capital and Stonebriar will look at older airframes and structured leases; private banks lean on the borrower's overall wealth relationship rather than the asset.

Relationship banks rarely touch aircraft as standalone collateral. If your regional bank offers you an aircraft loan, it is almost always cross-collateralized against deposits, securities, or real estate. That is fine, but understand you have not actually financed the aircraft — you have pledged other assets.

What do current loan terms actually look like?

Expect 20-30% down, 10-15 year amortization, and rates of 6-9% as of late 2024, with the best paper going to credit-strong borrowers on new or near-new aircraft. A balloon at year 5, 7, or 10 is standard rather than full amortization. Rates float over SOFR plus 250-400 basis points or come fixed at a premium of 50-100 bps over the float.

Down payment scales with airframe age. A 2022 Phenom 300E might finance at 15-20% down. A 2008 Hawker 900XP could require 35-50% down and a shorter 7-year amortization. Pre-1990 aircraft are largely uncollateralizable through banks — you are looking at Stonebriar, GJC, or a personal loan against other assets.

Lenders require a current logbook review, a clean title search through the FAA Aircraft Registry in Oklahoma City, an appraisal by a USPAP-qualified appraiser (often using AMSTAT or JetNet comparables), and detailed financials on the borrower. Underwriting typically runs 30-60 days, which has to be built into your transaction timeline.

How does an operating lease differ from a finance lease?

An operating lease keeps the aircraft off your balance sheet and the residual risk with the lessor; a finance lease (capital lease) treats you as the economic owner with depreciation rights. Global Jet Capital, GE Capital's successor portfolios, and a handful of others structure both.

Operating leases run 5-10 years with fixed monthly payments and a stated residual or fair-market-value return. You do not depreciate the aircraft; the lessor does. This is attractive for buyers who do not have offsetting income to absorb bonus depreciation, or who want certainty on exit. The all-in cost is usually 75-150 basis points higher than a comparable loan, which is the price of transferring residual risk.

Finance leases look economically like loans dressed in lease clothing. The lessee claims depreciation and interest deductions. These exist mostly for state sales tax structuring or for buyers whose credit profile fits a lease underwriting box better than a loan box.

When does paying cash actually make sense?

Cash makes sense when your marginal after-tax return on liquid capital is below the loan rate, or when you want absolute structural flexibility on depreciation and Part 91 versus Part 135 use. With loan rates at 7-9% pre-tax, a borrower earning 10%+ on deployed capital is giving up real money by writing a check.

The depreciation argument cuts both ways. Bonus depreciation phased down to 60% in 2024 and 40% in 2025 under current law, with full expensing potentially restored by pending legislation. Whether you pay cash or finance, the depreciation schedule is the same — the IRS does not care how you funded the purchase. What cash does buy you is freedom from lender covenants that restrict charter use, international basing, or modifications.

Most credit-strong buyers split the difference: finance 60-70% at attractive rates, keep the rest of the capital working, and prepay if rates move against them.

What do first-time buyers get wrong on financing?

The biggest mistake is sequencing — shopping aircraft before getting a financing term sheet in hand. Lenders take 30-60 days to underwrite a first-time aviation borrower, and pre-purchase inspection findings can blow up a deal if financing is contingent. Get pre-qualified before you sign an LOI.

The second mistake is ignoring insurance loading. First-time owners of turbine aircraft face insurance premiums 50-200% higher than experienced operators for the first 12-24 months, particularly on aircraft requiring two-pilot crews. Lenders require minimum hull and liability limits, and if the insurance market will not write you at the lender's minimum, the loan dies. Confirm insurability before closing.

Third, buyers underestimate the all-in transaction cost. Beyond the 3-5% broker commission and the 20-30% down payment, you have a pre-purchase inspection at $25,000 to $150,000+ depending on category, escrow and closing at $5,000 to $15,000, lender legal at $10,000 to $25,000, and potential sales or use tax depending on delivery state and basing. Roughly 70% of pre-purchase inspections surface $50,000+ in squawks that have to be negotiated or absorbed before closing.

How do you structure financing around tax?

The aircraft must be held in an entity structured for both your tax goals and the FAA's operational rules, and the financing has to match. The common error is putting the aircraft in a single-member LLC that only owns the aircraft and leases it back to the operating business — the FAA can deem this an illegal flight department company subject to Part 135 rules.

Work with an aviation tax counsel (Aerlex, GKG Law, Crowell & Moring all have practices) before signing loan documents. The lender will lend to whatever entity you specify, but unwinding a bad structure post-closing is expensive. Sales tax planning — Delaware, Montana, and Oregon registration structures, or fly-away exemptions — should be settled before the loan closes so the entity on the loan matches the entity on the registration.

What should your financing timeline look like?

Plan on 60-90 days from term sheet to funding, running in parallel with the 60-180 day acquisition path. Start lender conversations at the category selection stage, get a soft term sheet before the broker engagement is fully underway, lock the rate (if offered) when the LOI is signed, and clear final underwriting during the pre-purchase inspection window. Closing the loan and closing the aircraft happen the same day in escrow, with the lender wiring funds, the title transferring at the FAA Registry, and the aircraft moving to the buyer's insurance — all coordinated by the escrow agent, typically Insured Aircraft Title Service or Aerospace Reports in Oklahoma City.