Are you considering refinancing your business aircraft in the near future? What advice can the experts give, and what questions should you be asking to determine if it’s the right move? Gerrard Cowan explores.
Business aircraft owners have a range of refinancing options related to their aircraft, enabling them to secure better terms or access capital for other uses. But what are the key questions they need to ask themselves and their lenders before pursuing the refinancing option, and what tips do the experts offer?
Refinancing a business or personal aircraft can be a good option in a range of scenarios. For example, a National Aircraft Finance Association (NAFA) spokesperson told AvBuyer it is opportune when interest rates change – for example, when the financial status of the borrower changes or improves, or when a borrower needs to free up cashflows.
Additionally, refinancing could be an option “if the value of the aircraft increases, if the current structure of the loan becomes unfavorable for any reason, or if there are changes in tax laws or the position of the owner that may make refinancing desirable”, the spokesperson adds.
Business aircraft owners should first consider their current terms compared to the new terms, interest rates, the cost of refinancing, aircraft values and market conditions, any tax implications and their personal debt profile and creditworthiness, the spokesperson highlights.
Chris Lee, President of the Aircraft Finance Division in 1st Source Bank, believes refinancing could be a good way to free up capital for other areas, because equity in an aircraft typically isn’t as productive as equity invested in the owner’s business.
“We saw a run-up in aircraft values over the past four years, but values in business aircraft have begun to normalize now,” he says. “Even so, aircraft values remain strong and refinancing while aircraft values are high can help you maximize the efforts of refinancing.”
This article was originally published by AvBuyer on November 11, 2024.