Loan questions for my first airplane.

Wolfy

Wolfy

Well-Known Member
I'm trying to get a loan for a 1974 Bellanca Citabria 7ECA. The plane is $40,000. That's higher than some other 7ECAs, but it has 51 hours on a new engine, new wings, overhauled prop and a huge amount of other work recently done to it. It's also already at my airport, and I know the owner.

My plan is to put it on leaseback with the flight school, so I can do tailwheel instruction in Sonoma. I already have approval from the owner of the flight school, and an insurance quote. My only problem is the loan.

I have very little collateral and income over the last few years. My credit score is decent at 660. To help out, I'm working to get a cosigner (family). So far I haven't put in any official applications just called the companies.

Dorr Aviation: Don't do loans under $75,000 in my area.
NAFCO: Airplane is too old to get a loan for an income generating airplane.
AOPA: Limited to 250 hours per year. I plan to have it fly more.

Does anyone work in the airplane loan field, or have someone they recommend?
 
Have you tried your local bank? If you already have established yourself as a customer that might be a good place to look.

Are you buying it under an LLC or some other corporation? Make sure you apply as the company and not as an individual.
 
A while back, I was unable to get a loan for a Grumman Tiger with a credit score of 650. The standard line that I received was that I need to have at least 700-720. Since then, I've saved up cash, but am looking at other a/c.

It's a little different for you because it sounds like your airplane is also a business investment; I was advised that I should never finance an airplane and that airplane reposessions can take place in as little as two weeks from a missed payment.
 
Nihon_Ni said:
Have you tried your local bank? If you already have established yourself as a customer that might be a good place to look.

Are you buying it under an LLC or some other corporation? Make sure you apply as the company and not as an individual.
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I use Citibank. I walked in and the manager said they don't do airplane loans. But, there is something on the website about it. Citi's a huge company with a lot of different parts.

I'll own it myself, unless I get a partner in it. Then we'll set up an LLC.
 
Wolfy said:
I'll own it myself, unless I get a partner in it. Then we'll set up an LLC.
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I'm not a tax expert, but you don't have to have more than one "owner" to establish an LLC...plus, you'll have some legal financial insulation built-in...

FWIW, I would never be an "owner" of a business as a sole-proprietor...too much risk, too little benefit.
 
stensonb said:
I'm not a tax expert, but you don't have to have more than one "owner" to establish an LLC...plus, you'll have some legal financial insulation built-in...

FWIW, I would never be an "owner" of a business as a sole-proprietor...too much risk, too little benefit.
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All I'll own is the airplane. The flight school is the rest of the business. I have financial risk, of course. But the accident liability doesn't concern me much, considering the leaseback agreement and the insurance.
 
Wolfy said:
All I'll own is the airplane. The flight school is the rest of the business. I have financial risk, of course. But the accident liability doesn't concern me much, considering the leaseback agreement and the insurance.
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My understanding is, if you set it up as an LLC, and lease it back to the school through that company, any losses incurred to the business can then be used as a deduction on your personal income tax. If you own the plane and simply lease it back I am not sure if the same holds true. Also, if things dont work out as expected, your finances are not at risk, only the LLC's.

Again, that is my understanding of how it can work. I have not done it nor do I have any experience with it. Only discussed it with the flight school when I was considering buying an airplane.

Bank of America has an airplane loan branch. http://www.bankofamerica.com/vehicl...G&statecheck=PA&template=aircraft_loans&type=

Good luck!
 
Matt13C said:
My understanding is, if you set it up as an LLC, and lease it back to the school through that company, any losses incurred to the business can then be used as a deduction on your personal income tax. If you own the plane and simply lease it back I am not sure if the same holds true. Also, if things dont work out as expected, your finances are not at risk, only the LLC's.

Again, that is my understanding of how it can work. I have not done it nor do I have any experience with it. Only discussed it with the flight school when I was considering buying an airplane.

Bank of America has an airplane loan branch. http://www.bankofamerica.com/vehicl...G&statecheck=PA&template=aircraft_loans&type=

Good luck!
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Thanks, I'll give more thought to the LLC. AOPA loans are done through BoA.

Also, just did try number 4, Sterling Associates. They have a $100,000 minimum. Man, this is looking kinda grim.
 
Wolfy said:
Thanks, I'll give more thought to the LLC. AOPA loans are done through BoA.

Also, just did try number 4, Sterling Associates. They have a $100,000 minimum. Man, this is looking kinda grim.
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One of the suggestions that comes up on the AOPA boards about the where to get a lone issue is go to a local credit union. Lots of times, they are more willing to work with people on the lower dollar airplanes. Might be worth looking into.
 
I would talk to a aviation/tax lawyer. They should be able to let some things straight with what you would be able to do through a LLC. I'm not sure how much it would cost to talk to one of them but AOPA should have some resources on things you can look at to get financing.
 
KSCessnaDriver said:
One of the suggestions that comes up on the AOPA boards about the where to get a lone issue is go to a local credit union. Lots of times, they are more willing to work with people on the lower dollar airplanes. Might be worth looking into.
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Thanks, I just tried 3. Small town local one said over the phone they don't do airplanes, but I may go ask. The larger regional one will only do up to 10 years old. SkyOne will do it, and I put in an app to be a member. I may be able to since I live with a retired airline pilot, but it's a stretch. They still seem like my best bet.
 
Try Red River State Bank at airloan.com

I know a few people who have financed through them and had nothing but good things to say about the process.

Good luck.
 
If you know the guy and he's at your airport, is owner financing at all an option?
 
You absolutely SHOULD do an LLC. Even if you were purchasing it for you to use without any lease back intended. Everyone I know including myself set up LLC's(usually the tail #, LLC) to protect you/your family in the event of something unfortunate happening. If you were to do harm to someone on the ground(prop strike) or ??.....you can personally be sued. Period. The LLC is an added piece of protection for very little $$ and then they would go after the LLC, which has no $ or assets. As far as the loan, I used AOPA a few years ago. Rate was great, term was great and very easy to deal with. They do require income from the past couple years(tax returns) as a determination along with credit score. Also, I recommend you don't have everyone and there mother pulling your credit. Your score after a few pulls will drop a good deal...good luck! Cool airplanes! :)
 
Not to rain on the parade, financing is tough right now... You will prob. need a bunch of cash to put down on the plane, esp. without a stellar credit rating.

If you could put down +20% then it might be easier. I used to sell them out of the local airport, and late 2006, things started to get tougher... the last few years have been really tight. I've seen people with mid 700 scores get turned down, or banks wanting significant collateral. If you have a home mortgage with a bank that does other loans, they may be more willing if you have been a good borrower.

Remember, banks think of planes as big ticket items... no matter how cheap they are.

Final note, a cosigner may be required to be on the insurance as a co-owner, and, if they don't have flight time, will drive the rates up.
 
Wolfy said:
All I'll own is the airplane. The flight school is the rest of the business. I have financial risk, of course. But the accident liability doesn't concern me much, considering the leaseback agreement and the insurance.
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That's more than enough to be liable for an accident, even if you weren't in the airplane. It's about $400 to have someone set up an LLC for you, less if you do the running around yourself. Compared to your future lifetime earnings it's pennies.

I STRONGLY suggest you incorporate and then be vigilant to avoid piercing the corporate veil so you don't leave an opening for someone to side-step the protection you put in place. See an attorney and they can set you up in no time.

BTW, I had an airplane on lease-back. Fortunately I was incorporated when a student & CFI crashed it.

This will answer a lot of your questions about incorporating:
http://www.amazon.co.uk/Rich-Dads-A...=sr_1_1?s=books&ie=UTF8&qid=1279891202&sr=1-1
 
Wolfy said:
I'm trying to get a loan for a 1974 Bellanca Citabria 7ECA. The plane is $40,000. That's higher than some other 7ECAs, but it has 51 hours on a new engine, new wings, overhauled prop and a huge amount of other work recently done to it. It's also already at my airport, and I know the owner.

My plan is to put it on leaseback with the flight school, so I can do tailwheel instruction in Sonoma. I already have approval from the owner of the flight school, and an insurance quote. My only problem is the loan.

I have very little collateral and income over the last few years. My credit score is decent at 660. To help out, I'm working to get a cosigner (family). So far I haven't put in any official applications just called the companies.

Dorr Aviation: Don't do loans under $75,000 in my area.
NAFCO: Airplane is too old to get a loan for an income generating airplane.
AOPA: Limited to 250 hours per year. I plan to have it fly more.

Does anyone work in the airplane loan field, or have someone they recommend?
Click to expand...

Brother, I don't mean to sound like your mother, but you need run from this deal. I don't know if the flight school owner talked you into all of this, or if you came up with it on your own. I don't know the details of your "leaseback", but they're rarely a good deal for the owner of the plane... in my humble opinion. Also, based on your financial information you've stated, you're not ready for this. Your best chances of getting a loan is going to be through Bank of America w/ the AOPA program. If you can't get it there, it's not likely going to happen. Save yourself some cash and a lot of headache. Buy the plane when you can afford it without all the required financial creativity.
 
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